Jon Pareliussen
Economics Department of the OECD
Korea's Unborn Future
Understanding Low-Fertility Trends
Birth rates are falling across the world. This is arguably good news for the environment and for the women and men across the world who have gained access to birth control and have the freedom to use it to live the lives they want with the number of children they prefer. Even though this message of sustainability and empowerment is true, there is also another side to the story. In several countries, young generations bring very few children to the world despite their preferences for more, and despite society desperately needing more children to dampen rapid ageing. In Korea, every woman had six children on average over her lifetime in 1960 (Total Fertility Rate, TFR). The TFR dropped to just below one child per woman in 2018, and fell further year by year to reach 0.72 in 2023. This is the lowest in the world, lower than in Japan (1.2), China (1.2), Singapore (1.0) and Chinese Taipei (0.9) (Yang et al., 2024). Most importantly, it is far less than the number of children Korean women say they would like to have.
Ultra-low fertility in Korea is a symptom of structural traits of Korean society constraining people’s possibilities to combine career and family. Parents need to reallocate some of the time that would otherwise have been spent on paid work to childcare. For a variety of reasons discussed in this book, mothers tend to reallocate more time away from work and towards childcare than fathers. The value of this time increases with average incomes, and it increases as women gain more equal access to education and careers. These forces, which are largely common across countries, nonetheless yield very different outcomes, as some countries successfully soften the trade-off with a combination of family-friendly labour practices, family policies like subsidised childcare, and more gender-equal norms and more equal sharing of caring responsibilities between mothers and fathers.
Korea’s ultra-low birth rates reflect Korea’s rapid achievements in raising incomes and empowering women in a society where young people’s fertility choices remain constrained by the realities of life, notably gender norms and labour practices which are remnants of a different time when men were breadwinners and women home-makers by default. This constrained choice is the main reason why low fertility is rightfully among the top priorities of the government, who declared it a national emergency and announced new policy initiatives in 2024, including a plan to establish a new ministry (tentatively named the Ministry of Population Strategy Planning) to achieve the target of raising the fertility rate to 1 by 2030.
Ageing caused by low fertility is a major societal challenge in several OECD countries, and nowhere more so than in Korea (Figure 1.1). This said, Korea’s ageing challenges have just barely begun. The Korean labour force has experienced demographic tailwinds for decades. The share of the population in working age is today close to its peak, as large generations born in the 1960s, 70s, 80s and even 90s are all in working age. Some signs of ageing are nonetheless becoming apparent. The population begun to decline in 2021. Kindergartens are increasingly converted into nursing homes and wedding halls into funeral parlours, while the sales of pet strollers exceeded those of baby strollers on a leading e-commerce platform for the first time in 2023. This anecdotal evidence only foreshadows the profound changes to come as large cohorts of baby-boomers reach retirement and new cohorts reaching working age are continuously shrinking in size.
Once it has taken hold, ageing is largely irreversible. The dynamics of low fertility in the past rapidly diminish the generations of women in childbearing age today (Table 1.1), with the consequence that population decline can only be slowed marginally in the short term. A fertility rate of 0.72 means roughly that for every 100 people in the current parent generation there will be only 36 children and 13 grandchildren. Assuming that fertility remains around the current level and immigration follows past trends, the Korean population is expected to halve over the next six decades and the elderly (aged 65 or older) will account for around 58% of the total population by 2082. During this time, the old-age dependency ratio (the ratio of individuals aged 65 and over to those aged 20 to 64) will surge from 28% today to 155%. The combination of a shrinking and ageing population poses a formidable challenge to sustaining social insurance systems and maintaining living standards. Labour shortages will intensify as retirees make up an increasing share of the population, and the fiscal cost of health, long-term care and pensions is set to more than double to 17.4% of GDP by 2060 (Chapter 2; OECD, 2024a).
Note: The line represents the UN’s medium scenario and the shaded area is bounded by the UN’s low and high scenarios.
Source: UN, World Population Prospects 2024.
Completed and uncompleted cohort-specific total fertility rates1, number of women and births
1. Cohort-specific fertility rates are obtained by summarising age-specific birth rates transposed from Table 2.1. Missing numbers are extrapolated by assuming that they are equal to the age-specific birth rates of the preceding cohort (for the 1981-85 and subsequent cohorts) and the subsequent cohort (in the case of the 1936-40 cohort).
2. The sizes of the birth cohorts from 1936-55 are derived from Statistics Korea’s 1960 Projected Population Database, and cover South Korea only.
Source: Author’s calculations based on Kwon, T. and D. Kim (2002), Understanding Population (revised edition), Seoul National University Press (in Korean), and Statistics Korea.
This rapid ageing is perhaps the most intuitive and well-documented reason why politicians do and should care about low fertility, but measured in GDP per capita and the fiscal balance, increasing fertility will have immediate negative consequences with gains materialising only in the very long term. Children do not pay much taxes, their mothers may reduce their labour supply, while children and their families receive substantial transfers and in-kind services like schooling, childcare and health services from the public sector. As an example, if Korea’s fertility rate were to miraculously increase by two and a half times from today to reach 1.85, the dependency ratio would still increase to 117%. This is a sizeable improvement from 155% but would still turn the country from one of the youngest in the OECD to the oldest by a margin over the coming six decades (Chapter 2; OECD, 2024a).
Fertility has fallen rapidly since the 1950s, over a period that took Korea from a rural society ravaged by war to a modern, urban society with per capita incomes at the OECD average (OECD, 2024a). Falling fertility in the beginning of the period can be related to rising female employment, but also to high population pressure and a wish to escape poverty. The TFR plummeted from 4.5 in 1970 to 2.1 in 1983, a drop of 2.4 in just 13 years. The timing of this dramatic fall inevitably links it to the state’s family planning and population control initiatives from 1962 to 1979, but the previously accepted narrative that family planning and falling birth rates was caused by top-down pressure is increasingly challenged. The initiatives rather satisfied a latent demand for birth control and family planning. The initiatives may have influenced norms, with the need for birth control becoming a widely shared social value, and the ideal number of children dropping to stabilise around two, a level at which it remains today. A possible negative long-term effect of the family planning programme is that it may have contributed to the norm that workers are expected to let work take priority over family (Chapter 2; Choi et al., 2024).
After a period of stabilisation and a temporary rebound around 1990, the TFR continued falling to reach a new low of 1.18 in 2002. This was the first time it fell below 1.3, marking the beginning of what is often called in Korea the era of ultra-low fertility (or “lowest-low” in Korean). It temporarily edged up to around 1.3 in the early 2010s before declining again, falling below one for the first time in 2018. Since then, fertility continued falling until it bottomed out at 0.72 in 2023 and started edging up again from the summer of 2024. Postponed marriages during the pandemic and the sequencing of childbirths after marriage means that even fewer babies were born in 2021, 22 and 23 than what would have been the case without by the 2020-21 pandemic. Likewise, the recent uptick reflects a catch-up effect which will at least in part be temporary. The big question, which is further discussed at the end of this chapter, is if there are also other factors pulling up fertility. It cannot be ruled out that 2024 will mark a turning point of Korea’s era of ultra-low fertility, but it would be premature to draw this conclusion, and fertility remains extremely low.
Since the start of the millennium, a number of studies have decomposed the fertility trend into various driving forces. They all point to marriage patterns and childbearing behaviour within marriage as key forces behind falling fertility rates. Childbearing outside of marriage has only had a very limited impact, as almost all births occur within marriage in Korea. Some earlier studies looking at the fertility behaviour of cross-sections of women at a given point in time (“synthetic cohorts”) observed that people married and had children later in life than before. Fertility in younger age groups (women in their 20s) had fallen as a result, while it had increased in older groups (women in their 30s). These studies inaccurately concluded that couples had approximately the same number of children as before, but only later in life, so birth rates were bound to catch up in the future (Chapter 2; Choi et al., 2024).
With the benefit of hindsight and better methods, it became clear that the number of children each woman has over her lifetime has been falling consistently from one cohort of mothers to the next (Table 1.1). From the 1960s to the 2000s, a reduction in the number of children per married woman and a continuous increase in the age at which women first got married both contributed to the decline in fertility. Already by the end of the 1980s it had become so rare that married couples had three or more children that a continued fall in third and higher-order births had little effect on overall fertility. From the 1990s to the mid-2010s, the falling incidence of second births was the main driving force of the declining birth rate. Up until the mid-2010s, a vast majority of Korean women ended up marrying and having at least one child, likely partly due to a strong social norm towards the duty to marry and have children. The period starting in the late 2010s marks a change, as falling fertility from this time on has increasingly been driven by married women having no children and women foregoing marriage altogether (Chapter 2; Choi et al., 2024). This trend seems to have continued into the 2020s, but numbers remain difficult to interpret due to the effects of the Covid-19 pandemic, as further discussed below.
Any parent in any country knows that having children comes with costs. There are some direct costs to having children, for example food, clothing, housing, childcare and education. In addition, there is the opportunity cost of lost income, as parents reallocate some time that they could otherwise have spent in paid employment on raising their children. The opportunity cost affects the overall family budget, and it entails an individual career cost to the parent disproportionately shifting efforts from career to childcare.
In Korea, the direct costs of having children are magnified compared to many OECD countries by fierce competition to enter prestigious universities and high private education expenditure (credentialism). The opportunity cost of having children is high due to a dual labour market with unequal pay, working conditions and social insurance coverage, and largely seniority-based career progression combining to create a very high cost for any temporary absence from the labour market. Taken together, credentialism, seniority-based careers and gender discrimination lead to a misallocation of human capital and likely a substantial loss of productivity. Literacy skills and tertiary education, objective measures of skills which are highly correlated with employment and productivity in most OECD countries, do not significantly affect the likelihood of employment in Korea (Figure 1.2). The weak link between objective skills and labour market outcomes also raises normative questions about fairness and the intrinsic value of equal opportunities.
Note: The log likelihood of being employed is estimated in a logistic regression controlling for 10-year age-gender cohort, parental status (by gender), education level, literacy skills and work experience (relative to age). Literacy skills are measured in PIAAC score points on a scale from 0 to 100. Education is measured by the International Standard Classification of Education (ISCED). ISCED 5A and 6 corresponds to tertiary education at Bachelor level or above. For details, see Pareliussen (2022), “How labour market outcomes reflect age, gender and skills in Korea”, OECD Economics Department Working Papers, No. 1739, OECD Publishing.
Source: Author’s calculations based on OECD Survey of Adult Skills (2023).
While the costs of career breaks are high, they are also difficult to avoid for women who choose motherhood. A culture of long work hours and a lack of flexibility where work is expected to take priority over family makes it hard to reduce work efforts for a period while children are young. When choosing parenthood, Korean fathers therefore typically become fully committed breadwinners and mothers typically become fully committed carers for an extended period of time. At the family level this translates into a sizeable loss of family income. At the individual level, most women and men would likely be happier spending reasonable amounts of their time on both career and family. When they are constrained to specialise in one of the two, this is a welfare loss for both (Cavapozzi et al., 2024). The individual cost to Korean mothers is particularly high. They suffer on average a long-term labour income loss of about 66%, mainly due to a decline in their labour force participation after childbirth (Chapter 3). Women therefore increasingly choose not to marry, or to marry but having fewer babies than in the past or not having any at all, a trend which has given rise to the terms “birth strike” and “marriage strike”.
Parents invest more in their children: The golden ticket syndrome
The demographic transition is closely connected to economic development, industrialisation, and widespread access to contraception. New technologies are increasingly skill-intensive, while education has a cost. Parents therefore respond to economic development by reducing the number of children while investing more in the human capital of each of them. This is the so-called quantity-quality trade-off. Investments in one’s offspring also include items such as food and clothing, which have been continuously falling as a share of total household expenditure in developed countries and are therefore unlikely to be related to falling fertility. The same is the case with childcare, which is increasingly subsidised and affordable across the OECD, and has been provided free of charge since 2013 in Korea. Other items, notably housing and private education expenditures have become more burdensome.
A cross-country empirical study found that increases in household expenditure on housing had a significant negative effect on fertility rates across the OECD (OECD, 2024b). This is also the case in Korea, where the doubling of housing prices between 2013 and 2019 was found to reduce the likelihood of people getting married by between 4 and 5.7% (Kang, 2022). Seoul is one of the most densely populated cities in the OECD. In particular, many parents flock to popular areas such as Gangnam and Seocho, where good schools and high-quality private education providers are concentrated. This, along with the increase in single-person households over the past 20 years, has increased demand for housing in Seoul, while supply has not followed suit, resulting in rising prices (Chapter 3).
Korea is known worldwide for its zeal for education, which has played a major role in its economic development but has in many ways become excessive. A university degree has become the minimum academic achievement for a majority, and the proportion of the 25-34 age group with tertiary education is the highest in the OECD. Credentialism, a reliance on academic qualifications as the best measure of an individual’s capabilities, and “education inflation”, which requires job candidates to obtain higher degrees for positions that formerly had lower requirements, have undermined the value of work experience and diplomas from all but the most prestigious universities. Given Korea’s dual labour market and a scarcity of quality jobs, graduates from top universities are much more likely to obtain a high salary. The intense competition to gain admission to these prestigious universities, dubbed “the golden ticket syndrome”, leads many students to prioritise the name of the institution over choosing a field of study according to their interests and skills (OECD, 2022). As a result, the share of working-age Koreans who are over-qualified for their jobs is among the highest in the OECD, and the share of employees with qualifications that are mismatched to the job they actually do is almost 50%, which is the highest in the OECD (Figure 1.3).
Incidence of field of study mismatch among adults aged 25-64 (2023)
Note: A worker is classified as well-matched by field of study if the area of study of their highest qualification is related to the field that is most relevant to their job. Caution is required when interpreting results for Poland due to the high share of respondents with unusual response patterns. BEL refers to the Flemish region and GBR refers to England.
Source: OECD (2024), Do Adults Have the Skills They Need to Thrive in a Changing World? Survey of Adult Skills 2023, OECD Publishing, Paris.
In a race to secure their offspring a “golden ticket” to top universities and quality employment, many Korean parents allocate a sizeable portion of their income to private tutoring, making education expenditure another major hurdle to have children. In 2023, almost 80% of Korean schoolchildren participated in private tutoring for which their parents spent roughly 10% of their disposable income on average. Tutoring is positively correlated with academic achievement and likely contributing to Korea’s high academic performance as measured by for example the PISA survey (OECD, 2023). These gains in academic achievement are likely outweighed by the cost of provision and negative side-effects, including postponed entry into working life, weaker adolescent mental health and life satisfaction, lower equality of opportunity, and lower fertility.
Prosperity and gender equality in education and work accentuate the motherhood cost
Raising children consumes some of the time that was previously available for paid work, which lowers the household’s combined income. In previous times, when women had very limited roles in the labour market, this so-called opportunity cost of having children was also low. In most OECD countries, until around 1930, married women were simply not hired, and almost all births happened within marriage. The labour market participation of married women rose gradually in most OECD countries in the 1930s and 1940s, and much more rapidly after World War II. Korea follows a similar pattern, but with different timing (Figure 1.4). Before the 1980s, Korean employers selectively recruited men and unmarried women. Women’s educational attainment made little difference to their likelihood of marriage or career. Since the 1980s, both the government and businesses began to recognise the need to utilise the labour force of married women, but a lack of public support for pregnancy, childbirth and childcare made combining work and motherhood largely impossible. Women therefore tended to participate in the labour force until marriage, after which they exited. Since 2000, women’s employment rates have been on a continuous upward trend, only interrupted by the credit card crisis in the early 2000s, the Global Financial Crisis in the late 2000s and Covid-19 in 2020-21. The gender gap in employment has also narrowed over the past two decades, although it remains among the highest in the OECD.
Note: The employment rate is defined as the ratio of employed (aged 15 and over) to population (aged 15 and over).
Source: Korean Statistical Information Service.
The trend towards more gender-equal access to education (Figure 1.5) and employment increased the opportunity cost of motherhood and gave rise to a negative relationship between women’s labour force participation and fertility both between countries and within countries, where women who worked full-time usually had fewer children than those not in employment and women who worked part-time fell in between. Likewise, earnings prospects and the opportunity cost of having children are higher for women with higher education. Before the 1990s, there was therefore a negative cross-country correlation between fertility and female labour force participation (Fluchtmann et al., 2023).
Female to male ratio, students at tertiary level education
Source: The World Bank.
However, this relationship turned positive by the year 2000, as some countries like Sweden, Norway, Denmark, France and the United States managed to ease the time constraint for mothers by combinations of labour market structures, family policies and more equal sharing of caring responsibilities between mothers and fathers. In contrast, the fertility rate declined sharply in low-participation countries such as Italy and Spain between the 1970s and 1990s. Korea’s experience resembles that of Italy and Spain, but lags in time and the fall in fertility rate has been even more dramatic (Figure 1.6).
Total fertility rate
Source: OECD (2024), Fertility rates (indicator). doi: 10.1787/8272fb01-en.
Chapter 3 discusses how the career-motherhood trade-off varies between countries and with income levels. Countries with salient trade-offs include middle-income countries like Türkiye, Mexico, Colombia and Costa Rica, who combine fertility rates on par with for example Iceland and France with male employment rates 25-35 percentage points higher than those of women (compared to 5-10 percentage points in France and Iceland). In high-income countries with strong trade-offs like Korea, Italy, Greece and Japan, the gender employment gap is in the range of 15-20 percentage points, while fertility rates are the lowest in the OECD. Rising incomes have sharpened the quantity-quality trade-off and the opportunity cost of motherhood in these countries and turned the balance towards lower fertility and higher female employment.
The sharp opportunity cost of motherhood in Korea comes about because many women leave the labour market for an extended period when they marry or have children, and because these absences have severe long-term consequences for their lifetime earnings. Despite a rapid rise of dual-income families in Korea, driven by a rise in the employment rate of married women with children, a series of studies confirm that the conflict between motherhood and employment remains strong. Kim and Park (2019) found that only 8.7% of women were continuously employed both before and after marriage. A recent survey found that 16% of married women aged 15-54 were currently on a career break due to marriage, family and childcare. Around 41% of them had been away from the labour market for more than 10 years, while 23% had a 5-10-year break (Chapter 3).
Together with the long durations of women’s labour market absences, Korea’s dual labour market is an important reason for the large income loss. Regular workers enjoy social insurance coverage, good working conditions and high wages, while non-regular workers, including part-time employees, face lower wages, reduced access to social insurance, and precarious job conditions. There is a rigid distinction between regular and non-regular workers, with limited opportunities for transitions. Women often quit their regular contracts as a consequence of motherhood, but find that low-paid non-regular jobs are the only way back in when they seek to re-enter the workforce. As a result, mothers are three times more likely to be in non-regular employment than fathers. Conscient of this, women tend to delay family formation and have fewer children (OECD, 2022; OECD, 2021a).
Long work hours, little flexibility regarding when and where to work and a general expectation that work should take priority over family needs make it difficult to combine two careers with family. This is a main reason why mothers tend to take long career breaks in Korea. Korea’s statutory 40-hour regular workweek aligns well with most other OECD countries, and the average usual weekly hours of full-time workers have fallen faster than in any other OECD country over the past two decades. A reform reducing the maximum weekly working hours including overtime from 68 to 52 hours in stages from 2018 to 2021 has greatly improved work-life balance, while initial evidence indicates that hourly productivity increased to fully offset the reduction in work hours. Despite these giant strides towards work-life balance, Korean workers devote more time to paid employment than in most OECD countries, and a higher proportion of Korean employees, both women and men, work very long hours than in most other OECD countries.
Regular employment is in general full-time, while “part-timers” work on different contracts with lower pay and protection. This contrasts with several OECD countries where the possibility to work part-time by for example reducing hours in a person’s career job makes it easier to combine work with parenthood. This fits a broader pattern of rigid working norms reducing parents’ flexibility to adapt when and where they do their work, thereby making it challenging to combine career and family. Korean parents’ legal rights to use flexible working arrangements, including flexible or reduced working hours and teleworking align well with other OECD countries, but their actual use remains among the lowest in the OECD. Many firms do not have systems in place for flexible work practices such as teleworking, and employees hesitate to use available options due to concerns about potential negative impacts on their income, job security, promotion prospects, and career evaluations. Findings by Shin and Lee (2021) indicate that they are right to be worried. They found that even though the use of flexible work arrangements prevented career interruptions for women, increased job satisfaction and improved employees’ ability to concentrate on their work, it also increased the risk of scoring low on performance evaluations (Chapter 3; OECD, 2024a).
Since the career-family trade-off is very much alive in Korea, continuously rising female education and employment has come at the expense of fewer childbirths. What has changed is that when facing a conflict between family formation and work, women increasingly prioritise work with the consequence that they postpone marriage and childbirth and have fewer children over their lifetime, or even forgo motherhood altogether. This reflects that with more gender-equal access to education and employment, women’s earnings have become an important part of family income and the loss of household income resulting from motherhood has therefore increased.
Birth strike: Women may veto parenthood when they have a lot to lose personally
Some of the ongoing changes are less tangible than those directly related to the household budget constraint. A typical trait of the male breadwinner-female carer model is that prime-aged men’s labour supply is not very sensitive to their wage level, while married women's labour supply is largely determined by their spouse's income, and is also very sensitive to the level of their own wages. In other words, men will be fully dedicated to work and providing for their families, while women will only work out of necessity or if the financial reward is substantial. These stylized facts described the situation in Korea very well until the early 2000s, but the elasticities of married women's labour supply in response to their own wages and spouses' income have been decreasing considerably since then (Jung, 2019). This finding indicates that when women today choose to work, they tend to do so less out of necessity and more out of preference than in the past.
A shift towards individualism and away from conformity to traditional norms designating people’s duties and their rightful place in the collective, such as the male breadwinner – female carer norm and women’s duty to marry and have children, can help explain this potential shift in Korean women’s work-family preferences. More practically, as an increasing share of marriages end in divorce, it matters to fertility decisions if one person in a couple bears a disproportionate share of the individual career cost of having children. Children are only likely to be born if both partners desire to have a baby, and the partner carrying the largest individual cost can “veto” the decision. Therefore, countries with more gender-equal sharing of domestic work and lower motherhood penalties in the labour market generally have higher fertility.
Marrying and having children have traditionally been seen as duties in Korea, but young people increasingly reject this idea. Unmarried women are much more likely than unmarried men to cite the loss of freedom from having children and the desire to keep their career as important reasons for not wanting children. Norms towards having children have also changed among those who choose to get married. The duty to have children was an almost universally held norm among married women in 1994, while only approximately 30% agreed to this in 2021 (Chapter 3).
The male breadwinner – female carer norm still stands strong in Korea compared to other OECD countries. The share of the population agreeing that a pre-school child suffers with a working mother and the share of the population agreeing or strongly agreeing that men should have more right to a job than women if jobs are scarce are higher in Korea than in any other OECD country. These attitudes are largely reflected in large gender gaps in time spent per day on paid and unpaid work, although Korea ranks slightly better in these outcomes than it does in norms. If a woman in a childless couple does a disproportional part of the housework this may not prevent her from pursuing a full-time job, but this may become very difficult once a child is born.
The male breadwinner – female carer norm is also perpetuated by a vicious cycle of gender discrimination in the labour market. Korea’s gender wage gap is the highest in the OECD, despite narrowing from 37.2% in 2015 to 31.2% in 2022. There is consensus in empirical studies that gender discrimination is a major driver of this gap, with different studies finding evidence of considerable gender discrimination in all age groups, for women with and without children, for employed women, and in hiring (Chapter 3). For example, Kim et al. (2021) decomposed the reduction in the gender wage gap between 2002 and 2020 with changes in observables such as education, industry and occupation. They found that these observables had narrowed the gender wage gap while the practice of paying women less than men under the same conditions had increased the wage gap over this period when seen in isolation. Empirical studies also generally find that this discrimination is limited to the private sector, while public sector jobs such as government officials and teachers, which have strong legal controls in the hiring process, show almost no gender wage gap (Kim and Oh, 2019).
Such a gender wage gap likely contributes to a gendered role separation among couples during childbearing years, as couples will minimise income loss if the lower-paid women work fewer hours or leave the labour force altogether. Employer expectations that women are less likely to work during their childrearing years thereby become a self-fulfilling prophecy, reinforcing a vicious cycle of statistical discrimination and employment discontinuity of mothers which cannot be easily resolved without public intervention. Such discrimination is illegal in Korea, but women who have been discriminated against have faced difficulties in making a case, and many cases have been dismissed due to a lack of supporting evidence or resolved only through corrective measures without imposing penalties. Legal protections, sanctions and enforcement have all been strengthened in Korea in the past few years, but it remains an open question whether or not this is sufficient to make a fundamental difference (OECD 2024a).
Family policies, including early childhood education and care, paid parental leave and family benefits, can reduce and compensate for the direct cost from having and raising children, and they can limit the loss of income and future career prospects. Publicly financed childcare and paid parental leave are designed to make it easier to combine work and parenthood, and Korea has made giant strides to implement such family policies. Publicly financed childcare is in particular found to be important across OECD countries. Many studies show that quality childcare boosts female employment and fertility (e.g. OECD, 2017). Children benefitting from high-quality childcare services also perform better in school than children who do not attend.
Outcomes of other common family policies are more mixed, with their effects on fertility often found to be low compared to their cost, while their effect on female employment is in many contexts insignificant or even negative. Maternity, paternity, and parental leave 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, the idea is that they should have a positive effect on women’s employment in the long run by maintaining attachment to the labour market and employer-employee matches. However, empirical evidence from various countries does not always show a positive impact on women’s labour market participation, nor do such policies always encourage mothers to return to their original jobs. A key mechanism behind this is that any cash transfer or subsidised service provided in-kind will increase a household’s disposable income, directly in the case of cash transfers, and indirectly by lowering household expenses in the case of in-kind or subsidised services. As discussed above in the context of spouse's income, this income effect enables parents (usually mothers) to stay at home. For 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, but the savings on childcare expenses could enable her to stay at home longer than previously planned.
The overall effects of such policies will therefore depend on individual situations and preferences. The career maintenance effect will likely be weaker and the income effect will likely be stronger in countries like Korea where it is difficult to combine career and children at the outset. These insights also create a fairly clear order of priority between the main types of family expenditure if the objectives sought are to boost employment and fertility. Childcare- and parental leave expenditures contribute to both, while the income effect can reduce their aggregate effectiveness in boosting female employment. Child benefits or tax credits, be they recurrent or baby bonuses, will at the outset subsidise fertility, and can improve the livelihoods of families with children, but at the expense of female employment. They will do nothing to bridge the career-family trade-off. In recognition of this, many OECD countries have in recent years shifted their family policy packages towards public support for early childhood education and care and promoting paid leave for both parents.
Korea has introduced a number of family policies in recent years. 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. 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. It remains lower than the OECD average of 2.3%. This may be an unfair comparison as Korea has a relatively low share of children in the population, but spending per child as a share of GDP per capita is also lower than the OECD average (Chapter 4).
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 (OECD, 2019). 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. Public childcare expenditure 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. Empirical evidence shows that the 2013 reform has had positive effects on fertility, but only limited positive effects on women's employment rates, these being conditional on quality childcare options being available in the vicinity. Childcare support from the extended family, notably on the mother’s side, has been found to be a stronger determinant of maternal employment. 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, as discussed above and in Chapter 3. Against this backdrop, 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 regular opening hours at childcare centres.
Parental leave has also been expanded and strengthened considerably over time in Korea, with the result that both the duration and the level of payment eligible parents are entitled to compare well with the OECD average. The main problems with parental leave in Korea are that only around half of the total workforce are eligible, and that even those who are eligible are reluctant to take leave in fear of adverse career consequences. The result is that despite increasing rapidly, the share of parents taking parental leave remains among the lowest in the OECD, especially so among men. Research also shows that the income effect of parental leave is dominant, and female leave-takers do not have an increased likelihood of returning to their jobs (Chapter 4).
In the third quarter of 2024, the number of births rose compared to the same period the year before for the first time in 14 years. The marriage rate has also been on the rise after reaching all-time lows during the Covid-19 pandemic. This increase is of course good news, but both marriage rates and birth rates remain very low and below their pre-pandemic levels (Chapter 2). It seems clear that the rebounding marriage rate is largely a catch-up effect after the pandemic, when many marriages were postponed. Childbirth typically follows marriage with a lag, and the rebound in birth rates can therefore also be interpreted as a lagged effect of the pandemic, which is likely to be temporary in nature.
However, it is too early to quantify the effect on fertility of the Covid-19 pandemic in 2020 and 2021, and thereby too early to conclude that this is the full story. A reform was rolled out from 2018 to 2021 to limit the statutory work week including overtime from 68 to 52 hours. This momentous change in favour of family-work balance is not obviously visible in fertility statistics, but positive effects on fertility could have been masked by the subsequent pandemic and cost-of-living crisis. Designating low fertility as a national emergency along with a steady expansion of family policies over time can also have helped to give young couples the needed confidence to bring children to the world. It is not inconceivable that the sum of these changes can have turned the tide on fertility rates, but there is so far no evidence to support such a claim.
In any case, any fertility revival will at best be slow and gradual until policies, gender norms and working practices taken together enable a large majority of women to pursue career and family in tandem. In the meantime, the cohorts of women in childbearing age keep shrinking and the large cohorts born in the 1950s, 60s and 70s keep ageing. Even in a very optimistic scenario, where birth rates more than double, Korea will turn from one of the youngest countries in the OECD to the oldest in a few decades.
Declaring victory on ultra-low fertility would for these reasons be wishful thinking. Rather than stabilisation at a low level, the goal of policy should be that young people in general are given the means and confidence to have and raise the number of children they desire. Policymakers should therefore continue to strengthen family policies, reform labour markets and nudge people’s norms towards more gender-equal sharing of paid work and caring responsibilities. Simple patches like increasing baby bonuses will incite some to choose motherhood over career, but may prove to be little more than costly distractions, as they will not solve the underlying problem. Removing constraints to live balanced lives where family and career can be combined should have priority, but will require much more fundamental changes, including reforming labour market duality and winning over people’s hearts and minds in support of family-friendly and gender-equal norms and working practices.
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