South Korea’s Golden Time to Overcome Low Birth Rate

South Korea is facing a critical period in addressing its low birth rate, with the next 10 years being deemed the “golden time” to overcome this issue. According to a report by the Korea Institute for Health and Social Affairs, the female population aged 31 to 35, the main childbearing age group, is expected to remain at around 1.5 million until 2032 and then rapidly decline thereafter.

The Need for a Temporary Fund to Address Low Birth Rate

The report highlights the need for a temporary fund to be created to respond to the low birth rate intensively and increase financial stability. The current budget for addressing the low birth rate is estimated at 270 trillion won, but a significant portion of this is indirect support, such as housing support, which has little direct relation to the low birth rate.

Limitations of Current Financial Scale

The report points out that the current financial scale has limitations in overcoming the socioeconomic conditions that are the cause of the low birth rate. In particular, the scale of the low birth rate finance is analyzed to be significantly reduced from 2.38% to 1.5% of nominal GDP in 2022, when excluding construction costs and reflecting actual benefits such as low interest rates.

The Importance of Centralizing Financial Resources

The report emphasizes the need to centralize and stabilize financial resources to improve the efficiency of low birth rate support projects and finances. Currently, financial resources for addressing the low birth rate are scattered across the general account, special account, and fund, making it difficult to establish mid- to long-term business plans and execute core projects.

Establishing a New Fund

The report suggests that a new fund should be established to centralize financial resources and increase stability. This fund would allow for investment in core projects that are effective in increasing the birth rate, such as maternity and childcare leave. The report cites many OECD countries as examples of countries that have established a maternity and childcare fund to secure funds through social insurance and tax-based national finances.

Government’s Plan to Establish a Special Account

The government has announced the establishment of a special account for the population crisis, which would grant the Presidential Committee on Low Birth Rate and Aging Society the authority to adjust the budget. However, discussions on securing funds for this special account have not progressed.

Establishing an Independent Financial Basis

Ultimately, discussions on establishing an independent financial basis for the low birth rate budget through funds or special accounts are likely to be possible after the establishment of the Population Strategy Planning Department. The government plans to review this issue after the Population Ministry Establishment Act is passed through the National Assembly.