copy the linklink copied!5. Falling birth rates, key factors and pathways to overcome barriers to parenthood

This chapter describes the dynamics that led Korea to a fertility rate of 0.98 children per woman in 2018, which is the lowest among OECD countries. The strong segmentation of the labour market, changing attitudes towards marriage and children, and insufficient support to secure the transition to adulthood are key factors explaining the persistence of low fertility in Korea. Job insecurity, the cost of housing and education also limit fertility.

To reverse the trend, Korea could consider: i) providing more support for young people to find affordable housing and enter the labour market; ii) increasing the rate of payment for parental leave and providing it with a “speed premium” as it exists in Sweden; iii) increasing flexibility in working hours (including more opportunities for part-time work); and iv) investing more in the well-being of families.

    

The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

copy the linklink copied!5.1. Introduction and main findings

The total fertility rate (TFR) has fallen at a rapid pace in Korea since the early 1980s. In 2018, the TFR was less than 1 child per woman (0.98). The decline in birth rates was first driven by a decline in the number of large families (with 3 or more children), but over the past few decades, the number of families with two children has also fallen. Childlessness is on the rise too.

The decline in the TFR is related to many young Koreans postponing parenthood: the mean age at childbirth for mothers increased from 25 to almost 33 years of age over the 1985-2018 period. Moreover, although the trend is more recent than in other countries with very low fertility rates, the number of women who remain childless is also increasing: 12% of women born between 1971 and 1975 remain childless, a rate twice as high as for women born in 1950 or 1960.

Regional variations in fertility rates are important, and fertility rates are generally low in metropolitan cities such as Seoul, Busan or Daegu. By contrast, fertility is substantially higher than the national average in Sejong – the new administrative centre of Korea (1.67 children per woman in 2017). Sejong appears to be a relatively “family- and child-friendly” city with working conditions in the civil service that are conducive to reconciling work and family life, housing that remains financially affordable, and relatively easy access to quality childcare and school facilities.

Attitudes towards children have changed: nowadays, having a child is seen less as an obligation and more as a personal preference. Being too old is the reason 25% of married women of childbearing age do not have another child, but about 33% of women cite childrearing and education costs, and another 11% report work/life balance issues as the main obstacles.

The dichotomy in the labour market is an important cause of low fertility: it can force people to choose between a career and having children; it exposes a large fraction of the working population to economic insecurity; it creates very strong competition among young people at labour entry, and makes the transition from school to careers long and uncertain. Labour market dualism also feeds into the competitive nature of the education system in Korea that affects children from an early age onwards and imposes high (private) education costs on families (Chapter 4).

The evidence available for all OECD countries shows that fertility rates are declining in countries where the share of temporary employment is increasing. Conversely, fertility rates seem positively associated with higher employment rates of men and women, and relatively high incidences of part-time employment among women. Analysis of data from the “Korean Labor & Income Panel Study” shows that women in Korea are more likely to become a mother and/or to have a second child when they have one year or more professional experience before having a first child. Moreover, working women are more likely to become mothers (and more likely to become mothers quickly) when they hold a regular contract compared to those in non-regular employment with limited job security. However, once women in non-regular employment have a child, they are more likely to have a second child than regular workers, probably because their labour market opportunity costs are relatively low. Public sector employees with high job security are significantly more likely to have a first and a second child than those working in the private sector.

Housing status also influences the entry into parenthood. Tenants paying a monthly rent are less likely to have a first child than home owners or tenants who paid a large deposit on moving into a dwelling (the Jeonse system, see below). Tenants who pay a monthly rent usually have limited resources, and thus, limited financial means to start a family. Evidence from the OECD-wide analysis in this chapter shows that the share of household consumption allocated to housing and health is negatively associated with fertility trends.

The cost of education is cited as a main reason for not planning the birth of a child (whether it is the first or an additional child) for 31% of married women aged 15 to 49. Some Korean studies show that the cost of education has a negative influence on fertility.

In response to declining fertility, the Korean government has implemented several action plans since the early 2000s to promote fertility and make family life more compatible with employment. Many of these measures were found to have had a positive effect on fertility, but the policy response can be strengthened by:

  • Easing youth transition into adult life. Enable young adults to start family formation as soon as they wish, which requires: i) improving the school to work transition; ii) ensuring that more workers have access to job security and increase access to the social safety net; and iii) facilitating access to affordable housing.

  • Measures to increase the use of parental leave and introducing a “speed premium”. Eligibility for parental leave can have a positive effect on fertility, but increasing take-up rates remains a challenge in Korea (Chapter 3). Parents with strong labour market attachment may be willing to delay or forgo having another child rather than risk (more) damage to their labour market aspirations. To limit this risk, the entitlement to paid leave at a fixed rate can be extended if another birth occurs within a specified interval, as done for instance in Sweden.

  • Increasing access to flexible working arrangements. About 20% of women with no children or only one child cite difficulties in reconciling work and family life as the main reason for not intending to have additional children. Greater opportunities for part-time work as remunerated proportionally wages paid to regular workers and increased employee control on working time schedules can help address some of these issues.

  • Investing more in family well-being. Policy should not just focus on individual measures aimed at boosting fertility, but more broadly should focus on policies that help improve life satisfaction and the quality of life of parents and children. The level of social spending is much lower in Korea than the OECD average, except on early childhood education and care polices, which suggests there is room for increased investment in education, health and housing supports, and improved coverage and quality of services.

There is no instant remedy to low fertility outcomes through the pursuit of one or two policy measures. It is important that the different family policy measures of cash, fiscal and in-kind service supports fit together in a seamless system of continuous supports throughout childhood. Once people get the feeling that having children is compatible with work commitments – as they do in, for example, the Scandinavian countries and France, then they will actually have children.

Employers, unions, and society at large all have their role to play in forging an environment wherein young people sense they can successfully pursue their work and family aspirations. Public support for such a work and family society is indispensable, but it also has to be reliable. For family policies to be effective, they have to be trusted. Therefore, trust in family policies is gained by the stability and continuity of such policies. The widespread concerns among Korean policy makers on the persistence of low birth rates suggests that a consensus among the political spectrum needs to be found for years to come to build the stability and continuity that family policy needs to be effective.

copy the linklink copied!5.2. Fertility decline and underlying dynamics

The fertility rate has dropped sharply in Korea over the past six decades. The decline was particularly strong from the early 1960s to the early 1980s. Since then, the TFR continued to decline at a slower pace to reach the exceptionally low level of 0.98 children per woman on average in 2018. Korea is regarded as a country with persistent low fertility, as the TFR has been below 1.5 children per woman since the early 2000s.

5.2.1. Births are postponed and families are getting smaller

The decline in fertility has been driven by different processes over time, with three distinct phases (Yoo and Sobotka, 2018[1]) (Figure 5.1):

  • First, the shift to sub-replacement fertility in the 1980s was driven by a massive reduction in the third and higher-order births. During that period, having four or more children was rare in Korea. The births of a second child also became a little less frequent in the early 1980s than before.

  • Second, from the early 1990s, the further decline in fertility rates was largely driven by a continuous increase in the mean age of women at birth, which contributed to a decrease in the number of women giving birth to a first or a second child.

  • A third phase started in the early 2000s with a further decline in fertility rates that was primarily linked to a faster decrease in the likelihood to have a second child and increased childlessness.

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Figure 5.1. Declining fertility rates and postponed childbirths
Total fertility rates (left axis) by birth order and mean age at childbirths (right axis), Korea, 1981-2018
Figure 5.1. Declining fertility rates and postponed childbirths

Note: TFR stands for “total fertility rate” which is the average number of children born per woman over a lifetime given current age-specific fertility rates and assuming no female mortality during reproductive years; TFR1, TFR2 and TFR3+ refer respectively to the contributions of the births of a first, second and third or more children to the total fertility rate. For example, in 2015, the fertility rate is equal to 1.23 children per woman; births of a first child contribute for about 0.6 children, second births for 0.45 and third births and higher parity births for 0.11 children per woman.

Source: OECD Family Database, http://www.oecd.org/els/family/database.htm; Yoo and Sobotka (2018[1]), “Ultra-low fertility in South Korea: The role of the tempo effect”, Demographic Research, vol. 38, pp. 549-76, https://doi.org/10.4054/DemRes.2018.38.22.

The postponement of childbearing age and lower fertility rates results in smaller families. Korea is one of the low-fertility countries along with Spain where the completed fertility rate has fallen most sharply across generations, from an average of 2.5 children per woman for women born in 1950 to 1.8 children for those born in 1970 (Figure 5.2, Panel A). The decline in the fertility rate was very strong for generations born in the 1950s and primarily caused by a decrease in the propensity to have a second and/or a third child (Yoo and Sobotka, 2018[1]). The average family size continued to decline across the generations born in the 1960s and after, but at a much slower pace.

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Figure 5.2. A sharp decline in completed family size in Korea
Figure 5.2. A sharp decline in completed family size in Korea

Note: Completed cohort fertility is defined as the average number of children born to women belonging to certain cohort over the whole of their reproductive lives. The Human Fertility Database calculates completed cohort fertility for a given cohort if data are available for that cohort at age 44 or above, using data for the highest available age up to age 50. See the Human Fertility Database webpage (www.humanfertility.org) for more detail.

a. Data for women born in 1955 in Japan, Korea, Spain and the OECD average and 1953 for Singapore.

b. Data for women born in 1958 in Singapore.

c. Data for women born in 1968 in Singapore.

Source: The Human Fertility Database, http://www.humanfertility.org, and Yoo and Sobotka (2018[1]), “Ultra-low fertility in South Korea: The role of the tempo effect”, Demographic Research, vol. 38, pp. 549-576, https://doi.org/10.4054/DemRes.2018.38.22.; Sobotka (2019[2]), Rapid increase in childlessness among women in East Asia: A neglected “driver” of ultra-low fertility, working paper.

The propensity to remain childless in Korea is lower than the OECD average, but it has increased remarkably among women born in 1965 and after. Sobotka (2019[2]) estimates that the size of completed families has decreased in Korea by about 0.18 children between women born in 1972 and those born in 1960, and that is fully explained by the increasing propensity to remain childless. Childlessness, whether desired or not, is a growing phenomenon in Korea: 12% of the women born in 1970 remain childless, about twice as high as for women born in 1950 and in 1960.1

5.2.2. Large variations in fertility rates across regions

There are large variations in fertility rates across the different regions of Korea. In 2017, the total fertility rate in Seoul at 0.84 children per women was well below the national average, as were fertility rates in other big metropolitan cities such as Busan and Daegu (Figure 5.3). By contrast, fertility rates in Sejong (Figure 5.3) and in rural areas such as Chungam or Chungbuk are well above the national average

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Figure 5.3. Fertility rates vary considerably across Korea
Total fertility rates by region, 2017
Figure 5.3. Fertility rates vary considerably across Korea

Source: Vital Statistics, Statistics Korea, http://kosis.kr/eng/.

Various factors contribute to cross-regional variations in fertility rates. Large metropolitan areas such as Seoul often host young people who are educated, unmarried and whose current priority in life is to successfully complete their studies and get into professional life. The high population density of metropolitan areas (especially in Seoul) also exerts upward pressure on house prices, which limit opportunities to enter into partnerships and start a family (see below). Metropolitan areas attract a large share of the population of reproductive age and have a large effect on the national fertility rate, and while fertility rates are higher in more rural areas, there are less people of childbearing age (Lee and Yi, 2018[3]).

5.2.3. Fertility intentions and obstacles to realise fertility plans?

The sharp drop in fertility in Korea does not reflect a complete disinterest in having children. Until the late 1990s, having a child was widely perceived as an obligation (Chapter 2). People now prefer to have a child, and 90% of the population aged 15 to 44 think that having children is better than not having any. However, there are many obstacles to marriage, and the number of people who stay single has risen sharply over the past decades. In 1970, only 1.4% of women age 30-34 were never married. In 2010, that percentage was almost 30%.

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Box 5.1. The fertility-friendly environment of Sejong

The fertility rate in Seiong is much higher in other parts of the country due to the particular composition of the population, the nature of the job market and the infrastructure regarding housing, childcare and schools.

Sejong was founded in 2007 as the new administrative centre of Korea to ease congestion in Seoul, and encourage investment in the country's central region. Since 2012, the Government of Korea has relocated numerous ministries and agencies to Sejong, but the National Assembly and other important public agencies remain in Seoul.

Many residents of Sejong are employed in the civil service or as staff (including researchers) in national policy institutes, with job security, other good employment conditions, and working hours that are reasonably compatible with family life.

Another element that makes life in Sejong attractive for families is the availability of affordable housing. Renting a home in the Jeonse system is relatively inexpensive compared to buying a home: at 51.9% the lease-to-house price ratio of Sejong is well below that in Seoul (66.3%), Daejeon (68%), Gyeonggi (70.1%) or Gwangju (75.0%).

Sejong Municipality is committed to providing good quality early childhood and school infrastructure. By 2015, Sejong had 43 kindergarten, with a child-per-teacher ratio (12.84) that is slightly lower than the national average (13.09). The school environment is also attractive with 35 elementary schools, 17 junior schools, and 13 high schools and an 11.6 student-to-teacher ratio as well, which is below the national average of 14.2 (Data Korea, 2019[4]).

In 2018, women aged 25 to 39 who had married intended to have an average of 1.89 children (accounting for children already born and the intention to have more). This number is comparable to that of European countries with low fertility, but much lower than the “intended” number of children in countries with higher fertility rates (Figure 5.4).

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Figure 5.4. The ultimately intended family size is comparatively low in Korea
Mean average actual and intended number of children, women, 25- to 39-year-olds
Figure 5.4. The ultimately intended family size is comparatively low in Korea

Note: For Korea, this figure may overestimate fertility intentions because the survey at hand does not account for non-married women who may not wish to marry and have children.

Source: Eurobarometer 2011: Fertility and Social Climate; for Korea, 2018 National Survey on Fertility and Family Health and Welfare; only women who ever married are covered.

The reasons for not intending to have another child are diverse. About 20% of women report having realised their fertility intentions, while another 20% consider themselves too old to have more children (Figure 5.5). The burden of childrearing and education costs is another reason why many women (around 30%) do not intend to have another child, while a further 11% refer to work/life balance issues, and 8% cite job insecurity. Infertility is a common reason for childless women (20% of women who have never had a child). The Korean government put various measures in place to address the issue.

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Figure 5.5. Being too old, having already had the desired number of children, and the costs of raising children are common reasons cited by Korean women for not wanting any (more) children
Reasons for not intending to have an (additional) child, married women aged 15-49, by number of children they already have, 2018.
Figure 5.5. Being too old, having already had the desired number of children, and the costs of raising children are common reasons cited by Korean women for not wanting any (more) children

Note: “Work-life balance” refers to the sum of those reporting difficulties balancing work and family, lack of free-time, and the perception of household work and childcare.

Source: 2018 National Fertility and Family Health and Welfare Survey.

copy the linklink copied!5.3. What drives the persistence of low fertility

The context in which fertility decisions are made has evolved considerably across OECD over the past several decades, and this has contributed to changes in the way fertility trends are linked to economic development. The period of the so-called “demographic transition” involved a significant decline in fertility linked to economic development (Bloom, Canning and Sevilla, 2001[5]) (Murtin, 2013[6]). However, this negative association has weakened and some of the most economically advanced countries have seen an increase in fertility rates since the late 1990s, while their economies continued to grow (Myrskylä, Kohler and Billari, 2009[7]) (Luci-Greulich and Thévenon, 2014[8]). This increase particularly concerned countries where institutions were developed to help men and women balance work and family commitments, so that countries with high rates of female employment often had fertility rates that are above the average (McDonald, 2000[9]) (Luci-Greulich and Thévenon, 2014[8]). However, some countries are stuck with TFRs around 1.3-1.4 children per woman and these “lowest-low” fertility countries (Kohler, Billari and Ortega, 2002[10]), include European countries as Greece, Italy, Portugal and Spain and Japan and Korea in Asia (Rindfuss and Choe, 2016[11]).

5.3.1. Unravelling the factors explaining low fertility

Many different factors contribute to the persistence of low fertility, which are summarised in Figure 5.6.

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Figure 5.6. Factors explaining the persistence of low fertility
Figure 5.6. Factors explaining the persistence of low fertility

Source: OECD.

Labour market dualism: a challenging environment for fertility decisions

The high segmentation of the labour market creates an environment that is very challenging for fertility decision-making for three main reasons. First, it is associated with a large labour market segment of temporary jobs and other low quality employment often without social protection coverage, which contributes to a high level of economic insecurity in the labour market. Economic uncertainty makes fertility planning difficult and leads to substantial delays in first childbirth (Adsera, 2004[12]) (Adsera, 2011[13]).

Pronounced labour market dualism also creates a high level of competition across the early life course as students compete to enter the best schools and universities (Chapter 4) and compete for the best jobs and careers on entry in the labour market. Youth experience a lengthy job search period: young adults need about 1 year to get a first job upon graduation, often in SMEs, but it often takes 2-3 years before they get into stable employment in larger companies (OECD, 2019[14]). Moreover, the share of youth who are neither employed nor engaged in formal education or training (NEETs) is considerably higher than the OECD average (18.4% and 13.4% respectively). Given these uncertainties and issues around affordable housing, it is no surprise that the vast majority of Korean youth (i.e. over 81% of those aged 15 to 29) live in with their parents, compared to about 60% across the OECD on average (OECD, 2019[14]). The highly competitive environment resulting from labour market segmentation also makes family planning difficult, which contributes to the postponement of family formation among young people.

The segmentation of the labour market also contributes to the stark choices young men, but usually young women, face when considering options to pursue both family and labour market aspirations. Workers know that the prevailing workplace culture (Chapter 3) makes it difficult to combine the two. Prospective parents know that if they interrupt their labour force participation to have children, this will cost them dearly as the chances of getting back into well-paid regular employment are small. With this knowledge, young people will first postpone the family formation decision, and may well choose not to have children at all. When women stop working to raise children, they are likely to end up in part-time work and other jobs with low pay and poor career opportunities (Blossfeld and Hakim, 1997[15]) (Esping-Andersen, 1999[16]). Raising children, then, has a high cost in terms of career opportunities that women must forego.

Changing attitudes towards family, gender and children

Attitudes towards family, gender and parenting norms are changing, and these changes also shape fertility behaviours. One of the factors explaining these changes is the increase in educational levels across generations, which led to changes in life aspirations as a young people enter adulthood. The prolongation of studies implies that young people stay longer with their parents and depend economically on them for longer. When they do leave the parental home, young people aspire to live a period of life without new family obligations.

In Korea, many unmarried men and women do not want children as they would like to enjoy a period of life geared towards personal and/or couple well-being and free of family obligations (Figure 5.7). In addition, 25% of the unmarried men like to enjoy their material well-being without children. Also, around 28% of both men and women think it will be difficult to make children happy, and cite this as the main reason for not wanting to have children.

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Figure 5.7. Personal freedom and a preference for a period of life geared towards personal well-being are among the most common reasons given by unmarried men and women for not wanting children
Distribution of reasons for not wanting children, unmarried men and women aged 20-44, Korea, 2018.
Figure 5.7. Personal freedom and a preference for a period of life geared towards personal well-being are among the most common reasons given by unmarried men and women for not wanting children

Source: Korea National Fertility and Family Health and Welfare Survey (2018).

In Western countries, social norms have changed and pathways to adulthood have diversified, which have contributed to a postponement of partnership formation and parenthood (Lesthaeghe, 2010[17]) (Wagner and Thévenon, 2017[18]). Traditionally, marriage was the necessary pre-requisite to childbearing: it was considered as the hallmark of a lasting and stable relationship that provides the secure environment in which to raise children. However, this no longer holds in many Western countries, where a large share of births take place outside marriage. The proportion of children born outside marriage is even higher than that of children born to married couples in Chile, Denmark, Estonia, France, Iceland, Mexico, the Netherlands, Norway, Portugal and Sweden, where births outside marriage contribute to a little more than one child per woman on average (Figure 5.8). In these countries, marriage often occurs after and not before a childbirth to make the environment wherein children grow up more secure, and strengthen their rights particularly in the event of the separation or death of one of the parents.

By contrast, in Korea, the traditional model of marriage before parenthood continues to hold, as it does in Israel, Japan and Turkey, where less than 2% of births are outside marriage. In Korea, non-marital births contributed at most 0.02 children to a total fertility rate of 1.17 children per woman in 2016. Since the early 2000s, fertility rates of married women have remained stable and even have increased slightly in the late 2000s. However, the proportion of married women of childbearing age has dropped sharply, from about 71% of women aged over 15 in 2000 to about 51% in 2016, leading to substantial decline in the fertility rate (Lee, 2018[19]).2 The decline in fertility rates is linked directly to the sharp increase in postponement of marriage across the younger generations (Chapter 2).

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Figure 5.8. Childbirth is strongly associated with marriage in Korea
Contributions of births outside marriage to total fertility rates, 2017.
Figure 5.8. Childbirth is strongly associated with marriage in Korea

Source: OECD secretariat calculation based on data from the OECD Family Database, http://www.oecd.org/els/family/database.htm.

Parents may also invest in greater material and emotional capital to support child development from an earlier stage than in the past (United Nations, 2011[20]). The rise in income inequality may be another factor pushing parents towards greater educational investment to enhance their children’s chances to move up the socio-economic ladder (Doepke and Zilibotti, 2019[21]). However, one consequence is that parents focus their increased investment on a smaller number of offspring (Anderson and Kohler, 2013[22]).

In many countries, fathers are nowadays expected to invest more time in childcare and household chores than before (Goldscheider, Bernhardt and Lappegård, 2015[23]). Their greater involvement in childcare, from the very first months of a child's life, is regarded as a way to strengthen the father-child relationship and improve child development (Huerta et al., 2013[24]). In Korea, however, the social role of fathers is changing slowly due to their workplace commitments and a lack of motivation to engage more in family life (Hyun et al., 2016[25]).

Whether or not greater involvement of fathers in unpaid housework benefits fertility is a contested issue. Some studies have found traditional gender role attitudes and behaviours to be associated with higher fertility, (Bernhardt and Goldscheider, 2006[26]). Others, by contrast, claim that gender-egalitarian behaviour and more equally shared domestic work increases birth rates (e.g. (Duvander and Andersson, 2006[27]) (Aassve et al., 2015[28]). Duvander, Lappegård and Andersson (2010[29]) found that the involvement of fathers in caring for the first child in particular, increased the likelihood of couples having a second child in both Norway and Sweden. Recent evidence for Korea also suggested that a greater involvement of husbands in domestic chores increases the likelihood of a second birth in households (Kim, 2017[30]) (Yoon, 2017[31]) (Kim, Yang and Sung, 2013[32]).

Fertility outcomes seem also to depend on the kind of unpaid work each partner is involved in. Miettinen, Lainiala, and Rotkirch, (2015[33]) found that when women in Finland spend less time on housework, there may be a higher probability of a subsequent birth. However, while a greater male contribution to housework does not seem to boost fertility, their increased participation in childcare does.

Influence of the institutional and economic context

The institutional context in which work/family decisions play out is important as its role is twofold: i) institutions can reduce direct and indirect (opportunity) costs of having children; and ii) institutions can reduce the uncertainty on work/family decisions by providing assistance that makes the consequences of having children less costly and more predictable. In this regard, policies that could potentially increase fertility include:

  • Family benefits (financial and in-kind supports) and education subsidies that reduce the cost of raising children. More broadly, policies that reduce families’ living costs (including housing and health policies) can help alleviate household budgetary constraints.

  • Policies that foster the reconciliation of work and family life, in particular through rights around childbirth (Chapter 3), the provision of childcare and out-of-school-hours care services (Chapter 4) and flexible workplace arrangements (Chapter 3).

  • Policies that promote a family-friendly environment and a higher level of life satisfaction for parents and children, with potentially substantial effects in Korea (Mencarini et al., 2018[34]).

An economic crisis can have a negative impact on fertility because of its effects on employment, living standards, and uncertainty for the future (Sobotka, Skirbekk and Philipov, 2011[35]). These effects can be long lasting. For example, Korea experienced a deep economic recession after the 1997 financial crisis (OECD, 2000[36]) that contributed to delay in marriage and childbearing among the Korean youth and smaller families for older generations (Kim and Yoo, 2016[37]). The economic recession reinforced demographic trends that had emerged before the crisis (Yoo and Sobotka, 2018[1]).

5.3.2. How do fertility trends relate to labour market features?

What is the evidence for OECD countries?

How do fertility rates vary with changes in labour market characteristics? Figure 5.9 answers this question by showing the main findings of a cross-country analysis of fertility trends and employment characteristics over the 1995-2016 period. The main findings include:

  • The female employment rate for women aged 25 to 54 has risen sharply since the mid-1990s (+9.5 percentage points on average across the OECD), and this increase is positively associated with fertility rates. Ceteris paribus, a 1-percentage-point increase in female employment is associated with a 0.003 increase in the number of children per woman. This confirms results of earlier studies that show that increased female employment can stimulate fertility in a majority of OECD countries (Engelhardt, Kögel and Prskawetz, 2004[38]) (Luci-Greulich and Thévenon, 2014[8]).

  • Increases in the share of women working part-time (i.e. 30 hours a week or less) also share a positive association with fertility rates. Ceteris paribus, a one percentage point increase in the incidence of female part-time work is also associated with an increase in the fertility rate by about 0.003 children per woman.

  • An increase in working hours of female part-time workers seems to be associated with a positive effect on fertility rates, especially when the number of working hours is around 20 to 25 hours per week.

  • There appears to be a substantial positive association between fertility trends and male employment rates. This suggests that the -4.8 percentage point decrease in male employment rates in Korea between 1995 and 2016 contributed to the continued decline in fertility rates.

  • The increase in temporary employment (+2 percentage points on average across the OECD since the mid-1990s) appears to be negatively related to fertility rates. This suggests that the decline in temporary employment over the past decade in Korea (-6 percentage points between 2006 and 2016) contributed to limiting the decline in fertility rates. However, at 16%, the incidence of temporary employment remains well above the OECD average at 11%.

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Figure 5.9. Labour market characteristics and fertility in the OECD
Estimated association between labour market factors and fertility trends.
Figure 5.9. Labour market characteristics and fertility in the OECD

Note: The figure shows the effects, all other things being equal, of over time increases in the variables represented on the horizontal axis on the total fertility rate from 1995 to 2016. For each variable, the marginal effect is estimated at the sample mean. Estimates are based on two-way fixed-effects model with panel-corrected standard errors. ***, ** and * represent significance at 1%, 5% and 10% level, respectively; n.s.: non-statistically significant. Detailed results are available on request.

It may be that the decrease in the average working hours of full-time workers from 1995 to 2016 across the OECD is associated with higher fertility. However, the effect is not statistically significant (Figure 5.9).3

How do labour market conditions influence fertility in Korea?

Women’s employment participation in Korea has increased substantially over the past two decades. Like elsewhere in the OECD, many young women want to establish themselves in the labour market before establishing a partnership and building a family (Ma, 2013[39]). However, unlike in many Western countries, upon childbirth, women often withdraw from the labour market for a prolonged period (Ma, 2016[40]).

The analysis of individual longitudinal data facilitates a look at the relationship between female employment and the chances of giving birth to a first and/or second child in Korea. The main results of this analysis include (see Figure 5.10):

  • Women are most likely to enter motherhood (and to do it quickly) when they have a job before having a first child. Women with a permanent employment contract are more likely to have a first child than those who have never worked, while women with temporary employment contract are less likely to have their first child.

  • Several effects suggest that job stability and employment security increase the chances of having a first child. These effects include: having a temporary job reduces the chance of having a child; being employed for a year or more increases the chance of having a child; and civil servants are more likely to have a first and a second child than those working in the private sector.

  • Women in non-regular employment have a lower propensity to have a child than women in regular employment; working for a large rather than a small firm increases the likelihood of having a child.

  • Women who worked before the birth of the first child and who were no longer working after childbirth are more likely to have a second child (Figure 5.10, Panel B). Women in non-regular employment have a greater chance of having a second child, probably because the opportunity costs in career terms are lower than if the woman holds a regular job before having a second child.

  • Wages and working hours have no noticeable impact on fertility decisions.

  • Housing status matters: tenants paying a monthly rent are less likely to have a first child. This makes sense because this housing status is often associated with a lack of financial resources.

Women’s participation in the labour market before family formation has become increasingly common in Korea, as in many other OECD countries. Women who had labour force experience prior to the first birth show also a higher propensity to have a second child, which suggests that making a good start in employment is key for building a family. However, once settled into the labour market, women who continue to work after a first birth are less likely to have a second child than those who interrupt their labour market participation to establish a family. Fertility decisions then depend on the effect that having a second child may have on a career. This cost is lower for public service employees whose job security is high and women in non-regular jobs with limited career prospects. However, it is higher for women in regular employment in the private sector who, irrespective of their other characteristics, are less likely to have a second child.

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Figure 5.10. Influence of women’s labour market participation on fertility in Korea
Figure 5.10. Influence of women’s labour market participation on fertility in Korea

Note: The figure shows the results of an event history analysis on the likelihood of having a first (Panel A) and second (Panel B) child, based on pooled panel data from 1980 to 2016. Coefficients reported on the left-hand side of the two panels are based on data including all women, working or not, from age 15 to 49; the coefficients reported on the right-hand side focus on the role of job characteristics for working women only. When coefficients are higher than 1, it means that women with the corresponding characteristic have a higher probability of having a first or second child than those with the “reference” characteristics. For example, women who have worked but are no longer working at the time of child conception are 2.1 times more likely to have a first child than those who have never worked, other things being equal; conversely, a coefficient that is lower than 1 reflects a lower propensity to a one birth, relative to the reference category. ***, ** and * represent significance at the 1%, 5% and 10% levels, respectively; n.s.: non-statistically significant. Detailed results are available on request.

Source: OECD secretariat estimates based on data from the Korean Labor and Income Panel Study, 1998-2016.

5.3.3. Household consumption and its relationship with fertility

Raising children involves new outlays and shifts in household consumption patterns, which, for some households, may be an obstacle to having more children. Among these costs, one of the most important is that of housing because parents may need to move to a home with a larger number of rooms or they may want to move to an area that has a more child-friendly environment and good schools. Across the OECD, the share of household budgets allocated to housing is increasing and housing represents 23% of household final consumption on average (Figure 5.11). In contrast to this average trend, the share of housing in households’ final consumption has declined over the past decade in Korea, and at 18% is well below the OECD average.

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Figure 5.11. Household expenditures by broad categories
Share (%) of housing expenditures in household final consumption, current prices, 2016.
Figure 5.11. Household expenditures by broad categories

Source: OECD National Accounts Database, http://www.oecd.org/sdd/na/.

The presence of children also affects household food and clothing expenses, although it is possible to achieve economies of scale, for example, by reusing clothing purchased for a first child for subsequent children. Across the OECD, about 18% of household consumption is spent on food and clothing, and this amount is slightly higher in Korea (20%).

Raising children involves new expenditures on childcare, medical care, education and leisure. The national accounts do not facilitate an identification of spending on these items for children, but overall spending shares on these items is relatively small compared to spending on food and housing. This is due to high public investment in health and education, which reduces private costs. Nevertheless, Korean households spend three times more than the OECD average on education because of high private outlays on education during the schooling and university years (Chapter 4). Korea has also experienced significant growth in the share of health expenditure in household consumption (+2.5 percentage points since 2000), as the share of out-of-pocket (OOP) payments towards medical goods and services is significant.

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Box 5.2. Health expenditures in Korea

Healthcare is financed through the National Health Insurance (NHI), which covers the entire population. Other than some very new and costly technologies, most health-care services, including medical check-ups and cancer screenings, are covered and financing involves considerable cost sharing. Public expenditure accounted for 56% of total health expenditure in 2016, up from 39% in 1995. Health insurance contribution payments play a large role in health-care financing, while the role of tax-financed spending is relatively small.

Patients pay 20% of the cost for insured services covered by the NHI regarding inpatient care, and different cost-sharing ratios apply to outpatient care, depending on the health service provider. Low-income clients are exempt from cost sharing at the point of service, and vulnerable patient groups can make use of reduced co-payment rates. OOP payments for insured services are subject to a maximum and ceilings vary with household incomes. The percentage of OOP payments in total health expenditure has increased from 52% in 1995 to 63% in 2016. Nevertheless, OOP spending remains considerable, and increasingly, they concern payments for uninsured services, rather than co-payments to services, covered by the NHI.

Health expenditure has increased rapidly. Total health expenditure as a percentage of GDP has doubled over the past 20 years from 3.7% in 1995 to 7.7% in 2016 (Figure 5.12). Over the past 10 years, the mean annual real growth rate of health expenditure was exceeded that of GDP. Korea has experienced one of the highest rates of increase in health expenditure among OECD countries.

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Figure 5.12. Health expenditure as a share of GDP, 2016 (or nearest year)
Figure 5.12. Health expenditure as a share of GDP, 2016 (or nearest year)

Note: Expenditure excludes investments, unless otherwise stated. 1. Australian expenditure estimates exclude all expenditure for residential aged care facilities in welfare (social) services. 2. Includes investments.

Source: OECD Health Statistics 2017, WHO Global Health Expenditure Database.

How do household expenditures relate to fertility?

The price of consumption and changes therein affect household consumption decisions, and in extreme cases, high costs of child-related outlays (e.g. education, housing) can contribute to households having fewer children than they would like in the absence of budgetary constraints. In practice, it is very difficult to determine what role budgetary constraints play in fertility decisions.

Figure 5.13 illustrates the associations between fertility trends and increases in the share of consumption that goes to housing, health, food and clothing and education across the OECD. It shows that fertility trends share a negative association with the share of housing expenditures in household consumption: a 1% increase in the share of housing expenditure is associated with a lower fertility rate of about 0.014 children per woman. Housing prices increased significantly from the late 1990s to 2008 on average in the OECD before falling sharply as a result of the 2008/9 financial crisis. In many countries, housing prices started to rise again from 2013. Rents have also increased significantly since the early 2000s across the OECD (OECD Affordable Housing Database).

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Figure 5.13. Household expenditures and fertility
Association between fertility rates and the share of each spending category in household final consumption, OECD.
Figure 5.13. Household expenditures and fertility

Note: The figure shows the effects, ceteris paribus, of increases over time in the share of the various categories of expenditures in household final consumption on the total fertility rate from 2000 to 2016. These estimates are based on a cross-national time series analysis. Estimates based on two-way fixed-effects model with panel-corrected standard errors, and include other controls. ***, ** and * represent significance at 1%, 5% and 10% levels respectively; n.s.: non statistically significant. .Detailed results are available on request.

In Korea, rents have gradually increased since the early 2000s, while the increase in real house prices halted during the late 2000s. Various studies suggest that the housing costs and regional housing market conditions influence fertility in different ways. First, higher housing costs makes marriage less affordable for young adults who live with their parents, so young adults living in areas with higher housing prices tend to marry later (Lee and Lee, 2010[41]) (Lim, Kang and Ma, 2018[42]). Mortgage repayments and rent payments often compete with other household expenses related to children, and couples with higher shares of housing expenditures tend to have fewer children (Lee, Im and Lee, 2009[43]); and, at a more aggregate level, regions with higher housing prices tend to have lower fertility rates (Kim and Hwang, 2016[44]).

Beyond the cost involved, housing status is a marker of households’ wealth and economic security. Home owners tend to have children earlier than couples who rent their homes, and the difference in behaviour is greater in periods when the cost of housing is rising (Seo, 2013[45]; Lee and Noh, 2017[46]). Not all forms of housing rentals are the same. Households who can rent a dwelling by paying a large deposit or Jeonse (Box 5.3) are often wealthier than those who pay a monthly rent, or they have parents who provide some financial support. By contrast, households who pay monthly for their dwelling often cannot afford to make the large deposit (Lee and Choi, 2012[47]). For this reason, women in couples renting their home on a monthly basis have a lower chance to have a first child than their counterparts who rent by means of Jeonse (Figure 5.10). This finding is consistent with (Bae and Han, 2016[48]) who found that newly-married households with self-owned homes on average had children earlier in life than tenants. Moreover, while Figure 5.10, Panel B does not show statistically significant effect of housing status on a second birth, (Doh and Choi, 2018[49]) found that renters paying a monthly rent are less likely to have a second child than those who rent through Jeonse.

The quality of the housing matters, and in particular its size since fertility is higher for households in larger dwellings (Lee, 2013[50]) Lee (2013[50]) also found that fertility rates were highest for those who spent at least 5 years in their dwellings compared to those with a shorter rental period. Fertility is also higher in neighbourhoods with quality childcare facilities and where households report a higher level of satisfaction with regards to the quality of their residential environment (Lee and Noh, 2017[46]).

The share of health expenditure in consumption is negatively associated with fertility rates. This is consistent with the fact that the health status of a couple's partners is reported as the main reason for not intending to have additional children by 4% of all married women aged 15 to 49 and by more than 13% of childless women.

Unlike what is observed for the previous items, a positive association exists between fertility trends and the share of education expenditures in final consumption. This positive association suggests that, overall across OECD countries, households adjust their consumption by allocating more resources to education as the number of children increases.

The costs of education, however, can be a barrier to fertility. The burden of education costs is cited as the main reason for not planning to have another child by about 31% of married women aged 15 to 49. However, the evidence that education costs deter households from having children is limited. For instance, (Shin, 2008[51]) found no significant effect of childcare and education costs on fertility, but this result is likely to be due to data limitations regarding the full care and education cost of children. By contrast, a more recent time series analysis of 17 metropolitan municipalities in Korea found that private education costs are negatively associated with fertility rates (Choi and Won, 2018[52]). In addition, (Song and Shin, 2017[53]) point to a positive correlation between the increase in family income and per capita private education expenditures, which reflect the increased demand for high quality education of children. The decline in fertility, therefore, seems to be part of a change in parents' attitudes, who tend to invest more and more in the education of a smaller number of children.

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Box 5.3. Housing tenure and policy in Korea

There are three broad types of housing tenure in Korea: owner-occupied, Jeonse, and monthly rentals with deposits (MRD). Owner-occupied is the main housing tenure type in Korea but its level is decreasing. The national level of owner occupancy fell from 58.6% in 1980 to 53.6% in 2014, lower than in some advanced OECD countries. The level of homeownership is comparable with other countries such as France, Japan, the United Kingdom and the United States (OECD, 2018[54]).

Rental tenure in Korea is unique because of the existence of Jeonse. Under a Jeonse contract, the tenant makes a large upfront deposit – up to two years rents often 55% of the value of the dwelling or more – to the landlord during the signing of the lease. The tenant(s) do not pay monthly rent during the lease period. The deposit is fully refundable at the termination of the lease. Jeonse emerged during the times of housing shortages, high interest rates, rising housing prices, and inadequate mortgage financing.

The share of Jeonse in tenures has dropped from 23.9% in 1980 to 19.6% in 2014, while the share of the monthly rentals (23.9% in 2014) has been rising. However, house prices have stabilised and interest rates have fallen to record lows, challenging the economic viability of Jeonse from the landlord’s perspective. In recent years, there has been an increase in demand for Jeonse dwellings, while supply has fallen. Without parental support, the Jeonse system is difficult to afford for young couples. According to the Newly-married Households Housing Status Panel Survey in 2016, 47.1% of newly married couples lived in flat rented in the Jeonse market, 31.4% were living in one’s own house, 13.9% paid a monthly rent, and around 7% benefited from government provided free housing (MLIT, 2016[55]).

In order to facilitate access to the Jeonse market, public authorities offer low-interest loans to young people. To pay for the deposit, young people under 25 years of age can borrow up to KRW 35 million (USD 31 818) at a rate of between 1.8 and 2.7%. Newly married couples can benefit from special loans to buy a home or to rent a Jeonse flat for ten years, with an interest rate that is fixed and about 1% lower than the market rate. Young people under 35 can also borrow up to KRW 9.6 million (USD 8 727) over two years at a rate of 1.5% to pay monthly rent on the rental market.

Over the past decades, Korea’s housing policy aimed to close the quantitative housing gap and to improve housing quality. Housing affordability, however, has emerged as a newer challenge for policy makers in Korea (OECD, 2018[54]). As a result, the current housing policy agenda aims to alleviate the housing cost burden for young people, newlyweds, and multi-child families by: i) supplying and providing maintenance of public rental housing (200 000 units for public rental housing annually); ii) enhancing the coverage of housing allowances; iii) improving the regulation of the private rental market; and iv) increasing the number of loans for both rental housing and housing for purchase. The government aims to boost the supply of rental homes for newlyweds in city centres, and families with multiple children will have priority access to larger homes through the National Rental Housing Scheme (for a rental term of five or ten years). In choosing accommodations, parents will also consider the quality of the local environment in terms of access to public services, good quality childcare services, schools, jobs and commuting opportunities (OECD, 2018[54]).

There are two main channels to address housing affordability at the local level. First, local governments through local housing associations funded by the national housing urban fund, can provide public or social rental housing at below market rents to low-income and vulnerable households. Second, local governments can implement measures that reduce house prices and rents in the private housing market through land use regulations and the building approval process. Strict land use regulations can prevent housing supply from adjusting to growing demand, thereby increasing house prices. One policy measure applied in OECD countries is for local governments to require property-developers to make a share of newly built housing available to low-income residents (at below market rents).

The expansion of the stock of public rental housing will contribute to helping families find good quality affordable housing. Boosting the supply of public rental housing can also contribute to curtailing private rent prices. However, as social housing tenants can be reluctant to give up low rents and secure tenancies, the extension of social and community housing may be an obstacle to labour mobility.

copy the linklink copied!5.4. Pathways towards a rejuvenated Korea

There are tensions in Korea between modern attitudes, traditional family expectations and prevailing social and workplace practices, at the same time as issues around job-insecurity, low pay, housing and education costs. All these factors affect the timing and willingness of young people to marry and have children. To stop the fall in birth rates, or better still, to turn trends around towards more sustainable long-term patterns; policy has to better help (prospective) parents feel secure enough to have children. Korean family policy is already moving in that direction. An extensive set of measures has been put in place since the early 2000s (Chapter 1), including comparatively generous parental leave entitlements (Chapter 3) and the extremely rapid development of a wide range of ECEC services and OSH-care services (Chapter 4). Some of these measures have shown a positive effect on fertility, but their effectiveness can be strengthened by enabling youths to get a good start as adults (5.4.1), raising the use of parental leave entitlements (5.4.2) and flexible work time arrangements (5.4.3), and by investing more in family well-being (5.4.4).

5.4.1. Easing the labour market transition of youth

Korea’s labour market is highly segmented, and this segmentation is one of the drivers of persistently low fertility. It generates a high level of competition across youth to get access to stable jobs and good career opportunities, and leads to a large group of workers facing high levels of job insecurity and low levels of social protection. This is hardly compatible with starting a family. For this reason, many couples post-pone the birth of their first child until after they have gained professional experience and achieved a minimum of job stability; being in stable employment for more than 1 year is one factor that influences the probability of starting a family.

Policies to ease the transition to adult life by helping young people to have stable jobs are crucial to enable them make birth plans. Young adults often need about one year to get a first job upon graduation, often in an SME, and it frequently takes around 2-3 years before they get into stable employment in larger companies. Only two out of three 15- to 29-year old workers had access to employment insurance benefits in 2016, and strict eligibility criteria keep the proportion of 20- to 39-year-olds on social assistance (the Basic Livelihood Security Programme) to around 1%. OECD (2019[14]), Investing in Youth: Korea, elaborates on different measures that are needed to help youth have a good start in the labour market, including:

  • Address labour market duality by easing employment protection legislation, reforming large business groups and enhancing dynamism in small firms, and support companies in altering their recruitment practices by providing training in competency-based hiring and introducing intermediary matching services for small and medium-sized enterprises.

  • Improve the school to work transition by enhancing employment supports and improving the effectiveness of career guidance and counselling, and ensuring quality improvements in secondary vocational education, including through more and deeper connections with industry. Extend the coverage of apprenticeships among companies and youth and reduce their cost for employers.

  • Extend coverage of social protection among young people, including a more effective enforcement of social insurance legislation, widening the coverage of social protection among non-regular jobs, monitoring access to Earned Income Tax Credits among young workers and easing access to the Basic Livelihood Security Programme, by abolishing the strict rules on family support obligations (OECD, 2019[14]). There is a risk that increased access to social benefits increases the period of job-search. However, measures, including in-work benefits that raise the real earnings of youth employed by SMEs closer to wages for those working for large enterprises would mitigate the implications of labour market duality. The increase in real earnings for young workers can help provide a more solid basis for starting a family.

  • Increase coverage of housing support to young people. Currently, the government offers low-interest loans for housing deposits under the Jeonse system to young people, and young people under 35 with low income and no parental support can also borrow at reduced rate to help with monthly rent. However, renting housing outside the Jeonse system tends to delay the birth of a first child, regardless of income and employment status. Extending housing support to more young people can help reduce the barriers that housing can create to family formation.

5.4.2. Increase the use of paid leave to care for children

The effectiveness of maternity and parental leaves as a family support policy is limited, as large groups of workers are reluctant to use it or do not have access to paid leave around childbirth, even though recent reform tried to extend coverage (Chapter 3). Eligibility for maternity leave has proved to have a positive effect on fertility. Kim (2017[56]) estimates that eligibility for maternity leave has had a positive effect on the birth of a first child equivalent to about 0.04 children per year, and 0.06 children for a second child. However, the same study also points out that women in many occupations are not eligible to either receive maternity or parental leave, which pushes women who want to have a child without having to leave their jobs to businesses that offer paid parental leave. Conversely, many women who are not entitled to employment-protected parental leave may postpone childbirth or defer it indefinitely. Making paid leave available to a larger group of workers will reduce the need for prospective parents to be strategic in choosing their occupation and workplace.

Higher rates of earnings replacement over the leave period are also crucial to increase leave take-up and reduce socio-economic differences in labour market and fertility outcomes. The provision of income support during leave can have a small positive effect on fertility rates, while the duration of child-related leave has no impact. Despite repeated increases in payment rates and ceilings, parental leave in Korea is comparatively low paid (Chapter 3). An increase in the level of payments for the first few months of leave can increase uptake and provide the income security that couples are looking for in order not to delay the birth of children. One way of achieving higher payment rates is giving parents the option to use leave for shorter periods at higher payment rates, while using paid leave on a part-time basis (with regular earnings for the rest of the period of leave) can also sustain family incomes (Thévenon and Gauthier, 2011[57]).

Such a reform may also promote a more equal sharing of leave entitlements, which reflects the aspirations expressed by a large part of the Korean population. German policy reform since the mid-2000s provides an example of leave reform that offers higher payment rates for shorter durations: a 12-month paid leave at 67% of the parents' past earning including a 2-month bonus if both parents take at least two months leave. The leave can be taken on a part-time basis, in which case the allowance can be paid for 20 to 24 months, and is associated with an increase in fertility among highly educated women in their mid-thirties (Bujard and Passet, 2013[58]) (Stichnoth, Stichnoth and Holger, 2014[59]) (OECD, 2017[60]).

If the increase in the payment of leave leads to more women returning to work, there is a risk that, after the birth of a first child, mothers delay the birth of a second child and/or do not have another child. To limit this risk, it is possible to extend the paid leave entitlement if another birth occurs within a specified interval. The Swedish paid leave system extends eligibility to paid leave at the same payment rate as for the previous child if an additional child is born or adopted within 30 months since. The evidence suggests that this “speed premium” contributed to accelerated births, but its effect on the completed fertility rate and family size in Sweden is unclear (Box 5.4).

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Box 5.4. The speed premium in Sweden

Since the mid-1980s, parents in Sweden who give birth to another child within 30 months of the birth of the previous, one can continue to receive income support during paid leave at the same level of payment as when they went on leave for their previous child. This is commonly known as the “speed premium” and it is financially advantageous for parents who would otherwise go back to work after the first child, but who reduce working hours and earnings and would, therefore, qualify for a lower payment rate.

This premium has been found to reduce the spacing between the first and second birth and it also accelerated the timing of a third, a phenomenon that has persisted across economic cycles (Hoem, 1993[61]) (Neyer and Andersson, 2008[62]). The impact on completed fertility is nevertheless uncertain, and recent evidence suggests that its effect on birth spacing is nowadays quite small (Miranda, 2019[63]). There is also evidence that the speed premium has enabled mothers to reduce their activity without loss of family income, and that following the adoption of the speed premium, the school performances of the “already-born” children improved (Ginja, Jans and Karimi, 2019[64]).

Higher payment rates are likely to increase the number of fathers to take paid leave around childbirth and contribute to care provision at home (Chapter 3). However, whether this will positively or negatively influence fertility is an open question. On the one hand, the time off taken by the father can help reduce the time mothers spend on childcare and reduce their stress, which has a positive impact on fertility, as shown by (Kim, 2017[65]) (Lim, Kang and Ma, 2018[66]). The care experience may also change a father’s preferences towards having another child. On the other hand, the increase in father’s caring contribution after first childbirth may lead to mothers going back to work rather than having another child; or realising what childcare work actually involves, some fathers may become more reluctant to have another child.

There are not many studies looking at the effect of fathers taking leave and fertility outcomes, but (Song and Jo, 2019[67]) found that in Korea fathers working in companies where paid leave is available are less likely to have the second birth. Similar evidence exists for Spain where the introduction of two weeks paternity leave in 2007 was found to be responsible for a slower transition to a subsequent child in couples where fathers took leave (Farré and González, 2019[68]). By contrast, in Sweden, Iceland and Norway, fathers using leave after the introduction of a fathers quota in the parental leave system were found to be more likely to have a second child (Duvander et al., 2016[69]). The limited evidence that is available, thus, seems to suggest that fathers taking leave may have a negative, but in any case small, effect on fertility in economies with dual labour markets and where attitudes towards household division of labour remain traditional to some extent.

5.4.3. Enhancing workplace flexibility

Difficulties in reconciling work and family life is the main reason for not intending to have a child for about 20% of women without or with only one child (Figure 5.5). Greater flexibility in working time arrangements can help to overcome this situation. This involves:

  • Expanding opportunities to voluntarily work part-time. The analysis above suggests that, unless the reduction in working time in Korea is significant, it will not lead to a significant increase in fertility. By contrast, the development of part-time work for less 30 hours per week can help boost fertility, as shown above and corroborated by other comparative or national studies (Sleebos, 2003[70]) (Ariza, De la Rica Goiricelaya and Ugidos Olazabal, 2003[71]) (Begall and Mills, 2011[72]). In Korea, employees who voluntarily work part-time are 2 percentage points more likely than full-time workers to have a child (Kim, 2018[73]), and they are found to give birth to a second child more frequently (Han and Lee, 2015[74]).

  • Increasing control on work schedules. International comparisons suggest that higher levels of job strain (time pressure) significantly reduce fertility intentions for mothers when childcare availability is constrained, and that women with higher levels of work control are significantly more likely to intend to have more children (Begall and Mills, 2011[72]) (Choi, Yellow Horse and Yang, 2018[75]). In Korea, working time flexibility is found to decrease the interval between the first and the second birth (Han and Lee, 2015[74]). Flexible working time is also found to improve family life satisfaction and reduce parenting stress, which are two factors affecting women’s willingness to have additional children (Choi and Ahn, 2018[76]).

5.4.4. Invest more on family well-being

Public support for families is an important lever to help people have children at the time of their choosing. Some family benefits are directly aimed at supplementing families’ incomes and reducing the cost of raising children, others “give parents more time” for their work and care commitments, while yet other measures provide support across a wide range of issues that can influence fertility decisions:

  • Family cash benefits and tax breaks for families. These include “birth grants” that are paid with the explicit aim of encouraging fertility, usually one-off payments shortly after childbirth. Their effect on fertility is limited: births take place more quickly than in the absence of such payments, but the total number of births does not seem to go up (Thévenon and Gauthier, 2011[57]).

  • Paid income support during employment-protected, child-related leave (Chapter 3) and the provision of childcare, education and out-of-school hours care services give parents time to reconcile their work and family life. In particular, formal care support has a positive effect on fertility.

  • Support received in-cash and in-kind for housing, health, education and social protection purposes more broadly. By loosening household budget constraints, these supports can encourage fertility.

Per capita spending on social protection in Korea was just below half of the OECD average in 2015 (Figure 5.14): only the level of per capita spending on ECEC services is significantly above the OECD in Korea. By contrast, the amounts spent on public income support during maternity, paternity and parental leave in Korea are well below the OECD average, reflecting its limited use. Per capita expenditure on housing is also much lower than average, as are the per child expenditures on family cash benefit (though they do not account for the September 2018 reform).

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Figure 5.14. Per capita expenditures on family and social policies
Per capita expenditures in USD, 2015.
Figure 5.14. Per capita expenditures on family and social policies

Note: Family benefits include child allowances and credits, childcare support, and single parent payments; income support during leave are categorised in a separate category; Health expenditures include spending on in- and out-patient care, medical goods, and prevention. Tax breaks for families include tax exemptions (e.g. income from child benefits that is not included in the tax base); child tax allowances (amounts for children that are deducted from gross income and are not included in taxable income), and child tax credits (amounts that are deducted from the tax liability). Spending on early childhood education and care include the direct financing or subsidisation of childcare and early childhood education facilities, plus public childcare support through earmarked payments to parents. Government spending on primary, secondary and tertiary education are expressed per full-time student. Housing expenditures include housing allowances and rent subsidies. For each category, the total of expenditures is divided by the approximated population target: the number of children aged 0 to 17 for tax breaks and family benefits; the number of births for spending on leave; the number of children under age 5 for early childhood education and care services; the unemployed population for unemployment and activation policies, and the total number of the population for health and housing expenditures.

Source: OECD Social Expenditures database (www.oecd.org/social/expenditure.htm.) and Educational Finance Indicators.

Figure 5.15 presents estimates on the association between the evolution of fertility rates between 2000 and 2015 and changes in public expenditure levels in the different categories across the OECD. It shows the fertility variations associated with a 10% variation in each type of public spending. However, since the current spending varies considerably per category as shown in Figure 5.14, the effect of an absolute change of USD 1 000 in public spending per capita is also shown across the different categories of expenditure. Figure 5.15 leads to the following observations:

  • There is a positive association between fertility rates and the per capital level of total social spending.

  • Among all categories of social expenditures, the association between fertility rates and per child spending on early childhood education and care services is strongest. However, such spending is already comparatively high in Korea (Chapter 4), so that an increase of USD 1000 per capita would have a more limited effect than if the same amount was spent in other areas, ceteris paribus.

  • The fertility rate shares a positive association with expenditure on child-related leave, but not with the duration of leave. These expenditures are obviously highly dependent on the use of leave, and this result indirectly suggests that a greater use of leave may be associated with higher fertility.

  • Increases in health and housing spending are associated with higher fertility. In addition, due to a comparatively low level of expenditure per capita, the fertility variations associated with a USD 1 000 per capita public spending increase on housing and health are considerable.

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Figure 5.15. Estimated fertility response to changes in social spending
Estimated effect of an increase in public spending by spending categories.
Figure 5.15. Estimated fertility response to changes in social spending

Note: The figure shows the effects, all other things being equal, of over time increases in public expenditures by category on the total fertility rate from 2000 to 2016. These estimates are based on a cross-national time-series analysis. A USD 1 000 increase in per capita spending on housing means that it would be multiplied by more than 7 compared to the 2015 average level of public spending in this area. At 0.3 children per woman, the estimated effect of such an increase is out of scale and, for this reason, is not shown in this figure. Estimates based on two-way fixed-effects model with panel-corrected standard errors, and include few other controls. ***, ** and * represent significance at 1%, 5% and 10% level respectively; n.s.: non-statistically significant. Detailed results are available on request.

More research is needed to learn more about how health and housing supports can affect fertility behaviours. Some health expenditures are directly aimed at improving reproductive health, but low health insurance costs will also affect fertility through the relief they give to household budgets (Apostolova-Mihaylova and Yelowitz, 2018[77]). Similarly, more information on the effect of housing policies on fertility is needed. Better health and housing policies are likely to improve life satisfaction and happiness, thereby exercising a positive effect on fertility (Mencarini et al., 2018[34]) (Aassve, Mencarini and Sironi, 2015[78]).

The level of direct financial support to families is low in Korea compared to OECD countries (Chapter 2), and therefore it did not show up as a significant factor in the estimations underlying (Figure 5.15). However, evidence from both cross-national and country-specific analyses suggests that financial support can help to prevent postponement of childbirths and sustain fertility rates (Thévenon and Gauthier, 2011[57]) (Luci-Greulich and Thévenon, 2013[79]). For example, the French policy experience shows that a significant package of financial supports is needed to influence fertility, but that policy design has to be weary of unintended effects on labour supply (Box 5.5),

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Box 5.5. The impact of family cash benefits and tax break for families on fertility in France

Family cash benefits and tax breaks for families with children are important measures to supplement family income and increase fertility. The French experience is illustrative because of its extended family support policies and the evidence that is available on the effects of past reform (Thévenon, 2016[80]):

Effect of cash benefits

  • Ekert-Jaffé (1986[81]), estimated that the presence of financial benefits (family allowance, the additional benefit for large families on low incomes and the housing allowance) increased fertility by around 0.2 children per woman in France in the late 1970s, and that complete coverage of the direct cost of children could produce a further increase of about 0.3 children per woman.

Effect of tax breaks for families with children

  • The reform of the “quotient familial” in 1981 reduced the cost of a third child by increasing the associated tax reduction in family income (for tax purposes it could be counted as an adult, rather than a “half-adult”) (Landais, 2004[82]). The effect on fertility is positive, but very small. A 1% change in tax relief for a third child increased the proportion of households with three children by no more than 0.05%. In addition, the reform took 5 to 10 years to take effect. The effect was most pronounced among high-income families, who benefited most from the tax reduction.

  • Chen (2011[83]) found that the generosity of tax transfers to families contributes higher fertility among rich rather than poor households in France, in contrast to other European countries and the United States. The author estimated that tax incentives can have a large effect on fertility: a 1% increase in household income generates an average increase of 0.09 children.

Effect of tax-benefit support

Laroque and Salanié (2014[84]) estimated the effect of the tax-benefit system on fertility by using a micro-simulation model, taking into account the possible interactions between different welfare benefits and tax measures as well as interactions between mothers' labour-market and fertility behaviour. The influence of financial transfers on fertility seems to be significant but costly. The provision of one additional unconditional child credit of EUR 150 (USD 170) per month - which would cost about 0.3% of GDP - is estimated to potentially raise fertility by 3.3 points (equal to approximately 0.06 births per woman), while female labour-force participation would be reduced by 0.5 points. The impact varies with birth order, with the strongest effect for the third child.

Although subsidies are important to lower the cost of children, financial subsidies alone are not enough to reduce the social pressure to raise children and deter the young generations from having children. The provision of good quality services is equally important because it saves parents' time - who are particularly under pressure with long working hours - and also to reduce the stress associated with parenting that social expectations generate for children's success. Early childhood and after-school care services are obviously important to avoid having to choose between a career and children. However, to have a bigger impact on fertility, the services must also meet expectations around the quality and well-being of children.

It is important that the different family policy measures of cash, fiscal and in-kind service supports fit together in a seamless system of continuous supports throughout childhood. Once parents feel they can: use parental leave without repercussions, that childcare and other services are of good quality, and they generally have the feeling that having children is compatible with work commitments, they will actually have children. Public support for such a work and family society is indispensable, but also has to be reliable. For family policies to be effective, they have to be trusted. Such trust is gained through the stability and continuity of such policies. The widespread concerns among Korean policy makers surrounding the persistence of low birth rates suggests that a consensus among the political spectrum can be found for years to come to build the stability and continuity that family policy needs to be effective.

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Notes

← 1. Childlessness continues to grow for younger generations: (Shin et al., 2018[85]) estimated that 12% of married women and 15% of non-married women born between 1971 and 1974 remained childless at age 40 to 44.

← 2. Over the period 2005-2012, the fertility rate increased slightly from 1.08 to 1.30. Lee (2018[19]), suggested this increase was due to the fertility of married women (by 0.44 children per woman), while over the same period the proportion of married women declined, leading to a decrease in the fertility rate of 0.33 children per woman.

← 3. Detailed results (available on request) suggest that the association between fertility and working hours is negative as long as working weeks are shorter than 42 hours per week, but positive otherwise. With an average full-time working week of about 47 hours per week in 2016, Korea is far removed from the threshold for which a reduction of average working hours can be expected to have a positive effect on fertility.

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5. Falling birth rates, key factors and pathways to overcome barriers to parenthood