Active labor market policy in South Korea
Active labor market policies are government steps to help the unemployed find work. In South Korea, these policies are run by the Ministry of Labor and Employment. They include subsidized education and vocational training, direct cash support, and low-interest loans.
After the Korean War, Korea didn’t need these policies much. In 1963 up to 10.4% of people were unemployed, and exports were mainly low-skilled goods like shoes, wigs, and plywood. In the 1970s, many workers moved from farms to urban light industry, giving firms a steady supply of labor. Jobs were somewhat secure, with proper notice and a chance to challenge unfair dismissal. This continued into the 1990s during the “Miracle on the Han River,” when big family-run firms called chaebols dominated the economy. Unemployment fell to about 2.5% by 1997.
The Asian Financial Crisis of 1997 hit hard, and unemployment rose to about 8.7% by February 1999. The Brookings Institution notes that this rate felt as bad as 13% unemployment in other OECD countries because Korea had weaker social services and fewer women in the workforce to support unemployed husbands.
In response, a tripartite commission under President Kim Dae-jung created Korea’s first active labor market laws. These included measures that loosened unemployment protections and the Dispatched Worker’s Act, which created new temporary jobs for laid-off workers. Social spending increased, rising to about 4.8% of the total budget between 1997 and 2003, from 2.3% between 1990 and 1996. This expansion helped create more “non-regular” jobs, a situation some scholars call labor market duality—where insiders have stable jobs and outsiders do not.
Eligibility: unemployment benefits can last up to 240 days, depending on the worker’s age and how long they’ve been insured.
This page was last edited on 2 February 2026, at 05:24 (CET).