Yoonyoung Yang
Economics Department of the OECD
Jon Pareliussen
Economics Department of the OECD
Sunyoung Choi
Korea Institute for Health and Social Affairs
Sunyu Ham
Korea Institute for Health and Social Affairs
Hyunjeong Hwang
Economics Department of the OECD
Family policies, including early childcare and education, paid parental leave and financial benefits, can make it easier to combine work and family and thereby reduce the opportunity cost of having and raising children. Korea has scaled up family policies considerably and compares well with other OECD countries on many indicators. Even so, the policies have not been sufficient to make work and motherhood compatible in general. Resulting fertility gains have therefore in the big picture been marginal and mostly come at the expense of female employment. The effects of policy interventions vary based on factors like women's education and labour market position, access to support programmes like quality childcare, and childcare support from relatives. Some gaps remain to bring childcare fully in line with working parents’ needs. Parental leave eligibility is restricted and take-up low for a number of reasons including low replacement rates and weak legal protection against discrimination compared to OECD best practice.
Family policies, including early childhood education and care, paid parental leave and family benefits, can reduce the direct cost and limit the loss of lifetime earnings from having and raising children (referred to as the opportunity cost of childrearing in Chapter 3). Policies such as publicly financed childcare and paid parental leave are designed to make it easier to combine work and parenthood, but any cash transfer or subsidised service provided in-kind will increase a household’s disposable income. As is the case with a spouse's income, this income effect enables parents (usually mothers) to stay at home, and the overall effect will depend on individual situations and preferences. To illustrate the point with an extreme example, a stay-at-home mother who already has her child enrolled in childcare while it is payable will not start working if it becomes free. On the contrary, the savings on childcare expenses could enable her to stay at home longer than what would otherwise be the case. Likewise, mothers prone to enrol their children and increase their labour supply if childcare became cheaper would only do so if childcare was available, conveniently located and fulfilled the parent’s quality requirements. These mechanisms can help explain why such policies are not always as impactful as expected and why the effects vary based on individual circumstances and cross-country differences in for example labour market institutions and gender norms, as discussed in Chapter 3.
OECD countries follow different pathways in building their packages of family policies. Nordic countries spend a considerable amount on providing public services for families with children. Some countries, such as Hungary and the Czech Republic, focus more on providing families with financial support through family cash benefits and tax breaks. Other countries put greater emphasis on targeted benefits directed at specific groups, such as single-parent families or families on low incomes. France combines generous cash and tax benefits with active spending on family services. Others, including Japan, Türkiye, the United States and some countries in Southern Europe, have lower family spending than the OECD average (Figure 4.1, Panel A). Despite these differences, family policies have shifted in many OECD countries in recent years to encourage a more gender-equal division of labour by boosting public support for early childhood education and care and promoting paid leave for both parents.
Korea has introduced or strengthened a number of family policies in recent years. Public spending on family benefits increased from 0.7% of GDP in 2010 to 1.5% in 2020, and is estimated to have increased further by about 0.1-0.2% of GDP since then. The enrolment rate in childcare facilities has increased significantly with higher public investment in preschool childcare. Income loss from parental leave gave the right to employment insurance from 2001 and the parental leave benefit for dual-income parents has been increased since 2022 conditional on both parents using parental leave (OECD, 2024a). The eligibility for child allowances has been expanded to children up to the age of eight (previously five), and the allowance amount for infants under two years has been significantly increased.
However, notable gaps persist and there is scope to prioritise the use of public funds to maximise their effect. Despite a remarkable increase in family spending, the total fertility rate has continued to decline, indicating a potential misalignment between public spending and actual needs (Figure 4.2). Usage rates of paid parental leave are the third lowest in the OECD, after Ireland and Japan. Some gaps exist between the level of service parents need from childcare and what is actually given, and there is room to further increase quality to converge to high-performing OECD peers. The largest share of the budget was allocated to housing, which is a much less direct way of supporting fertility than parental leave policies, the category receiving the smallest portion of Korea’s fertility budget despite survey results and research underscoring their importance in addressing the low fertility rate. Moreover, the share of the budget allocated to overall policies aimed at enhancing work-life balance has declined in recent years (NABO, 2023). Public spending on family benefits is still lower than the OECD average of 2.3% (Figure 4.1, Panel A). Korea’s low family spending is partly due to the relatively low number of children, but spending per child (as a share of GDP per capita) is also lower than the OECD average (Panel B).
2019 or latest
Source: OECD, Social Expenditure Database, OECD National Accounts Database and own calculations
Note: Bars represent the result of the government's survey on the most needed measures to boost the fertility rate. The survey targeted 1,200 citizens aged 18 to 79 residing nationwide in Korea. The triangles represent the executed budget to boost fertility in 2022.
Source: OECD Economic Surveys: Korea 2024.
Research findings suggest that these gaps in family policies, working culture and gender norms are mutually reinforcing the difficulties of combining career and family in Korea (Seo and Kim, 2016; Yang et al., 2021). Empirical evidence shows that parental leave and childcare support, two key family policies, have had positive effects on fertility, but limited effects on women's employment rates. This appears to be because, even after returning from parental leave, mothers find it difficult to balance work and childcare in practice due to long working hours and an inflexible working culture, where workers are expected to be fully committed, as discussed in Chapter 3.
Early childhood education and care (ECEC) policies are key to maternal employment and children’s cognitive and social development (OECD, 2011), and the expansion of quality childcare has been an overarching component of family policies behind the rise in female labour participation in a number of OECD countries since the 1960s. Access to affordable and quality childcare services allows parents with young children to engage in paid work (OECD, 2017). Children benefitting from high-quality childcare services perform better in school than children who do not attend (Vandenbroeck, 2020; Vandenbroeck et al., 2018). Many studies show that quality childcare boosts female employment and fertility. For example, Greulich et al. (2016) found that childcare development at the country level increases the individual probability of women having a second child more than other types of support, such as paid parental leave and lump-sum cash transfers.
The trifecta of affordability, availability and quality, all directly affected by policy, are key determinants of the use of childcare services, while the socio-economic status and attitudes of parents also play a role (Eurofound, 2020; Janta, 2014). Childcare provision and subsidised childcare fees facilitate take-up across the earnings distribution, but are likely to disproportionately influence the fertility of highly educated women, because they are more active in the labour market and more likely to have sufficient income to cover childcare fees (Baizan et al., 2016; Vandenbroeck, 2020; Vandenbroeck et al., 2018).
Public spending on childcare and preschool services as a share of GDP has increased significantly over the past 20 years in most OECD countries, but still varies across the OECD (Figure 4.3, Panel A). Nordic countries, Belgium and France offer comprehensive, largely publicly funded childcare and allocate a high share of family-related spending to public childcare. Sweden and Denmark have spent the most per child on childcare services since the early 1990s (Sobotka et al., 2019). Another example is Norway, where public expenditure on childcare almost doubled between 1998 and 2012, when it reached 1.4% of GDP. Policy reforms initiated to reduce user fees and provide full kindergarten coverage as a legal right to parents from 2009 greatly increased enrolment, and the government went from covering 55% of the kindergartens’ operating costs in 2000 to 85% in 2012. To expand the qualified facilities, the government supports both public and private institutions and applies the same staff requirements and quality standards, which makes private and public institutions largely equivalent. ECEC enrolment rates are now among the highest in the OECD while the use of the home-care benefit which is offered as an alternative fell from 75% of all children aged one to two in the early 2000s to less than 25% in 2011 (Engel et al., 2015; OECD, 2023a).
The Korean government has sharply increased public spending on childcare by introducing a series of major reforms aimed at increasing the availability and affordability of early childcare and education services, including extensive subsidies to childcare providers and generous cash benefits for parents using ECEC (OECD, 2019d). A major policy reform in 2013 made all preschool-aged children eligible for free childcare regardless of parental income, accompanied with the introduction of a parental home-care allowance for parents opting to care for their child at home (Home Childcare Allowance). Measured as a share of GDP, Korea’s spending on ECEC is still lower than the Nordic countries, but spending per child as a share of GDP per capita is approximately 20%, which is third-highest in the OECD and on par with the Nordics (Figure 4.3, Panel B). Even so, the current childcare system falls short of meeting the needs of working parents, with approximately 30% of mothers citing a lack of suitable childcare options as a reason for career interruption (MOHW, 2022). This reflects quality differences between different categories of suppliers, a scarcity of the high-quality childcare options in high demand, gaps in the service offer after school hours, and a mismatch between parents’ long and inflexible working hours and the shorter opening hours at childcare centres.
Note: Public expenditure on early childhood education and care covers all public spending towards formal day-care services (e.g. day care centres, generally aimed at children aged 0 to 2, inclusive) and pre-primary education services (including kindergartens and day-care centres which usually provide an educational content as well as traditional care for children aged from 3 to 5, inclusive). In some countries local governments play a key role in financing and providing childcare services. Such spending is comprehensively recorded in Nordic countries, but in some other (often federal) countries it may not be fully captured by the OECD social expenditure data.
Source: OECD Family Database, OECD National Accounts Database and own calculations.
Lee (2016) provides tentative evidence of an increase in both the labour force participation and the number of hours worked by mothers between 2010 and 2013, when the universal free childcare policy began. However, because of the simultaneous introduction of universal free childcare and the homecare allowance, it has been difficult to establish empirically the effect of childcare policies on labour supply. Common to the two policies is that any monetary or in-kind transfer increases families’ disposable income, and this income effect will reduce female labour supply when seen in isolation. Apart from this, these two alternatives give parents diametrically opposite incentives. Childcare support is an indirect subsidy of women’s labour participation, while a parental home-care allowance increases non-labour income for households conditional on caring for your own child, thereby directly subsidising staying at home to care for children (Cukrowska-Torzewska, 2017).
The uptake of childcare and home care allowances varies by the age of the child and parents’ income quintile. The rate of receiving the allowance for children aged zero is overwhelmingly high at 83.8%, but it drops significantly to 29.2% at age one and decreases to less than 10% from age three onwards (Table 4.1). According to Noh (2016), 12.2% of the households in the lowest income quintile do not use childcare facilities, compared to only 3.5% in the highest income quintile, but this tendency to provide childcare at home and differences in behaviour by household income level mainly relates to children aged zero to one, while there was no consistent pattern for pre-school children aged two and above.
2018
Note: The percentages are weighted values, and the number of cases represents the actual number of respondents.
Source: Kim (2022).
Before 2013, childcare fees were provided primarily for low-income households, which has allowed extensive research on the impact of childcare support on employment among low-income groups. The overall picture is that there is no conclusive evidence that the introduction of publicly financed childcare has increased female labour supply. Evidence from a 2007 reform shows a negative female labour supply effect from childcare subsidies (Choi, 2011; Byun and Heo, 2014), while the time spent caring for children increased. Kim (2018) found that the Parental Child Care Subsidy, which subsidised low-income parents to pay for childcare increased the labour force participation rate of married women by 3.5 percentage points, while no effects were found from the Basic Child Care Subsidy, which provided direct support to childcare facilities for infants based on the number of children in the facility. Neither of the subsidies had a significant impact on the weekly working hours of married women who participated in the labour market.
Kim (2022) suggests that for public funding of childcare to have a positive labour supply effect, a change in caregiver is required. If children are already attending childcare institutions, paying for childcare merely reduces household expenses, creating an income effect without necessarily increasing the incentive to participate in the labour market. Kim found that there was no increase in the labour participation rate among the group providing childcare at home – the exact group the policy had targeted. Instead, Kim’s results show a decrease in working hours and labour participation among employed women.
The dominance of the income effect of childcare subsidies should be seen in the context of the quality and availability of subsidised childcare options. Min and Lee (2020) pointed out that the policy of childcare fee support does not guarantee access to quality childcare services. By exploiting regional differences in childcare availability they found that childcare subsidies encouraged women with more than one child in areas with good access to childcare facilities to maintain a career. According to their results, the subsidy did not affect career maintenance among mothers with one child in a dual-income household, or incite mothers who had not previously worked to enter employment. However, the findings suggest the reason many studies have been unable to detect a positive influence on career maintenance from childcare subsidies could be linked to childcare facilities being too few and geographically mismatched to demand or of insufficient quality.
Min and Lee (2020) also found evidence that childcare subsidies increased fertility, conditional on the availability of quality childcare. In areas with a high supply of childcare facilities or public daycare centres, the birth rates among women aged 30 to 49 increased after free childcare was introduced. Lee (2022) used National Health Insurance big data to explore whether the policy had different impacts on childbirth depending on the supply of public childcare facilities by city, county and district. The findings indicated that the higher the possibility of enrolling in public daycare centres, the higher the birth rate. This effect was stronger at higher income levels up to, but not including, the top 20%. Both studies indicate that the success of childcare subsidies as a policy tool to increase birth rates is directly related to the availability of adequate childcare services, both in terms of quality and quantity.
Availability of childcare is crucial to reconcile work and family. In order to do so, the service should start immediately after the end of parental leave and meet parents’ and children’s diverse needs, such as the age of children accepted and opening hours adapted to work hours (Sobotka et al., 2019). Gaps in the service on offer, such as the limited availability of affordable after-school care, make it difficult for parents (usually mothers) to continue to work full-time.
The enrolment rate in early childhood education and care can be used as an indicator of availability. Despite increasing over time in most countries, enrolment of children aged zero to two is generally lower than that of children aged three to five, while cross-country variation in participation rates of very young children is also higher. Participation rates of children aged zero to two were 60% or above in the Netherlands, where services are often used on a part-time basis, while some countries have participation rates below 10% (Figure 4.4, Panel A).
However, as highlighted in Mills et al. (2014), it is necessary to look beyond enrolment rates to determine if childcare supports work-life balance and parental employment to its full potential. If formal childcare is provided for only a few hours per week, it is unlikely to lead to full-time employment. As an example, the EU Barcelona targets cover both participation and intensity of ECEC use in member states. The participation rate target is 50% for children under the age of three and 96% for children aged three to pre-school by 2030, and the associated criteria for satisfying intensity of participation are at least 25 hours per week for zero- to two-year-olds and 35 hours per week for those aged three or above (European Commission, 2022). In most EU countries, zero- to two-year-olds in early childhood education and care use it for more than 25 hours per week, with an average of 32 hours (OECD, 2024b).
Enrolment and intensity of participating in ECEC are both relatively high in Korea, but this may still not be sufficient to meet the needs of working parents, given long and inflexible working hours. The enrolment rate for children aged zero to two jumped from 38.2% in 2010 to 64.2% in 2021, the second highest level and the fastest increase in the OECD. More than half of OECD countries, including Korea, have enrolment rates of 90% or above for children aged three to five (Panel B). Korean childcare users (zero to five year-olds) use it for an average of 37 hours per week, which is higher than the EU average and the Barcelona target (Ministry of Health and Welfare of Korea, 2022). This likely reflects that in countries like Korea, where working hours are long and inflexible, more hours of childcare are needed to facilitate full-time employment. The standard opening hours are from 9:00 AM to 4:00 PM. Extended childcare teachers can provide services from 4:00 PM to 7:30 PM, with the flexibility to adjust hours in agreement with parents or the operating committee. However, these extended hours are not widely offered as the usual practice for parents is to pick up their children from childcare at 4:00 PM. Working parents, who are often in minority among parents, often experience feelings of guilt when they deviate from this norm, and are concerned about their children being alone in the facilities because there are not enough children for the after-hours programmes (KICCE, 2022). Consequently, many working parents resort to alternative out-of-school arrangements, such as relying on parents, relatives or private babysitters (Yang et al., 2024). As a comparison, in France, where working hours are comparatively shorter, centre-based ECEC facilities typically operate between 8:00 AM and 7:00 PM (EC, 2023). The government plans to extend basic childcare hours to 5:00 PM. Further progress in this direction would make it easier to combine family with full-time employment. This would also send a signal to parents, shaping their perceptions and norms regarding pick-up times.
Share of children enrolled in early childhood education and care services¹, 0- to 5-year-olds
1. ISCED 0 and other registered ECEC services) for 0- to 2-year-olds and ISCED 2011 level 0 or primary education (ISCED 2011 level 1) for 3- to 5-year-olds.
2. Data for Belgium, the Czech Republic, France, Greece, Hungary, Ireland, Italy, Latvia, Luxembourg, the Netherlands, Poland, the Slovak Republic and the United Kingdom are OECD estimates based on information from EU-SILC. Data refer to children using centre-based services (e.g. nurseries or day care centres and pre-schools, both public and private), organised family day care, and care services provided by (paid) professional childminders, regardless of whether or not the service is registered or ISCED-recognised.
Source: OECD Family Database.
Another option to enhance accessibility is to promote employer-supported childcare. Employers can either provide on-site childcare services, partner with other employers for the provision of inter-company nurseries, or collaborate with private childcare providers or the local community (OECD, 2022d). Such childcare services offer some advantages to both companies and employees. For instance, employees can benefit from adapted opening hours and the ease and tranquillity of having their child nearby. Employers can benefit from higher productivity, employee loyalty, recruitment and talent retention (OECD, 2022d). In Europe, many large private employers provide their employees with emergency back-up care (UNICEF, 2020).
The benefits of workplace childcare are greater in countries like Korea where telework is uncommon. Employer-based childcare is consequently one of the most popular childcare options in Korea, but it is only available to a small share of parents (OECD, 2024a). Since 2012, the establishment of workplace childcare facilities has been mandatory for large companies with over 500 full-time employees or 300 female full-time workers in Korea. As a result, most large companies (93.1%) have workplace childcare facilities (MOHW, 2024). However, the large firms under the mandate account for only 0.02% of total employers with more than five employees. (MSS, 2024). As a result, the share of workplace childcare has been persistently low at less than 5% of total childcare facilities. A few OECD countries make workplace childcare mandatory with a lower threshold. For instance, it is mandatory for companies with more than 50 full-time employees in Chile and for companies with more than 150 women workers in Türkiye (World Bank, 2019; Turkish Labor law, 2017).
Even though expanding the availability of workplace childcare seems beneficial, simply lowering the firm size threshold to oblige more firms to offer it is probably not a good solution. Financing and providing childcare to the benefit of parents and the wider society should at the outset not be the responsibility of private sector firms who happen to have parents among their employees, regardless of firm size. Larger firms may able to shoulder this burden and some may see it in their interest to offer childcare to attract talent, but lowering the threshold for mandatory workplace childcare facilities may inadvertently burden businesses in general, resulting in unintended consequences such as increased gender discrimination and reduced employment opportunities for workers with parenting responsibilities.
Addressing obstacles faced by firms when establishing childcare would help expand workplace childcare services for companies who see this as beneficial. Currently, workplace childcare centres must meet all installation standards set forth in the Infant Care Act, such as establishing them on the first floor (up to fifth floor under certain conditions). This can be particularly problematic in Seoul where leasing costs for lower floors are high. Indeed, some firms in Seoul gave up setting up childcare for this reason (Asia Economy Daily, 2017). The requirements should be carefully reviewed, and streamlining the process or introducing a fast-track approval system should be considered. Government support focuses on installation costs (up to 60% for large enterprises and 90% for SMEs) (MOEL, 2024b). Employers are required to pay at least 50% of total operating costs. Currently, the burden of operating costs prevents many employers from establishing workplace childcare (KICCE, 2023). Greater support for operating costs, particularly when employers collaboratively establish childcare facilities, could help address concerns about low enrolment as well as cost burdens.
Public interventions can encourage companies to offer and maintain childcare services. In the United Kingdom, employers that set up an in-company nursery facility are exempt from the payment of tax and national insurance on the value of the nursery, provided the service complies with certain conditions (UK Government, 2022). In France, corporates that contribute to childcare costs can have 76.5% of costs reimbursed through tax credits and deductions. In Spain, the company can benefit from corporate tax relief for building childcare facilities and providing childcare services for their employees (OECD, 2020c).
The need for childcare continues when children enter primary school. A full-time working week is not directly compatible with school hours, and working families must find care solutions before and after school hours and during school holidays. This makes out-of-school hours care an essential element to reconcile work and family (OECD, 2007). Many OECD countries provide formal out-of-school services before and after school, which include homework support, recreational activities, sport and creative events to foster child development and to provide a protected environment (OECD, 2011). The use of out-of-school hours varies across European OECD member countries. France offers childcare services specialising in childcare for children of various ages and needs, including services for children under three years or school age. The Nordics continue to provide childcare services for schoolchildren (Nordic Health and Welfare Statistics, 2024). Hungary also makes extensive use of out-of-school services (OECD, 2016a). Korea’s use of out-of-school hours is relatively high compared to most EU countries, except for some Nordic countries (Figure 4.5). However, it should be noted that in some countries, such as Germany, France, Austria, and Italy, extracurricular activities are included in the regular school day, resulting in a longer school day of six to eight hours (Parente and Nakano, 2020).
Share of 6- to 11-year-olds using centre-based out-of-school-hours (before and/or after school) services during a usual week, 2019 or latest
Note: Data for Iceland and the United Kingdom refer to 2018. Data generally reflect the proportion of children who use centre-based out-of-school-hours services for at least one hour during a usual week, cover the use of services offered before and/or after school hours only, and do not cover ‘school-going’ children who use centre-based services only during school holidays or only on days when schools are closed. Exact definitions differ across countries.
Source: OECD Family Database and Ministry of Education of Korea.
Formal out-of-school hours services are increasingly facilitated by schools or delivered in the school building, less often in sports clubs or community centres, as it is increasingly integrated into school systems. This is especially the case in countries such as Denmark and Sweden, where out-of-school services are well developed. Some countries such as Portugal, Greece and Austria also introduced all-day school systems linking out-of-school services more closely with regular school schedules (Eurofound, 2020).
In Korea, where school ends before 2:00 PM in the lower primary grades, a shortage of quality day-care services for young school-age children pushes mothers to exit employment or take parental leave (Choi et al., 2022). Han (2021) found that Korean mothers of elementary school students who use out-of-school care have a 7.8% higher labour supply than mothers who do not use out-of-school care. The government has extended the operating hours to 8:00 PM for first to fourth-grade primary school pupils from September 2024 (OECD, 2024a).
Childcare costs can weaken employment incentives for parents. Given that women remain the main caregivers, childcare costs are a greater constraint for women whose earnings tend to be lower than men’s (André et al., 2023). On average, across OECD countries, the net cost of childcare (out-of-pocket childcare fees minus any benefit payment or tax relief directly related to childcare use) for a two-earner family with two children aged two and three in full-time centre-based care is under 14% of average earnings (Figure 4.6). Net childcare costs are low in countries where gross childcare fees are already relatively low, including Austria, Estonia, Germany, Iceland, Latvia, Lithuania, Norway, Spain and Sweden and in countries like Greece, Hungary, Italy, and Portugal, where childcare fees are largely offset by considerable state financial support. Korea’s net childcare cost is one of the lowest in the OECD, due to fairly low fees which are compensated by government support. Informal childcare costs such as private babysitters are not covered by this measure of childcare fee, while such costs are considerable in Korea.
Net childcare costs for a two-earner two-child family, 2021
Note: Data refer to 2021 for all countries except Australia, Canada, Israel, Korea and Switzerland where they refer to 2020 and New Zealand where they refer to 2018. Data reflect the costs of full-time care in a typical childcare centre for a two-earner two-child family, where both parents are in full-time employment and the children are aged 2 and 3. Gross earnings for the two earners in the family are set equal to 100% of average earnings for the first earner, and 67% of average earnings for the second earner. Full-time care is defined as care for at least 40 hours per week. Average earnings refers to the gross wage earnings paid to average workers, before deductions of any kind (e.g. withholding tax, income tax, private or social security contributions and union dues). See the OECD Tax and Benefit Systems website (http://www.oecd.org/els/soc/benefits-and-wages.htm) for more detail on the methods and assumptions used and information on the policies modelled for each country.
Source: OECD Family Database.
Affordable childcare is vital notably for poor and sole-parent families who often face major time and money constraints. Access to affordable formal childcare helps parents in these families to participate in paid work, reduces poverty risks and supports child development. Childcare costs partly contribute to inequalities in the use of childcare services. Many countries therefore have support programmes in place to reduce the costs for low-income families. Such support usually includes fee reductions, cash benefits, or tax relief for childcare costs (OECD, 2020b). For example, countries with large-scale publicly funded childcare, such as Denmark, Iceland, Norway, and Sweden, charge lower or no fees for low-income families. Some countries such as Belgium, Denmark, Greece and Norway provide additional financial assistance and in France, Germany and Italy, priority access to services is guaranteed for large or single-parent families (OECD, 2020b; Eurydice, 2019).
Even so, high-income families are more frequent users of childcare services than low-income ones. In European OECD countries, low-income families with children under the age of three use childcare services about one-third less than higher-income families (OECD, 2016b). For example, in the United Kingdom and Ireland, where childcare costs for low-income families reach almost 30% of household income, participation rates for low-income families are less than half that of higher-income families (OECD, 2020b). On average, across OECD countries, a low-paid single mother who takes up full-time work loses almost two-thirds of her in-work earnings to childcare costs, taxes, and the loss of social benefits (OECD, 2020b). Since the net cost of childcare is low regardless of family situation in Korea, families pay a low share of earnings for childcare costs in international comparison, even though the cost remains more burdensome for low-income families (Figure 4.7).
Net childcare costs, share of net household income, 2022
Note: This indicator measures the net childcare costs for parents using full-time centre-based childcare, after any benefits designed to reduce the gross childcare fees. Net childcare costs are calculated for both couples and lone parents assuming two children aged 2 and 3. In low-earning couples, both parents earn 67% of the average wage.
Source: OECD, Benefit, Taxes and Wages (Database).
Quality is the last key ingredient of a good childcare system. Quality care policies historically have focused on safeguarding the children such as making standards on buildings, materials, or staff-to-child ratios. However, more attention is now paid to the educational and emotional interactions that childcare and teaching staff provide for the children and their relations with parents, which is called process quality (Vandenbroeck, 2020; OECD, 2021; La Paro et al., 2014). In a survey by the Korean government, the most desired childcare policy for parents was “improving the quality of childcare services” at 22.1% in 2022 (MOHW, 2023).
ECEC governance systems across the OECD are broadly divided between integrated and split systems. In a split system, responsibility for childcare (zero to three) and pre-primary education (three to six) is usually separated, whereas in an integrated system, it is unified and usually the responsibility of the Ministry of Education (Cadima, 2020; OECD, 2019a). In 2019, about half of OECD countries had an integrated ECEC system, and an increasing number of countries recently moved towards an integrated system (OECD, 2019a). The benefits of an integrated system have been highlighted as having more coherent policy and greater continuity in key areas such as access, regulation, funding, and staffing regimes, as well as greater effectiveness in terms of consistency and quality of care (Cadima, 2020; Kaga et al., 2010). An integrated system can also contribute to higher quality of care by providing age-appropriate education and being delivered by highly qualified staff (Eurydice, 2019). Many OECD countries such as Italy, Germany and Finland, have adopted standardised quality assessment tools and an integrated monitoring system to improve the quality of childcare facilities (OECD, 2024a). In some countries including China, Portugal and the United States, there are quality differences between public and private institutions due to country-specific differences in governance regimes and different choices in investment and human resources management (OECD, 2019c). In countries where more qualified staff are employed in public institutions, public preschool centres appear to score higher than their private counterparts in process quality (OECD, 2019c; Coley et al., 2016; Hu et al., 2016; Slot et al., 2015). However, this difference was not found in Spanish ECEC centres, where private institutions subsidised by public funds scored lower than public centres on infrastructure quality, but better in meeting children’s needs (Sandstrom, 2012), and the quality of public and private kindergartens is equivalent in Norway’s unified system.
Korea currently has a split early childcare and education system where childcare centres are subject to lower quality standards and different levels of quality and control than private kindergartens (OECD, 2016b). For example, staff qualification requirements are higher in kindergartens than in childcare facilities and kindergartens face stringent debt limits. Private childcare facilities are allowed to have debt up to 50% of total investments, whereas private kindergartens are required to have zero debt. According to a government survey, most childcare experts believe that the 50% debt ratio in childcare facilities is high, leading to lower quality of services, as it may force facilities to prioritise revenue generation for debt servicing, resulting in cost-cutting measures such as staffing, resources, and maintenance (MOHW, 2017).
The quality differences among childcare centres have led to a clear ranking in parents’ preferences, which are tilted in favour of workplace childcare, public childcare and against private childcare centres (Figure 4.8). 77% of children attending early childhood education and care are in private institutions in Korea, which is higher than the OECD average of 32% in 2020. In 2012-13, the government abolished the income threshold for childcare subsidies paid to parents and started paying the tuition for all children, including in private childcare centres. This led to a surge in demand for childcare. In response, the government encouraged the private sector to supply childcare through subsidies and deregulation (KIHASA, 2013). The rapid expansion of private childcare facilities through easing criteria has raised concerns about a potential decline in quality. From June 2019, the Assessment and Accreditation system has been mandatory and applied to all day-care centres. However, few poor-quality childcare facilities are actually forced out of the market, due to a lack of enforcement measures (KICCE, 2019; KIHASA, 2013).
1. Compiled from an interview survey of 1,000 households with infants and toddlers attending childcare centres. The satisfaction level for each type of childcare centre ranges from 0 to 5.
Source: OECD Economic Surveys: Korea 2024.
Eliminating these quality differences and raising quality to the level demanded by parents would imply unifying regulation and governance of childcare and kindergartens, and raising standards for childcare to the level currently applicable to kindergartens. The government is planning to go in this direction and unify the management bodies of childcare centres and kindergartens under the Ministry of Education.
One often-used and easily available indicator of the quality of childcare services is the number of children per staff (Figure 4.9). The weight of evidence favours the conclusion that the child-to-staff ratio in ECEC is significantly associated with quality (Huntsman, 2008). Many OECD countries have a child-to-staff ratio between 10 and 15, while some countries such as Sweden and Iceland, are below 10. Countries such as France, Mexico and Colombia have high ratios over 20. Korea’s child-to-teaching staff ratio is slightly below the OECD average, while the child-to-contact staff ratio, including teachers and teaching aides, is higher than average.
Average ratios of pupils to teaching staff and to all contact staff (teachers and teaching aides) in pre-primary education (ISCED 02) services (public and private), based on full-time equivalents, 2021
Note: The figures should be interpreted with some caution because the indicator compares the teacher/student ratios in countries with ‘”education-only” and “integrated education and daycare” programmes. In some countries, the staff requirements in these two types of provision are very different. Data for Japan do not cover day care centres and integrated centres for early childhood education and care. (http://www.oecd.org/education/education-at-a-glance-19991487.htm/?refcode=20190209ig).
Source: OECD Education at a Glance, https://www.oecd.org/education/education-at-a-glance/
Staff’s initial education, continuing professional development and working conditions are the main policy considerations to ensure process quality in ECEC (OECD, 2022a). Most OECD countries, including Belgium, Denmark, Estonia, Norway and Sweden, require a bachelor’s degree or an equivalent for ECEC teachers, while some, including France, Iceland and Italy, require a master’s degree (OECD, 2021). In some countries, the minimum required qualifications differ between early childhood development services and pre-primary education. For example, teachers working with younger children (usually under three years) in the Flemish Community of Belgium, the Netherlands, and Türkiye are required to have an upper secondary qualification, while teachers working with children from the age of three (or four in the Netherlands) are required to have a tertiary degree (OECD, 2022b). In Korea teachers in kindergartens are required to have tertiary degrees while teachers in childcare centres are only required to have upper secondary qualifications (OECD, 2016b; OECD, 2022b).
Working conditions, including salaries, contract status, and the organisational climate, are the second pillar for building and retaining a high-quality childcare service workforce (OECD, 2020a; OECD, 2021; OECD, 2019c). In addition to salary and career progression, hours worked and time allocation are important elements of staff’s working conditions and well-being (OECD, 2021). The actual qualification level of many childcare staff in European countries is lower than the qualifications required, as unfriendly working conditions hinder the recruitment and retainment of qualified personnel (OECD, 2019b). In Korea, working conditions are not frequently monitored by the government. According to a survey by Korea’s Institute for Childcare and Education, most staff work overtime and are dissatisfied with their low salaries with an overall satisfaction of 3.4 on a 5-point scale (Yang, 2020).
Parental leave entitlements include maternity (or pregnancy) leave and paternity leave to be used immediately before, during and immediately after childbirth, and parental (and home-care) leave, which can be used more flexibly until the child reaches a certain age. These entitlements provide employment protection for parents absent from work to care for their young children combined with income replacement benefits. While leaves of absence might have a short-term negative impact on career progression, they are expected to have a positive effect on women’s employment in the long run by maintaining attachment to the labour market and employer-employee matches (Mari and Cutuli, 2018). However, the parental leave system can have two effects on women's childbirth decisions. First, if returning to one’s original place of work is guaranteed by the parental leave system, the opportunity cost created by career gaps associated with childbirth and child-rearing can be reduced. At the same time, parental leave benefits compensate for income loss, thereby enabling extended absences from work. Both effects would encourage women to have children, but their relative sizes are uncertain, and the income effect from parental leave benefits could mean that increased fertility comes at the expense of female labour supply. Studies outside of Korea have not always shown that parental leave policies have a positive impact on women’s participation in the labour market, nor do such policies always encourage mothers to return to their original jobs (Budig et al., 2015; Cukrowska-Torzewska, 2017; Misra et al., 2011).
Empirical research from Korea indicates that increases in parental leave benefits encourage couples to have children. Parental leave benefits have kept rising since the system’s introduction in 2001, and studies have examined the impact of these policy changes on women's childbirth decisions. Research by Kim et al. (2022) and Kwak (2022) investigated the effects of switching parental leave pay from a lump-sum to a fixed rate in 2011, using parents outside of the affected income band as a control group. Both studies found that an increase in parental leave benefits had a positive effect on the probability of having a child. Kim et al. (2022) found that the policy change increased the share of women in childbearing age becoming pregnant during a given period of time by between 2.3 and 2.5 percentage points. Kwak (2022), who used the same research design but took into account the movement between the control and treatment groups and the fact that only those enrolled in employment insurance are eligible for parental leave found a 2.1 to 2.5 percentage points increase in fertility.
Bae and Cheon (2018) found that married women in paid employment who perceived there to be a high possibility that they could use maternity and parental leave and return to their previous employer afterwards were more likely to give birth to their first child than the average. However, the effect of parental leave on the rate at which women actually return to their original workplace is generally found to be insignificant or even negative, contrary to its objective. Only about 70% remained in the same job just one month after returning from leave, falling to the mid to high 50% range after a year, despite a significant increase in the uptake rate since 2002.
Kim (2008) investigated differences between mothers who used their parental leave after maternity leave and those who did not and found that using parental leave had a negative impact on returning to their original workplace, and that longer leave duration led to lower rates of return. Kim also found that those who utilised parental leave exhibited a lower willingness to continue employment compared to those who did not. The biggest influence on women’s willingness to return to their original workplace, and even on their willingness to continue employment at all, was not the workplace environment, or the use of parental leave, but rather the level of childcare support provided by the mother’s family. Similarly, Lee (2009) found that those women who took up parental leave after having exhausted their maternal leave stayed with their employer for a shorter duration than those who did not, although this study did not claim causality. Lee pointed to a number of potential causes for this correlation, including individual preferences for family and negative career consequences for parental leavers upon their return. Mothers already more inclined to leave their jobs could self-select into taking up parental leave, while women who are able to and/or have stronger preferences towards combining family with continued work could self-select into other arrangements.
More recent research uses event studies to establish causality. Yoon (2019) investigated whether the post-payment system, which involves paying a portion of the parental leave payment (15% from January 2011 until July 2015, 25% thereafter) six months after employees return to their previous employer, had any impact. Yoon and Hong (2014) looked at how a 2011 shift from a lump-sum parental leave benefit to a fixed rate that entitled users to 40% of their normal salary affected workers in different income brackets. Neither study showed a significant impact on the rate at which parental leave users returned to work with their original employer. Jung and Yoon (2020) reached similar conclusions, while also looking into how quality of employment affect the probability of return to the original employer. Even though the usage rate of parental leave was higher in large corporations, the rate of return to the original workplace after parental leave was lower compared to small and medium-sized enterprises. This could indicate that large corporations provide relatively favourable conditions for using parental leave, but the competitive organisational culture and long working hours may make balancing work and childcare less feasible. Meanwhile, the study found that the likelihood of utilising the parental leave system was lower for high wage earners, but the probability that they would return to their original workplace afterwards was higher, probably because of the system’s low benefit ceiling.
Qualitative studies can help understand better the barriers preventing parental leave from facilitating job retention as it was intended to, even though these results based on very limited samples cannot be interpreted as causal and representative. Yang et al. (2021) interviewed 12 parents who took parental leave, and found that women faced various challenges, for example looking after their children when they had to stay home from school. They also experienced difficulties in adapting to organisational changes that were made while they were on leave, faced uncomfortable scrutiny, and scored lower on performance evaluations. These findings are supported by Seo and Kim (2016), which focused on eight individuals who resigned after their parental leave period ended. They found that women who had originally intended to return to work resigned after experiencing disadvantages at work and a strong attachment to their offspring.
There is also research suggesting that the use of parental leave has had a positive impact on preventing career interruptions for mothers in Korea, but these studies suffer from weaknesses casting the results in doubt. For instance, the empirical design used by Oh and Kim (2021) suffers from endogeneity, and Park et al. (2018) examined the impact of the respondents' perceived availability of parental leave on job retention, rather than actual use. As such the results should be understood to indicate that workplaces where parental leave is easily available tend to have characteristics with a positive effect on women's career maintenance, rather than the one causing the other.
There is no agreement on the optimal duration of parental leave (OECD, 2011; Budig et al., 2012), and the design, length and generosity of parental leave entitlements vary widely across countries (ILO, 2014). If parental leave is too short, mothers may not be ready to return to work and instead drop out of the labour force. If it is too long, skills may deteriorate, and extended absence from paid work can make return to work difficult (Canaan et al., 2022; Misra et al., 2011). Maternity leave is generally reserved for mothers (with exceptions notably for adoption) at or around the time of childbirth. Its average duration across the OECD is 19 weeks. Most OECD member countries also provide statutory rights to paid paternity leave around the birth of the child. At 2.5 weeks on average, these entitlements are much shorter than for maternity leave. Parental leave allows fathers and mothers to take longer periods of paid employment-protected leave to care for their young children (Figure 4.10). Duration varies considerably across countries. Finland provides 148.5 weeks of combined parental and home-care leave, while some countries do not offer any parental leave at all (OECD, 2023b). Korea offers 13 weeks of maternity leave, two weeks of paternity leave, and 52 weeks of parental leave for each parent on an individual basis, for a total of 119 weeks, which is the fourth longest duration in the OECD, behind Finland, Hungary and the Slovak Republic. Korea also plans to extend the maximum duration of paid parental leave for dual-income earners by six months per parent, if both parents take parental leave for more than three months each.
Total number of weeks of parental leave, including maternity and paternity leave, 2023
Note: Information refers to paid maternity, paternity, parental and home-care leave entitlements to care for young children in place as of April 2023. Data reflect entitlements at the national or federal level only. Because payment rates vary across countries and types of leave, entitlements are presented in both “duration in weeks” and “full-rate equivalent”, the length of the paid leave in weeks if it was paid at 100% of previous earnings, calculated for an individual on 100% of national average earnings.
Source: OECD Family Database.
Maternity, paternity, and parental leave compensation is available in most OECD countries to support parents during the time spent out of work. There are large differences between the systems in individual OECD countries, but a general pattern is that maternity and paternity leaves are well-paid, while parental leave has a lower replacement rate. Most OECD countries provide benefits that replace somewhere between one-third and two-thirds of previous earnings for paid parental leave. Some European member countries, such as Sweden, Finland, Poland, and Denmark, compensate at least 66% of previous monthly pay for parental leave, while countries like Ireland, Israel, Malta, Netherlands, Spain, and the United Kingdom make no payment (European Institute for Gender Equality, 2020; Koslowski et al., 2022). The lowest replacement rates are often found in countries with the longest entitlements. This is because these longer leaves are often paid only through low flat-rate benefits and therefore replace only a small proportion of previous earnings for average earners.
Korea’s full-rate equivalent total entitlement (the paid leave in weeks if it was paid at 100% of previous earnings) is among the highest in the OECD Figure 4.10). Korea’s replacement rate is 80%, which is similar to Sweden, Norway, and Iceland. However, the payment ceiling, at KRW 1.5 million (or at the end of November 2024, the exchange rate was KRW 1 394 per 1 USD ) per month (higher if both parents take leave, as explained below), is around 46% of the average wage (as of 2022), lower than in countries such as Sweden (95% of the average wage), Norway (124%), and France (82%) (Koslowski et al., 2022). From 2025, the government plans to raise the ceiling to KRW 2.5 million for the first three months of parental leave, KRW 2 million for the next three months, and 1.6 million for the last six months (see below).
Parental leave is often unavailable for certain categories of workers, such as the self-employed, non-standard (short-term, part-time), or informal workers (ILO, 2014). In EU countries, ineligibility rates are often high, notably for young workers and those with lower education, with workers in agriculture, forestry and fishery and in service and sales least likely to be eligible (European Institute for Gender Equality, 2020).
Some countries take a rules-based approach, rather than the insurance membership-based approach. Countries such as Croatia, Finland and Sweden allow all working women and men to access parental leave regardless of employment status, length of employment or type of job. In these countries, only basic conditions are imposed such as working in the country. There may be a social insurance fund making the payments or it may be financed pay-as-you-go by taxation, but payments are ultimately guaranteed by taxation. This may simplify the process and it ensures that all eligible individuals, irrespective of prior enrolment, have access to essential benefits. These countries also offer parental leave benefits at a comparatively high level (Koslowski et al., 2022). In the early 2000s, Estonia expanded its family policies ambitiously after fertility fell to record lows in the early 2000s and shifted from a social security-funded parental leave system to a universal, rules-based, fully tax-supported model with generous replacement rates. The total fertility rate increased from 1.37 in 2003, prior to the first leave expansion, to 1.61 in 2021. The female employment rate also rose, from 59.9% in 2003 to 72.3% in 2021. In countries such as Latvia, Germany, Czechia and Poland, nearly everyone working can access parental leave, and only unemployed or non-working people are excluded (European Institute for Gender Equality, 2020). In some countries such as Estonia and Lithuania, parental leave can be used by a person who takes care of the child other than the parents, such as grandparents or other relatives (ILO, 2014).
In Korea, paid parental leave entitlement is mostly tied to employment insurance which covers only around half of the total workforce (or 77% of wage earners). Employment insurance in Korea funds parental leave benefits as well as unemployment benefits. To receive the parental leave payment, employees must have been insured for at least 180 days prior to the commencement of parental leave and take at least 30 consecutive days of leave. Employment insurance is not compulsory for self-employed and some platform workers. Some workers choose not to subscribe to employment insurance despite a legal obligation to do so. This leaves many non-regular workers, characterised by inherent job instability and vulnerability, ineligible for parental leave. A provision allowing employers to deny parental leave to workers with less than six months of continuous service creates an additional barrier that disproportionately affects non-regular workers who tend to have shorter periods of continuous employment (OECD, 2024a). Strict eligibility conditions combined with low uptake among those who are eligible results in one of the lowest shares of parents in the OECD taking parental leave in Korea, and the share is particularly low among men (OECD, 2022c).
Expanding paid parental leave coverage to the entire workforce is a priority to address the current disparity. One viable approach involves extending employment insurance coverage to all workers. Another approach could be shifting from the current membership-based approach to a rules-based approach for parental leave eligibility. Either way, increasing parental leave payments would require additional funding, given the escalating deficits in the employment insurance fund (Figure 4.11, Panel A). An estimate suggests that expanding parental leave entitlements to the entire workforce would require an additional 22% of the current total parental leave benefits expenditure under existing parameters (KIHASA, 2022a). When the parental leave benefit system was introduced in 2001, it was decided to fund it primarily through employment insurance, with any financial gaps being covered by general taxation through annual budget allocations. Since 2001, however, only a fraction of the total parental leave benefit payouts have been covered by general taxation (Figure 4.11, Panel B). With an upward trend in both take-up rates and benefit levels, the share of parental leave benefit payouts in the employment insurance fund has grown. Without additional funding, this can jeopardise the primary role of employment insurance in safeguarding those who are unemployed (NABO, 2023).
Source: OECD Economic Surveys: Korea 2024.
In most OECD countries, including Korea, fathers take considerably less parental leave than mothers (Figure 4.12, Panel B). In countries like Luxembourg, Iceland and Sweden, fathers account for almost 50% of all parental leave users, while in countries like Australia, New Zealand, Poland and Czechia, fathers hardly take any parental leave. Studies have shown that when fathers take paternity leave and are more involved in the care of young children, it positively impacts mothers’ employment, reduces the gender pay gap, and stimulates children’s development (Bartova and Keizer, 2020).
Another potential reason to want to reduce the gender imbalance in uptake, is that the expansion of parental leave could in intensify statistical discrimination against women in hiring, as argued by Mandel and Semyonov (2005). This does not seem to be the case in Korea. Using data 2005 to 2019, Kim (2022) showed that the introduction of the parental leave system in workplaces significantly increased the proportion of female workers within the company, in particular a substantial increase in the number of non-managerial, entry-level female employees. These findings suggest that companies adopting the parental leave system may have shifted to a more favourable stance on the employment of women. The introduction of the parental leave system could also have led to a decrease in female turnover and affected corporate preferences. However, the study said nothing about how parental leave use affects the gender wage gap, which is likely also affected by gender gaps in parental leave-taking, as discussed in Chapter 3.
There are strong correlations between gender equality, the generosity of parental leave and female employment rates. In EU countries where the gender gap in employment is small, the gap in parental leave eligibility is also small. Sweden and Finland have the highest gender equality in the European Union with universal parental leave rights (European Institute for Gender Equality, 2020). Many sociocultural factors can discourage fathers’ uptake of parental leave regardless of the type of family leave provided. This includes gender norms and stereotypes that lead to gendered expectations, work practices and policies.
To enhance fathers’ take-up of paid leave, many OECD countries have introduced “fathers-only” paid leave entitlements that cannot be transferred to mothers and are lost if not taken by the father. In many Nordic countries, these quotas take the form of gender-neutral specified portions of an overall parental leave period allocated exclusively for each parent. These are often referred to as “father quotas”. Other countries, such as Korea, take the idea of reserved quotas to its logical conclusion and provide paid parental leave as an individual, non-transferable, gender-equal benefit (Adema et al., 2020). Certain countries, such as Germany, offer “fathers bonuses” in which a couple may be eligible for additional weeks of paid leave if both parents utilise a certain quantity of shareable leave. Evidence suggests that the introduction of fathers-only parental leave has increased the use of parental leave by fathers. In Sweden, for example, both the number of fathers taking leave and the duration of their leaves increased after the introduction of the father quota (Duvander and Johansson, 2012).
2021 or latest
Note: For Panel A, paid parental leave recipient rates exceeding 100 reflects both high take-up and the ability of parents to take leave over several years and/or in multiple blocks. Data refer to 2021 for the Czech Republic, Estonia, Finland, Germany, Ireland, Japan, Norway and Poland. Data refer to 2020 for Austria, Belgium, Canada, Denmark, Korea, Lithuania, Luxembourg, Portugal and Sweden. Data refer to 2018 for Iceland and Italy, to 2017 for Australia and New Zealand, to 2016 for France and to a pooled average between 2016 and 2020 for the United States.
Source: OECD Economic Surveys: Korea 2024.
The benefit level is the other determinant of fathers’ use of parental leave, given that the highest salary in many families is earned by the man (Karu and Tremblay, 2018). A high replacement rate is linked to a greater leave uptake by all parents, notably by fathers (Boll et al., 2014). For instance, 74% of Spanish fathers took at least some of their 4.4 weeks of fully paid paternity leave, while uptake was very low for the following parental leave without compensation (Blum et al., 2018). From 2024, if both parents use parental leave, the Korean government increased the replacement rate to 100% of previous earnings for the first six months of leave and raised the ceilings from KRW 2-3 million to 2-4.5 million based on the duration of the leave (MOEL, 2024a).
Flexibility, which enables parents to choose when and how to use their leave entitlements and the associated benefit level, also affects fathers’ uptake of parental leave. For example, when the Austrian government allowed shorter leave options with a higher replacement rate in 2008, fathers’ leave taking increased by 23%. The introduction of income-dependent benefits in 2010, increasing replacement rates, raised take-up by another 13% (Ziegler and Bamieh, 2023). Flexibility in the use of leave entitlements has several dimensions, including whether parents’ individual and shared entitlements must be used consecutively, whether both parents can use their entitlements at the same time, whether parents need to use their whole entitlement in one go or whether they can break it into several time blocks or take the leave on a part-time basis (Bartova and Keizer, 2020). Korea allows parents to take a year’s total parental leave in three batches until the child turns eight.
The use of parental leave in Korea is among the lowest in the OECD for both mothers and fathers (Figure 4.12). Consequently, public expenditure on parental leave benefits was the second-lowest in the OECD in 2019, although the recent expansion of benefits for working couples is expected to improve the ranking somewhat (Figure 4.13). As mentioned above, most self-employed and non-standard workers are excluded from parental leave benefits, but take-up rates are also low among those who are eligible. Only around three out of ten eligible parents exercised their paid parental leave right in 2022, although most of them were aware of the system, according to Statistics Korea. The utilisation rates are especially low among men and in small businesses (fewer than 50 employees). In 2021, the usage rate of parental leave during the year of the child’s birth in small businesses (5-49 employees) was 54.1% for women and only 2.3% for men. In the same year, the corresponding rate in larger companies (over 300 employees) was 76% for women and 6% for men (Statistics Korea, 2022).
Public expenditure on maternity and parental leaves per live birth, in current USD 2019 PPP, 2019
Note: Data for the United Kingdom refers to 2018.
Source: OECD Social Expenditure Database and OECD Health Statistics.
The low usage rate in SMEs is related to optionality in the parental leave system, where parents with children under the age of eight can either utilize parental leave or opt for a work-hour reduction system with compensation for the reduced income. The system is universal, but it is utilised differently by parents in different income brackets and employment situations. Employees of small and medium-sized enterprises (SMEs) tend to use the work-hour reduction system, whereas employees of large corporations are more likely to use the parental leave system. As of 2022, 49.4% of those using the work-hour reduction system for childcare were employed at workplaces with fewer than 30 employees, and notably, those from workplaces with 5 to 29 employees accounted for 36.8% of all users of this system. On the other hand, the proportion of parental leave benefit users from businesses with fewer than 30 employees was only 28.4%, and those from workplaces with 5 to 29 employees made up just 19.6%, which is lower than the utilization of the work-hour reduction system for childcare (Choi et al., 2024).
This suggests that the conditions for making use of the parental leave system vary depending on the workplace environment. According to the 2021 results of the Work-Family Compatibility Survey conducted by the Ministry of Employment and Labor, 92.3% of respondents from workplaces with 300 or more employees stated that there was an atmosphere where one could "apply for parental leave at any time without worry", whereas only 59.3% of those from workplaces with fewer than 10 employees and 68.3% from workplaces with 10 to 29 employees responded the same.
These findings are related to a social norm against taking parental leave, weak legal protections against gender discrimination and discrimination of leave-takers upon their return to work. For example, mothers taking maternity leave are seen as less competent at work, while those not taking leave are seen as bad parents (Morgenroth and Heilman, 2017). A government survey identified “an unfavourable workplace atmosphere or culture toward parental leave users” (31.8%) and “increased workload on colleagues” (25.2%) as the main reasons for underutilisation (MOEL, 2022).
This social pressure to avoid taking up parental leave reflects that employers often do not hire replacements. The 2021 results of the Work-Family Compatibility Survey revealed that in terms of the management difficulties caused by implementing parental leave, 28.2% of enterprises with 300 or more employees reported "no difficulties," while only 9.1% of workplaces with 5 to 9 employees and 7.7% of those with 10 to 29 employees reported the same, indicating that management difficulties vary according to the size of the enterprise. When asked about the primary management issues, 37.0% of workplaces with 5 to 9 employees cited "difficulty in finding replacement staff" as the top issue, while only 26.9% of those with 300 or more employees reported this issue (MOEL, 2022). The cost burden on employers is a primary deterrent (Figure 4.14). The absence of replacement workers generally leads to an increased workload for those who remain. In a survey asking how to cope with the gap left by parental leave, approximately half of the respondents indicated that the remaining employees bear the additional workload (MOEL, 2022). Like in other OECD countries, the situation is especially serious for small and medium-sized enterprises (SMEs) because these firms have a lower number of employees who can share the workload (KIHASA, 2022b). In Korea, SMEs account for more than 85% of domestic employment, surpassing the OECD average of 69% (OECD, 2023c).
Note: Results of an online survey conducted among 506 member companies, each with exports of over $500,000 and employing more than five regular workers. The survey asked, "If your company does not hire substitute workers during an employee's parental leave, what are the reasons?".
Source: OECD Economic Surveys: Korea 2024.
Another reason why people may be discouraged from taking parental leave is that Korean employers bear a higher share of the cost of maternity, paternity and parental leave than in most OECD countries. For the first 60 days of maternity leave, employers in companies with over 500 employees are obliged to pay 100% of the ordinary earnings of leave takers (Table 4.2). If the employer hires a replacement, the employer has to pay two salaries for one position. For SMEs, the government offers maternity leave benefits for the first 60 days, but the maximum monthly amount is KRW 2.1 million which is only slightly above the monthly minimum wage (KRW 2.06 million) and employers are required to cover the gap. In addition, employers, regardless of firm size, have to continue to pay health insurance premia for parental leave takers throughout the leave period, amounting to 3.5% of gross salaries, while other social security contributions can be exempted during parental leave. The government provides financial support for replacement personnel up to KRW 800 thousand to SME employers, with an increased level of support of KRW 1.2 million per month during the take-over period (up to two months). However, this was deemed insufficient to alleviate the financial burden. For instance, when replacing employees on the minimum wage taking maternity leave for 30 days, the additional costs for SME employers were estimated at around KRW 2.01 million per month (NABO, 2023), not including the time and expenses associated with recruiting new staff and providing necessary training. SME employers now can receive a monthly allowance of KRW 2 million for the first three months and KRW 300 thousand hereafter when granting parental leave for 30 days or more, but this allowance is no longer contingent on hiring replacement staff.
Note: SMEs are companies with 500 permanent employees or fewer for manufacturing industries, 300 or fewer for mining, construction, transport and warehousing, telecommunications, business facilities management, business support and rental services, professional, scientific and technical services and health and social work services, 100 or fewer for other industries, and SMEs under the SMEs Framework Act.
Source: Ministry of Employment and Labour; Ministry of Health and Welfare.
The burden of financing maternity, paternity and parental leave benefits and associated costs should in general be shared between parents and the government. Employers should be shielded from this cost, as they will tend to respond by discriminating in hiring and pay, discouraging leave taking and potentially even attempting to make pregnant workers resign. Many OECD countries, including Denmark and the United Kingdom, almost fully compensate maternity, paternity and parental leave benefits using public sources (Government of the United Kingdom, 2024; Strang et al., 2016), or compensate for the additional costs of hiring replacements during maternity leave as is the case in Italy (Clauwaert and Harger, 2000). In the United Kingdom, larger businesses can reclaim 92% of the maternity leave payments, and small employers 103% (Government of the United Kingdom, 2024). In France, employers with fewer than 50 employees receive financial support for temporary replacements during parental leave, covering up to 50% of the monthly minimum wage for each replacement (Tissot, 2024).
Enhancing workforce planning and ensuring more effective hiring of replacements can be achieved by extending the advance notice requirement for parental leave. Currently, employees seeking childcare leave must submit their application at least 30 days before the scheduled start date in Korea. This is a shorter notice period than in many OECD countries. In Sweden, for example, employees are required to give notice at least two months prior to the intended start date of childcare leave (Forsäkringskassan, 2021). In Luxembourg, parental leave that follows maternity leave must be notified to the employer no later than two months before the start of the maternity leave (Government of Luxembourg, 2024).
Another challenge for workers taking parental leave is the low benefit level. The government doubled the ceiling for dual income parents in 2022 to encourage fathers to take parental leave. This increase only applied if both parents chose to take parental leave. After this reform, take-up rates among fathers increased by approximately 30% compared to the previous year (NABO, 2023). Given the positive outcomes, the government further increased the maximum by 1.5 times in January 2024 (e.g., to KRW 4.5 million or 130% of the average wage) (Table 4.2). As a result, the income loss of dual-income couples taking parental leave has been greatly reduced. For instance, if both parents, each earning an average income, take parental leave for six months at the same time, the household income reduction compared to previous earnings is now approximately 10%, down from 60% in 2021 (Figure 4.15, Panel A).
However, the general ceiling applicable when only one parent takes parental leave has seen minimal change over time (Figure 4.15, Panel B). This is an obstacle to the broader adoption of parental leave, particularly among sole leave takers. Assuming that a single-income father earns the average wage, six months of parental leave will reduce household income by more than 60% (Panel B). The government plans to raise the ceiling from KRW 1.5 million to KRW 2.5 million for the initial three months. This is a considerable improvement, but still represents only around 70% of the average wage and remains below the ceiling applied to some dual-income earners mentioned above. In most OECD countries, one ceiling around the average wage applies across all types of households and scenarios (Koslowski et al., 2022).
Share of previous income, average earners
Note: For Panel A, the analysis assumes a scenario where each parent in a dual-income family earns the average salary and they concurrently take parental leave for six months. In contrast, Panel B assumes that only one parent in a single-income household takes a six-month parental leave. In both panels, the average salary for mothers and fathers is set as the average income of individuals aged 30-34 and 35-40, respectively. This choice reflects the average age at the time of childbirth, which was 33.5 for mothers and 36 for fathers in 2022.
Share of the previous household income for Panel A, and share of the previous individual income for Panel B.
Source: OECD Economic Surveys: Korea 2024.
Higher replacement rates for parental leave will lead to higher direct costs under the existing setting. Korea can limit the extra fiscal burden by giving parents the flexibility to shorten parental leaves at higher replacement rates, such as in Austria and Czechia. The introduction of such flexibility would also help increase fathers’ uptake and incentivise mothers’ to take leaves of shorter duration. From 2024, the Korean government extended the maximum period of parental leave per parent by another six months. The government plans to make it flexible by offering a higher benefit for the first few months and then providing support at lower levels of benefits for subsequent periods without reducing the overall duration of leave.
All OECD countries offer cash transfers or tax breaks to families with children. Family-related transfers are aimed at alleviating the direct cost of having children and creating better life conditions for children by improving families’ financial conditions (Sobotka et al., 2019; OECD, 2011). It is worth noting, as discussed above, that even transfers for the purposes of childcare and parental leave do not always increase female labour supply, as the increased non-work income enables mothers to stay at home for longer if individual circumstances make this the preferred choice. By increasing non-work income without any added employment incentives, cash transfers or tax breaks to families with children may to a smaller or larger extent incentivise fertility, but they will almost without exception disincentivise female employment.
The most usual types of financial transfers are cash transfers and tax breaks. Cash transfers usually come in two types: cash benefits given on a regular basis and “baby bonuses”, birth grants and other transfers paid as a lump sum. These transfers may be income-tested, and benefit levels may vary with the age or number of children. Tax breaks are typically in the form of tax credits and deductions from taxable income. Tax breaks include tax exemptions for income tax, child tax allowances reducing taxable income as a function of the number and age of children, and child tax credits. OECD countries, except for the United States, provide more cash transfers than tax support. Luxembourg, Poland, Estonia, and Belgium have cash transfers of more than 2% of GDP, while France, Hungary and Germany have high tax breaks relative to other OECD countries (Figure 4.16, Panel A). Korea’s combined cash transfers and tax breaks per child are around 3% of GDP per capita. This is among the lowest in the OECD, less than half the OECD average and a third of the EU average (Panel B).
Many studies find that regular cash transfers and lump-sum grants paid around childbirth have positive but only small effects on total fertility partly because the total amount of transfers often covers only a small part of the cost of raising children. They can be comparably more beneficial to low-income or low-educated parents who have a lower alternative cost of lost earnings and are more likely to care for their children at home (OECD, 2011; Thévenon and Gauthier, 2011). For example, a study on 18 OECD countries estimated that an increase in expenditures on cash benefits as a share of GDP per capita by 1 percentage point would lead to an increase in the total fertility rate by 0.02 percentage point (Luci-Greulich et al., 2013). Spain’s 2003 income tax reform increased the number of children eligible for the child tax deduction and introduced a EUR 1200 refundable tax credit for employed mothers with children up to age three. This reform was found to increase fertility by 3 per 1000 women, or 5%, compared to a no-reform baseline, with more pronounced effects for younger, less-educated women with no previous children (Azmat and González, 2009). There is some evidence pointing to increased fertility in both low- and high-income groups following the implementation of Australia’s “baby bonus”, a generous lump sum birth grant in place between 2004 and 2014 (Drago et al., 2011; Sinclair et al., 2012), and Quebec’s Allowance for Newborn Children, a generous, non-taxable, universal grant operated between 1988 and 1997 (Malak et al., 2019; Milligan, 2005). However these schemes had a high fiscal cost, and their causal effects on fertility remain disputed (Parr and Guest, 2011; Kim, 2014).
2019 or latest
Source: OECD, Social Expenditure Database and author’s calculations.
Korea provides cash allowances and tax breaks to parents (Table 4.3). The transfers mostly target parents with young children up to the age of eight. Starting in 2023, the central government introduced a cash handout for parents, offering KRW 700 000 per month for households with newborns. This amount was increased to KRW 1 million in 2024. Local governments also provide additional cash benefits to support childbirth. A study found that childcare allowances from the provincial government of Gangwon helped slow the decline in the fertility rate (Lee and Lee, 2022). There is also more anecdotal evidence that young couples move temporarily to places providing generous family support. Whether or not these local transfers have a positive effect on fertility at the national level, or if they mostly shift fertility to different places as prospective parents go “support shopping” is not clear.
What is clear is that Korea’s low fertility is for the most part driven by the work-family conflict facing prospective mothers. Cash allowances or tax breaks will do nothing to ease this conflict, while they will probably induce some more women to choose family over career. However, the lost life-time income from choosing motherhood is very substantial and family benefits would need to be generous on a different scale to make up for lost income as well as women’s lost opportunity to pursue their dreams and aspirations in working life. Public funds are therefore better used to invest in the quality and availability of free childcare, to improve the parental leave system, to invest in labour inspectors fighting discrimination and otherwise paving the way for labour market reforms to better balance career and family.
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