South Korea to offer up to $740 monthly to young people working in regional SMEs

South Korea is rolling out a significant financial incentive program to encourage young people to work for small and medium-sized enterprises (SMEs) outside the capital region. Starting next year, eligible individuals can receive up to 1 million won (approximately $740) per month for two years. This initiative is a key component of the government's 'Youth Employment Recovery Plan,' designed to address the persistent wage disparity between large corporations and smaller regional businesses.

The plan encompasses a multi-stage approach, focusing on pre-employment, employment, and post-employment support. Before entering the workforce, the government aims to cultivate over 300,000 skilled individuals in advanced fields like artificial intelligence by 2030, an increase from the original target of 200,000. This includes expanding vocational training programs like the K-New Deal Academy and bootcamps.

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There is research showing that the gap between the actual wages of young people working in regional SMEs and the wages they wish to receive is 1 million won per month. The intention is to fill this gap over the first two years using various means.

During the employment phase, a new platform called 'Youth Playground' will be launched to connect job-seeking youth with companies and public institutions. The government is also broadening the scope of the Youth Employment Leap Incentive, which encourages companies to hire young people. This incentive will now extend to mid-sized companies in the Seoul metropolitan area and large companies in non-metropolitan regions. Furthermore, the existing incentive for regional SME employees, previously offering up to 7.2 million won over two years, will be expanded to include young people working in the capital region and increased to a maximum of 18 million won.

Post-employment, the focus shifts to asset accumulation. A special track within the Youth Future Savings program will be introduced for those working in regional SMEs, significantly increasing the government's matching contribution from 12% to 25%. Additionally, the Youth Culture and Arts Pass, previously a one-time benefit for those aged 19-30, will now be available annually until age 34. The government estimates that a combination of these incentives could provide nearly 1 million won in monthly support to young people working in regional SMEs, directly addressing research indicating a 1 million won monthly wage gap perception.

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Combining the effects of public jobs and youth new deal measures, we expect a job creation effect of over 90,000 plus alpha. We also anticipate a significant decrease in the number of young people who are not in education, employment, or training.