Government Cuts Social Enterprise Job-Creation Budget... Execution Rate Plunges to 13.8% After Policy Overhaul [Labor Budget Deep Dive 3]

Two out of three small social enterprises receive 500,000 won a month
"Support criteria must be readjusted as hiring capacity declines"

Representative Park, 49, who runs a prospective social enterprise in Cheonan, South Chungcheong Province, that employs six people with developmental disabilities and older adults to make eco-friendly household goods, has scrapped all plans to hire new workers from vulnerable groups this year. Until 2024, the company received around 1.6 million won per new hire, including 70% of the minimum wage and premiums for the four major social insurance programs. But after a revision to the program cut the subsidy to “500,000 won a month”—one-third of its previous level—Park said, “At least 2.3 million won per person goes out every month, including social insurance premiums. What small business could afford to run a deficit and hire more people just to receive a mere 500,000 won?”

Execution rate in the 80% range plunges to 13.8%

According to the National Assembly Budget Office’s report, “Analysis of the 2027 Budget Proposal by Committee,” released on November 10, the Ministry of Employment and Labor has budgeted 29.995 billion won for next year for the job creation program under the “Promotion of Social Enterprises” project in the Special Account for Balanced National Development, down 2.105 billion won, or 6.6%, from this year’s 32.1 billion won. Under the program, the government subsidizes part of labor costs when a social enterprise hires a new worker from a vulnerable group and retains them for at least six months.

The problem is that the program’s revision failed to adequately reflect employment conditions and demand for support on the ground, resulting in unused budget funds. From 2022 to 2024, the program provided a fixed-rate subsidy of 60% to 70% of the minimum wage (1.15 million to 1.44 million won per month), plus an additional 150,000 to 200,000 won per month toward social insurance premiums, for up to five years. But when the budget was restructured in 2026, the minimum-wage-linked system was abolished and replaced with fixed monthly payments of 500,000 to 900,000 won. General workers were excluded from support, and the additional subsidy for social insurance premiums was eliminated entirely. The support period was also shortened from up to five years to three years (two years as a standard period, plus one year for top-rated enterprises). With the subsidy falling to 24% to 42% of the minimum wage, incentives for small social enterprises to hire weakened. As of the end of August 2026, the program’s execution rate stood at just 13.8%; as of November, it was reported to be around 25%.

65% of small businesses receive the lowest subsidy of 500,000 won a month

The government divides social enterprises into five tiers based on assessments under the Social Value Index (SVI), with labor-cost subsidies varying by tier. Enterprises scoring 90 or above receive 900,000 won a month in the “Excellent” tier; those scoring 75 to 89 receive 700,000 won in the “Good” tier; and enterprises rated “General” or not assessed receive 500,000 won. These amounts are equivalent to 42%, 33% and 24% of the minimum wage, respectively. According to the National Assembly Budget Office’s analysis, among workplaces with fewer than 30 employees, 64.8%—657 of 1,014—were rated “Satisfactory” or below on the SVI in 2025, meaning two out of every three fell into the lowest subsidy bracket. By contrast, 59.2% of enterprises with 30 or more employees were rated “Good” or above. Small social enterprises have less capacity to prepare for assessments and therefore receive lower subsidies, which could lead to fewer new hires. Critics say this creates a structural barrier to escaping lower ratings, since employment and social-value creation records are in turn reflected in future SVI assessments.

Government says tiered subsidies “incentivize performance”; budget office says “support criteria need revision”

The Ministry of Employment and Labor says tiered subsidies are intended to incentivize performance. The goal is to encourage the creation of quality jobs by giving enterprises with stronger social-value creation records higher subsidies for longer periods. The National Assembly Budget Office, however, said the current system does not adequately account for the employment conditions facing small businesses. “Despite the policy goals of encouraging the hiring of vulnerable groups and revitalizing the social economy, labor-cost subsidies amounting to only 24% to 42% of the minimum wage are not enough to encourage small businesses to make new hires,” it said. Warning that maintaining the current system could set off a vicious cycle in which hiring capacity shrinks and poor performance is reflected in lower assessment ratings, the office called on the ministry and the Korea Social Enterprise Promotion Agency to revise the subsidy criteria and rates to reflect conditions on the ground, rather than cut the budget.

This content was produced with the assistance of AI translation services.