SEOUL (Reuters) - South Korea said on Thursday it will propose a supplementary budget and boost business subsidies to help cut the country’s high youth unemployment, which it sees reaching a dangerous level.
Small- and medium-sized businesses will be eligible to receive 9 million won ($8,443.65) in annual cash subsidies for each entry-level job it creates over the next three years, up from current 6.7 million won.
High school and college graduates will also be able to receive bigger subsidies while job-searching, and will be exempt from income taxes for the first five years of full-time employment, subject to certain conditions.
By offering more tax and cash incentives, President Moon Jae-in hopes to increase the full-time job prospects for Korean millennials in the face of challenging job market conditions, which has led many to postpone marriage and pushed many into poverty.
The nation’s finance ministry said it will announce the size of the of the proposed additional budget package and other details later.
“Unless addressed, (youth unemployment) will reach a disastrous level in about four years. So that warrants a supplementary budget by the National Finance Act,” vice finance minister Ko Hyoung-kwon said in a press conference held on Wednesday.
Youth unemployment in South Korea hit a record 9.8 percent in 2017, almost three times the national rate of 3.7 percent and worse than the 4 percent youth unemployment rate in Japan and 8.1 percent in the United States.
A broader youth unemployment rate that also counts those in between jobs seeking full-time employment was at 22.7 percent in February.
Boosting income for young South Koreans has become an even more urgent task for policymakers as it seeks to broaden its tax revenue base to fund welfare costs for an aging population.
South Korea has the fastest aging population among Organization for Economic Co-operation and Development (OECD) nations.
Moon budgeted extra spending of 11 trillion won ($10.20 billion) as soon as he took office in 2017, in a push to create social service jobs and offer subsidies for maternity leave.
However, his administration faces a hurdle in passing the extra budget bill in parliament, where his Democratic Party holds only 41 percent of the 293 seats.
Reporting by Cynthia Kim, Shin-hyung Lee; Editing by Sam Holmes