published Mar 15, 2018, 2:59:22 AM, by Jiyeun Lee
(Bloomberg) —

South Korea plans an extra budget to help young people start companies and to support firms that hire them as the government battles to arrest the nation’s rising youth jobless rate.

The aim is to push youth unemployment below 8 percent by 2021, from 9.8 percent last year, the government said in statement on Thursday. The budget will be around 4 trillion won ($3.8 billion) and paid for with leftover tax revenue and spare public funds, Finance Minister Kim Dong-yeon said in a briefing in Seoul on Thursday. It won’t add to the government’s debt burden or hurt its fiscal soundness, Kim said.

Creating more jobs is one of the key promises of President Moon Jae-in, who pushed through an extra budget to add public-sector jobs last year. Without government effort, the youth jobless rate is expected to climb further as the number of people aged 25-29 is larger than other cohorts and this will create intense competition for those entering the workforce over the next few years, the government said.

“Unless steps are taken, the youth job market will be catastrophic for the next few years,” Vice Finance Minister Ko Hyoung-kwon said in a separate briefing Wednesday in Sejong, south of Seoul. The extra budget will be planned without issuing additional government bonds, according to Ko said.

The government hopes the budget can be approved in the parliament in April, according to the statement. It already passed a record 428.8 trillion won budget for 2018.

The extra budget in 2017 took more than a month to be approved by parliament as Moon’s party lacks a majority and opposition parties raised questions over whether it was necessary, considering the economy was growing.

Finance Minister Kim said the supplementary budget proposal this time is different from last year’s plan, and would be focused on creating private sector jobs, as opposed to the public sector.

Key points:

The government plans to offer up to 27 million won over three years to small-and-medium sized companies for every full-time worker they hire. Workers aged 34 or under who get hired by small companies will be exempt from personal income tax for five years. For those aged 34 or under who work for a small company, cheap loans to pay for house rentals and deposits will be available. To encourage entrepreneurship, young people who open their own businesses will be exempt from personal income and corporate taxes for five years.

To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net To contact the editors responsible for this story: Brett Miller at bmiller30@bloomberg.net James Mayger
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