The Ministry of Strategy and Finance is set to take a scalpel to the controversial day care subsidy program for children under 24 months old.
In March, the government began to provide day care subsidies to all families, regardless of their income, only if they registered their toddlers with a child care center. Previously, the subsidies were offered to families in the bottom 70 percent of the income distribution.
The expansion was rushed by the ruling Saenuri Party, which was blinded by its desire to win the April parliamentary election. Under pressure from the party, the administration implemented it without making necessary preparations. As a result, the ill-advised plan caused many problems, not least funding difficulties for local governments.
The ministry’s move to overhaul the misguided program is therefore a step in the right direction. But the problem is that it faces strong resistance from both the ruling party and the main opposition Democratic United Party. It remains to be seen how the ministry will push through its reform plan.
Kim Dong-yeon, second vice minister of finance and economy, suggested a need to make the universal program more selective, questioning the wisdom of providing subsidies even to the sons and grandsons of chaebol families.
Kim said that social justice would be enhanced if subsidies for chaebol offspring were cut and used to increase support for the underprivileged.
Kim’s point is perfectly valid. The program should be restored to its original form, although it would cause some confusion among families with toddlers.
The expansion of the subsidy program was misconceived for several reasons. In the first place, it led many families to shift from in-home care to day care services, a change that is not desirable given that in-home care is recommended for toddlers as it contributes to their emotional development.
As many stay-at-home moms opted to take advantage of the subsidized care services, child care enrollment surged. The surge, however, was not met with a corresponding increase in the supply of such services. Existing child care centers and their staff had to accommodate the increased enrollment.
The sharp increase in day care demand also caused problems for working moms, who were in greater need of child care services, by making it more difficult to secure slots for their children.
A more serious problem was the funding shortages at local governments. The subsidy program is only about half funded by the central government, with the remainder covered by each local government.
But the subsidy plan was expanded without any prior consultations with local governments. As a result, local governments were forced to implement it without the required funds on hand.
Hence, the association of provincial governors and mayors warned in March that they would not be able to continue the program without funding support from the central government. Last month, they renewed their warning.
On Tuesday, the Seocho Ward Office in the upscale Gangnam area of southern Seoul said its funds for the day care program would run out by July 10. The Seoul Metropolitan Government provided emergency funds for the ward office to maintain the program for another month.
The Seocho District is merely one of the many local governments facing funding problems. But the Ministry of Strategy and Finance says it cannot backstop local governments because if it does, it sets up an undesirable precedent and will face similar funding requests in the future.
The ministry’s policy is well advised. It needs to find ways to make the unsustainable program sustainable.
As local cities and provinces under its control face funding difficulties, the Democratic United Party demanded that the central government create a supplementary budget to finance the day care subsidy program. This is nothing more than nonsensical.
The subsidy scheme should serve as a reminder that populist welfare programs created for political purposes do not last long. This applies to the free school lunch program, which also faces many problems.
Under a limited budget, the lunch program cannot provide quality food to students. For instance, the milk it provides to students is not of the same quality as the milk they drink at home.
As a result, many students simply refuse to drink their school milk. According to reports, more than 15,000 packs of milk are thus thrown away every day. Furthermore, many students skip lunch altogether. This should make the opposition party realize that the free lunch program has simply failed.
