The 11.2-trillion won plan is the first since Moon Jae-In was elected president of Asia's fourth-largest economy last month and the finance ministry said it will be mostly funded by tax revenue rather than issuing state bonds.
Under the proposals, Seoul will spend 4.2 trillion won to help create 110,000 jobs -- including 71,000 in the public sector -- while 7 trillion won will be set aside for welfare for the elderly, working mothers and low-income households.
Among the new jobs being targeted are firefighters, police, assistant teachers and social workers, while young job seekers, small businesses and tech startups will also be helped.
Financial assistance will be increased for women on maternity leave, more daycare centres and nursing homes for the elderly are to be opened, while businesses hiring more full-time workers are to be given extra funding.
"We launched this extra budget as the high unemployment rate among young South Koreans will not be solved without drastic measures," Park Chun-Sup, the ministry's chief of budget, told reporters.
"There is a concern over a potential mass unemployment... we have nearly 1.2 million young, jobless people," he said.
Decades of rapid growth saw the South rise from the ashes of the Korean War to become a member of the OECD group of leading economies, but expansions has slowed more recently.
Economic frustrations were among the factors that fuelled the mass anti-corruption protests that saw former president Park Geun-Hye impeached and arrested over corruption.
Moon has described creating jobs, especially for the young, as a top policy priority.
Unemployment among under-30s hit 11.2 percent in April, more than double the rate for the entire working population.
South Korea's economic growth, which hit 2.8 percent in both 2015 and 2016, is expected to further slow to 2.6 percent this year, according to the central Bank of Korea.
The country's birthrate is one of the world's lowest and has led to concerns about the burden of welfare funding for the ageing population.