What happened
The South Korean National Economic Advisory Council, a presidential body, held a public forum on October 26 to discuss policy responses to the 'AI great transition era.' Experts proposed a 'national activity allowance system' designed to provide income security while workers undergo training for AI-impacted labor markets.
During a forum held at Ferrum Tower in Seoul, the National Economic Advisory Council explored strategies to mitigate the social impact of AI. Vice Chair Kim Sung-sik emphasized that the government must balance investment in AI infrastructure with investments in human capabilities to create a 'virtuous cycle' of growth.
Professor Hong Kyung-joon of Sungkyunkwan University introduced the 'national activity allowance system,' which is structured in two stages. The first stage, the 'national capability allowance,' provides financial support for up to 12 months over a lifetime to workers undergoing career transition or job entry training. The second stage, the 'national activity allowance,' extends support for up to 24 months to assist with child care, utilizing an income-proportional benefit model.
Additional proposals from researchers at the Korea Labor Institute and the Korea Institute for Health and Social Affairs included shifting employment insurance to an income-based system—moving away from traditional wage-worker definitions—and establishing sovereign wealth funds specifically to expand the social safety net using future response funds.
Source details: biz.chosun.com
Why it matters
As AI adoption accelerates, labor market polarization is increasing, making traditional employment models less reliable. This proposal represents a shift in government thinking from purely technological investment to human-centric social safety nets. By linking income support directly to career transition training and caregiving, the policy aims to prevent structural unemployment and ensure that the economic gains from AI are reinvested into the workforce, potentially serving as a model for other nations facing similar AI-driven displacement.
The proposal acknowledges that AI is not merely a technical challenge but a structural economic shift that threatens to leave workers behind. By addressing the 'livelihood gap'—where workers cannot afford the time to retrain—the policy attempts to solve a practical barrier to workforce adaptation.
The shift toward an income-based insurance system reflects the reality of the 'gig' or non-traditional work environments often associated with AI-enabled platforms. If implemented, this would represent a significant modernization of South Korea's social welfare infrastructure, moving it away from industrial-era frameworks toward a model designed for a more fluid, AI-integrated economy.
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What to watch next
The proposal remains in the discussion phase, and no legislative timeline or funding mechanism has been finalized. Observers should monitor whether the government adopts these recommendations into formal budget planning or national policy, specifically regarding the proposed overhaul of employment insurance and the potential creation of sovereign wealth funds to finance these social safety nets.
The primary unknown is the source of funding for these programs. While experts suggested using 'future response funds' and sovereign wealth funds, the government has not confirmed how these would be capitalized or if they would require new tax structures.
The feasibility of transitioning from a wage-based employment insurance system to an income-based one using National Tax Service data is a complex administrative hurdle. Future updates will likely focus on whether the government initiates pilot programs for these allowances or moves to formalize the proposed insurance reforms.