4,800 businesses closed after receiving youth employment subsidies

It has been found that 4,800 out of about 80,000 businesses that received “Additional youth employment subsidies” from the government have already been shut down. Under this system, the government offered financial incentives of up to 9 million won per year to SMEs that employ young people as regular workers for three years. Its goal was to help young people have stable employment for an extended period. However, about 20,000 jobs for the youths created by companies that went out of business had a fleeting nature, resulting in a waste of 148.8 billion won in tax money paid as subsidies.

Initially, when this project was pilot-launched in August 2017, only SMEs with growth prospects with revenue over a certain amount in the preceding three years were eligible for subsidy payments. However, with the expansion of this program in March 2018, SMEs with five or more employees, excluding hazardous industries, became eligible for subsidy payments, with revenue screening abolished. In other words, it has changed to a system in which companies could receive subsidies without the proof of financial data as long as they turned in the employment contract of the hired youth and documents proving wage payment for them.

For programs that the government provides subsidies to create jobs, it is common sense to review the business conditions to determine whether the company can maintain long-term employment. As for the “Employment incentives for the middle-aged job creation” program, which supports small and medium-sized enterprises that hire job seekers over the age of 50, the evaluation results of the financial soundness of the companies applying are reflected in the selection of subsidy recipient companies. However, as the youth employment incentives selected subsidy recipient companies without evaluating the company's financial situation, there were cases where a business with annual sales of zero received the subsidy before going out of business. No wonder some say that that tax money is up for grabs.

The Board of Audit and Inspection, which audited the youth employment subsidy program, notified the Ministry of Employment and Labor last month, saying, “When pursuing similar job creation programs in the future, you need to come up with improvement measures such as setting financial criteria to screen businesses.” However, the “Youth job leap incentive,” which replaces the youth incentive program, is run without financial requirement review. It is high time that the Ministry of Employment and Labor strengthen the screening criteria for youth job-related subsidies so that no precious tax money will be wasted.