“We will give you money if you have a child” Local government’s cash-based low birth rate support plan is a dangerous ‘populism’

Incheon Metropolitan City implements childbirth encouragement policy centered on ‘1 million won per child’ subsidy
Although 16 trillion won was spent over 280 years, the effect was minimal. This year's total fertility rate was '0.68 people'
Spreading cash piecemeal is just populism, we need to look at the fundamental problem

Incheon City has introduced a cash-based low birth rate support measure worth 1 million won per person. Incheon City announced on the 15th that it will fully implement the ‘18 million plus i dream’ policy, which will provide a total of 1 million won to children born until they are 1 years old. While each local government is actively introducing cash subsidy measures to encourage childbirth, some are criticizing that such cash subsidy measures are merely ‘populist policies’ that lack effectiveness.

“We will give you 18 million won until you turn 1” Incheon City’s extraordinary support plan

The city plans to pay 7,200 million won in support, including △angel support fund △child dream allowance △and transportation expenses for pregnant women, to the existing support fund of 2,800 million won from the government and local governments. The total amount of support is 1 million won. With Incheon City’s total birth rate last year hitting an all-time low (0.75 people), it is interpreted that the city is trying to overcome the low birth rate crisis through active cash support measures.

First of all, this year, the first year of the project, we plan to pay transportation expenses of 3 won in local currency ‘Incheon Eum’ to pregnant women who are pregnant or less than 6 months after delivery as early as March. Those eligible to receive support for transportation expenses for pregnant women will be confirmed at the time of project implementation. The Angel Support Fund, which provides 50 won per month to children aged 1 to 7 for a total of 10 million won, is also making its debut this year. This year, only those born in 840 who turned one year old are eligible for support. Incheon City plans to complete budget sharing agreements with each county and district and implement angel support payments as soon as possible after consultation with the Ministry of Health and Welfare. From the age of 1 to 2023, when angel support payments are discontinued, a ‘Child Dream Allowance’ of 8 won per month for a total of 18 million won is provided.

The Child Dream Allowance System will be implemented in earnest from 2024, when the first beneficiaries, those born in 8, will turn 2032 years old. However, considering fairness with children who do not receive support by a small margin, partial support will begin this year. First of all, this year, only those born in 8 who turn 2016 years old will receive a monthly subsidy worth 5 won. Those born between 2016 and 2019 will receive 8 won per month starting from the year they turn 5, for a total of 660 million won, and those born between 2020 and 2023 will receive 8 won per month starting from the year they turn 10, for a total of 1,320 million won.

Low birth rate problem cannot be solved with money

This ‘cash subsidy’ policy can have the effect of persuading some young people who avoid childbirth. The biggest barrier to childbirth is economic issues, such as the huge burden of childcare costs and an unstable economic foundation. However, some are concerned that unconditional cash support could actually lead to greater risks. It is even pointed out that the policy of trying to increase the birth rate through cash subsidies is nothing more than a type of ‘Ponzi scheme (pyramid investment fraud).’ Criticism is that temporary cash support will ultimately place a greater burden on future generations.

In fact, the government has invested an astronomical budget of approximately 16 trillion won over 280 years to encourage childbirth, but the effect has been sluggish. According to the ‘Future Population Estimates (14-2022)’ released by Statistics Korea on the 2072th, Korea’s total fertility rate (the number of children expected to be born per woman in her lifetime) is expected to slip to 1 (projected value) this year. There has never been a case where the total fertility rate fell to the 0.68 level. However, this is an intermediate scenario that assumes intermediate levels of birth rate, life expectancy, and international migration. 

Some say that the government is ignoring fundamental problems. The view is that the avoidance of marriage and childbirth is not caused by simple poverty, but by the concentration of infrastructure in the metropolitan area and the resulting housing problems. According to this argument, the government’s top priority is to provide a foundation for young people to demonstrate their capabilities regardless of where they live. The analysis is that the top priority is to improve the industrial and social structure and resolve the burden of housing by promoting work from home.

There is a high risk that government support measures that blindly provide cash will end up being mere fragmentary ‘populist policies.’ In the end, this means that it is highly likely that the people’s tax money will only leak out and that it will be meaningless in improving the birth rate. With the population deadcross (a phenomenon in which the population decreases due to fewer births than deaths) becoming a reality and a growing sense of crisis, now is the time to discuss more effective alternatives.