[Exclusive] Cutting Out the 'Bubble' in Low Birthrate Budget

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The government is cutting down on the so-called "bubble budget" that has been classified as a low birthrate countermeasure despite its minimal effect on encouraging childbirth. Last year, the budget to overcome low birthrate was 51.7 trillion won, but a significant portion of this amount cannot be considered an official low birthrate budget. Once these results are announced, the argument for increasing the low birthrate budget in the future is expected to gain credibility.

According to a comprehensive report by Asia Economy on the 22nd, the Low Birthrate and Aging Society Committee (LBS Committee) will announce a draft of the "Restructuring Plan for the Basic Plan on Low Birthrate and Aging Society" reflecting this direction in July. The Basic Plan is a system created and implemented by the government every five years to overcome low birthrate. The Moon Jae-in administration established the 4th Basic Plan at the end of 2020, covering plans until 2025, but there is an intention to revise it midway. The revision work mainly involves reviewing and reclassifying budget items tied to low birthrate across government ministries last year. This means filtering out budgets that have little relevance to increasing the birthrate, and according to Asia Economy's estimate, the scale could approach 30 trillion won based on last year's figures.

The government has decided to cut about 30 trillion won of "wasteful budget" that has been classified as low birthrate measures despite having minimal effect on encouraging childbirth. The Low Birthrate and Aging Society Committee (Jeogowi) will announce the "Restructuring Plan for the Basic Plan on Low Birthrate and Aging Society" containing these details in July. The photo shows twins and triplets attending the "Ssangdungi Plus Homecoming Day" held at Seoul National University Stadium on the 13th. [Image source=Yonhap News]

A representative project excluded from the low birthrate budget is the Ministry of Education's "Green Smart School Construction Project." This project transforms old school buildings into future-oriented schools and accounted for 1.8 trillion won in the low birthrate budget. Housing support and loan projects, which took up a large share of the low birthrate budget, are also expected to be largely excluded after review. About 46% of last year's low birthrate budget was spent on housing supply and loan support. Additionally, budgets for projects such as fostering industry-academia-research cooperation, supporting women scientists, increasing military officer salaries, and resolving youth smartphone overdependence will be excluded.

The LBS Committee began the classification work on the low birthrate budget because low birthrate measures were launched indiscriminately without proper effectiveness verification. The government spent 280 trillion won on low birthrate responses from 2006 to 2021. The budget started at 2.1 trillion won and ballooned to 51.7 trillion won last year. However, about half of it was housing support budget, which faced criticism for its low relevance and effectiveness. On the other hand, direct budgets for pregnancy, childbirth, and care were only 1.56% of GDP, which is even less than the OECD average of 2.29%.

280 Trillion Won Spent but Low Birthrate Unchecked... Upon Examination, Only Superficial Measures

Despite pouring enormous amounts of money over 16 years, the birthrate hit rock bottom due to the proliferation of indiscriminate measures. According to Statistics Korea, Korea's total fertility rate last year was 0.78, down 0.03 from the previous year. This is the lowest since statistics began in 1970. It is less than half of the OECD member countries' average total fertility rate of 1.59 in 2020. Korea is the only member country with a total fertility rate in the zero range. This has led to criticism that money was wasted on ineffective low birthrate policies.

In response, President Yoon Suk-yeol instructed on March 8, after receiving a briefing from Kim Young-mi, Vice Chair of the Low Birthrate and Aging Society Committee, to "prepare bold and definite low birthrate measures that the public can feel." On March 28, at the "2023 1st Low Birthrate and Aging Society Committee," President Yoon emphasized, "Despite astronomical budget inputs, the total fertility rate is at an all-time low," and added, "We must coldly reevaluate low birthrate policies based on scientific evidence and properly identify the reasons for failure."

The LBS Committee expects that once the verification of low birthrate measures is completed, the budget can be firmly increased in necessary areas. A committee official explained, "There is public opinion questioning why the low birthrate budget should be increased after spending nearly 300 trillion won," adding, "When unnecessary budgets are removed, the actual spending is not that large." He also said, "We need to identify ineffective measures first, which will help secure future budgets." This essentially means that if it is confirmed that not much money was actually spent on low birthrate responses, there will be room to invest more budget.

However, the government announced that projects excluded from the low birthrate measures will maintain similar levels of budget input for the time being. Many of these projects, although less related to low birthrate, are socially necessary, and sudden budget cuts could cause other side effects. A Ministry of Economy and Finance official said, "The government's stance to focus budget spending on overcoming low birthrate will be reflected," but added, "This reclassification does not mean the budget for specific projects will disappear."

The government plans to finalize and announce the restructuring plan in December after discussions once the research related to the Basic Plan is completed.