Government to Spend 7 Trillion Won on Birth Rate Aid

Starting in 2008, the government plans to allow middle-income families making approximately four million won a month to receive a government subsidy amounting to 30 percent of their child care spending every month.

Child care facilities for five hours a day or more for infants and toddlers under the age of five are expected to become eligible for government subsidies, in addition to the autonomy to decide their child care charges, in 2007.

According to “Comprehensive Measures against the Declining Birth Rate,” which Dong-A Ilbo obtained in an exclusive, the government plans to invest seven trillion won in 18 different projects beginning next year until 2009. They include offering child care grants, assisting infertile couples, offering paid maternity leaves and expanding child-care centers at work.

The government is currently reviewing an option to impose an additional tax, called the Birth Promotion Tax, which is expected to bring the government two trillion won, to finance projects concerned.

The new measure was devised by eight government agencies including the Ministry of Planning and Budget, the Ministry of Health and Welfare, and the Ministry of Gender Equality and Family. After consulting with experts, parties and administrators, the government plans to announce the finalized measure officially at the end of December.

According to the comprehensive measure, families who earn less than 130 percent of the average income of urban working families, or 4.04 million won a month, will receive 30 percent of the standard child care cost set by the government every month, beginning in 2008.

Given that the current average income of an urban working family is 3.11 million won and the standard child care cost for a child aged between three and five is 153,000 won, a family with a monthly income of 4.04 million won will receive 45,900 won every month. The less the family earns, the more child-care subsidy it will receive.

Furthermore, a new system called a “differential child care subsidy” will be introduced to child-care centers. Facilities which provide child-care services for more than five hours a day will receive subsidies in proportion to the duration of the child care they provide, while private kindergartens and half-day child care centers, which offer services for less than five hours a day, will not be eligible for the subsidy.

In an effort to promote the pregnancy of infertile couples on welfare, the government will provide each couple with 2.55 million won for each operation, or up to 5.1 million won, to help them pay for their infertility treatments.

The wages offered by the Employment Insurance Fund to female workers on child-care leave will also be raised from the current 400,000 won a month to 500,000 won a month in 2007.

Moreover, grants provided to regional child-care centers, which take charge of after-school activities for children of low-income families, will be increased from the current two million won to four million won in 2007.

In order to boost the birth rate, the government plans to divert central government budget money amounting to 1.2 trillion won to these projects next year, and expand the budget up to 2.1 trillion won in 2009.

The Ministry of Finance and Economy and the Ministry of Planning and Budget estimated that more than one trillion won is needed to finance the projects.

As a last resort, the Ministry of Finance and Economy is considering issuing additional national bonds or raising tax rates to make up the shortfall.

Analysts agreed on the need of measures to boost the birth rate. But they emphasize that a more careful approach needs to be taken to prevent the budget from being wasted, especially because financing is not easy these days.

Hyun Jin-gwon, an economics professor at Aju University, said, “It is hard to expect the quality of child care to improve if the government insists on handing out subsidies while prohibiting private companies from building child-care centers. This measure doesn’t respect the importance of the competition.”

Joong-Hyun Park legman@donga.com sanjuck@donga.com