German Welfare-to-Work Program Ideal for Korea

Korea needs to look into the German style welfare-to-work program as a solution for the current economic state where growth and employment are stagnant, while the welfare burden is getting hefty.

The Korea Economic Research Institute published a report on March 26 titled “Traits and Implications of German Welfare-to-Work Program” and pointed out that Korea’s current situation is similar to that of Germany when it embarked on welfare-to-work programs, during the 2003 Hartz Reform and 2010 Agenda Reform.

Korea currently is in a similar state with Germany at the beginning of the 2000s, in that welfare expenditures and financial worries are rising due to higher demand for universal welfare, and more direct regulations are imposed on labor usage, such as limiting the use of labor dispatching and temporary employment.

At the time, under Hartz Reform, Germany reinforced employment incentives by differentiating the government’s support according to work capabilities and reducing aid in case of job offer rejection. The gist of the program is that it allows the government to support the extremely destitute while focusing on individual responsibilities. The report analyzed that Germany saw a positive outcome of the program, as its unemployment rate went down by 3.04 percent while its employment went up 5.30 percent between 2009 and 2012.

The report argues that Korea needs to use the case as an example and seek employment expansion measures such as providing professional training to the jobless and employment services for re-hiring. “To maximize the effect of a welfare-to-work program in Korea, it should be combined with job-creating systematic reform, which will help to ease labor and corporate regulations. We need to enhance employment elasticity to enlarge employment opportunities and form an environment where companies will create jobs themselves,” insisted You Jin-sung, a researcher at Korea Economic Research Institute.