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South Korea: Childcare Leave & Fertility

Study: Paid Childcare Leave, Fertility, and Female Labor Supply in South Korea

In 2011, South Korea introduced a significant policy offering paid childcare leave and increased subsidies for working mothers, targeting the country’s lowest-in-the-world total fertility rate (TFR) and accelerated aging population.

Policy Mechanics

  • Financial Support Scheme: Initially, the policy provided 500 USD per month to women earning under 1250 USD. This amount increased incrementally for higher earnings, up to a cap of 1000 USD for those earning above 2500 USD.
  • Objective: The policy aimed to incentivize childbirth and support working mothers in a country grappling with severe demographic challenges.

Study Approach and Methodology

  • Data Source: Researchers utilized the National Fertility and Family Health Survey spanning 2006 to 2015.
  • Design: A difference-in-difference design, supplemented by a regression kink approach, was employed to analyze the impact of the childcare subsidy on fertility, contraception, and labor supply.
  • Target Population: The study focused on married, employed women, excluding those who were self-employed or had given birth outside of marriage.

Key Findings

  • Increased Conception Rates: The policy was associated with a 2.3 to 2.5 percentage point increase in conception rates. The arc elasticity of conception to the childcare subsidy was 0.65, suggesting a substantial response to increased financial incentives.
  • Decreased Contraception Use: A decline of 3.4 to 3.6 percentage points in contraception use was observed, with an arc elasticity of -0.10 in response to the subsidy.
  • No Significant Impact on Employment: The policy did not show a consistent effect on the shift towards permanent working arrangements for new mothers.

Comparative Analysis

  • Global Context: This study provides a rare insight into pro-natal policies in East Asia, a region with some of the lowest fertility rates globally. It contrasts with the majority of existing research focused on Western nations.

Implications and Relevance

  • Addressing Demographic Challenges: The policy addresses critical issues of a rapidly aging population and declining birth rates, significant concerns for South Korea’s economic and social stability.
  • Insights for Other Countries: The findings offer valuable lessons for other countries facing similar demographic challenges, especially those in East Asia.
  • Impact on Gender Equality: The policy’s focus on working mothers highlights efforts towards enhancing gender equality in a country with middling rankings in this area.

Limitations and Directions for Future Research

  • Limited Scope on Abortion Impact: Due to legal constraints, the study could not assess the policy’s effect on abortion rates. Future research could explore this aspect as abortion laws evolve.
  • Concentration on Working Mothers: The study’s primary focus on working mothers leaves out a significant portion of the population, suggesting a need for broader research.

Bottomline

South Korea’s childcare leave policy has positively influenced fertility behavior, marking a progressive step in addressing the country’s demographic challenges and advancing gender equality in the workforce. However, the full spectrum of its impact, particularly on non-working mothers and abortion rates, remains an area for further investigation.