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[Editorial] W100m childbirth incentive

Seoul explores cash incentive for each child born amid plunging birth rate

By Korea Herald

Published : April 25, 2024 - 05:28

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The South Korean government has taken a variety of policy steps to bolster the declining birth rate, which is accelerating during the much-dreaded demographic crisis. This time, a state-run agency is exploring the feasibility of a drastic proposal: a handout of 100 million won ($72,500) in cash for each baby born.

The Anti-Corruption & Civil Rights Commission started an online survey on April 17 in order to re-evaluate the country’s birth promotion policies. The survey is set to run through Friday.

“About 280 trillion won of state budget has been poured from 2006 to 2021 to boost the country’s birth rate, but the fertility rate is still falling,” the commission said. “The survey is designed to re-evaluate the government policies to tackle the low birth rate and check whether direct financial support to recipients could be more effective.”

The survey asks mainly three questions: whether unprecedented cash incentives such as the 100 million won recently offered by a private company would motivate respondents to have children; whether the government should be allowed to spend an estimated 23 trillion won per year; and whether the budgets originally earmarked for other state policies should be shifted to the cash handout program.

The first question is apparently based on South Korean builder Booyoung Group’s proposal. In February, the company said it would provide its employees with 100 million won per birth -- as many as two times per family -- to help shore up the country’s continually falling birth rate.

As with Booyoung’s high-profile promotion program, the Anti-Corruption & Civil Rights Commission’s survey has touched off a heated debate about whether such cash incentives would be both effective and sustainable.

For starters, as the commission clarified in the survey, the cash handout program, if implemented, would require a total of 23 trillion won in state funds, given that about 230,000 babies were born in 2023. Due to the decrease in the birth rate, the number of new babies is estimated to stand at around 224,000 this year, but an estimated 22.4 trillion won needed to cover the incentive for all these births is still an extremely burdensome amount, considering that the amount is equivalent to about half of the total that the government spent on all of its birth promotion programs last year.

For the Yoon Suk Yeol administration, which is already fighting hard to prop up shaky fiscal soundness, securing such a large amount of new budget funding would be a tall order.

There is no question that the country needs all the resources and policy ideas available to address its dangerously low birth rate. In 2023, Korea's fertility rate -- the average number of children a woman is expected to give birth to in her lifetime -- hit 0.72, down from the previous record low of 0.78 in the previous year. The figure is feared to decline further to 0.6 in 2024. These numbers are dishearteningly removed from the replacement rate of about 2.1, which is needed to keep the country’s population steady.

In major online communities, the survey on the cash handout is sparking mixed reactions. Proponents argue that whatever measures, including 100 million in cash handout, should be taken to stop the birth rate falling to below the 0.7 level. Opponents, however, claim that cash handsets have limitations as a long-term measure and may end up as a waste of public funds.

The Korea Development Institute, a state-run think tank, said in a recent report that the percentage of Korean women in their 30s without children whose careers were interrupted fell from 33 percent in 2014 to 9 percent in 2023, but the percentage for those with children edged down only from 28 percent to 24 percent during the same period.

The KDI suggested the government should prioritize changing social and workplace conditions to grapple with the birth rate problem.

It is unclear whether the 100 million won cash handout program would actually work to bolster the birth rate. What’s certain is that the country’s demographic crisis is serious enough to consider even such a dramatic proposal.