"Dad's Parental Leave Expansion, 'What About the Salary?'... Addressing Income Reduction Is Crucial [K Population Strategy]"

(21) Limitations in Setting Caps Despite Guaranteeing 80% of Ordinary Wages
Increasing Income Replacement Rate Encourages Active Male Parental Leave Participation

Editor's NoteThe key to solving South Korea's population problem lies within companies. A corporate atmosphere that evaluates employees based on work regardless of gender and a family-friendly culture are crucial to addressing the K-population issue. Although low birth rates result from complex factors, it is important to ensure that workplace burdens do not become obstacles that make people hesitate to have children. Asia Economy plans to visit companies leading family-friendly policies to identify the factors that helped these systems settle stably, and to explore various solutions with companies that lack practical conditions. Through this, we aim to encourage change starting from companies and analyze the government's role in enabling this. We listen to voices emphasizing that company culture and atmosphere that reduce psychological burdens are more critical than financial support, and present alternatives from diverse perspectives.

Expanding a culture that balances work and family life is essential to solving the low birth rate problem, and this requires increasing paternity leave and parental leave for men. However, it is still difficult for men to take parental leave in Korean companies. Even in dual-income households, a father's parental leave often leads to a decrease in household income, as female workers earn only about 60% of male workers' salaries.

Many male workers interviewed during the 'K-Population Strategy - Gender Equality is the Answer' investigative series also said that income reduction makes it difficult to take parental leave. A 40-year-old sole breadwinner working father at a large corporation said, "I have wanted to take parental leave several times, but I couldn't muster the courage because I have loan interest payments due immediately," adding, "If loan repayments were deferred during parental leave, I would want to take it right away." A 30-year-old dual-income working father at a small-to-medium enterprise confessed, "The parental leave pay provided by the government is honestly too low," and said, "Only if compensation is proportional to previous income will more men decide to take parental leave without worry."

Their concerns align with those of many working fathers. According to a low birth rate perception survey released by the Korea Population, Health and Welfare Association in January 2022, among 1,113 'working dads,' 40.7% of the 890 who had never taken parental leave worried about 'income reduction.' Besides the 'workplace atmosphere where men do not take parental leave' (47.5%), there are realistic concerns about household finances at the individual level.

Parental leave is legally a system that guarantees income compensation. According to laws related to gender equality in employment, parental leave pay guarantees 80% of the ordinary wage. However, since the minimum and maximum amounts are set at 700,000 KRW and 1,500,000 KRW respectively, it is common that the actual compensation rate falls below 50% in reality.

Recent 'low birth rate measures' proposed competitively by ruling and opposition parties also stem from this awareness, but it is difficult for the government to guarantee nearly 100% income compensation. The People Power Party announced plans to provide fathers with one month of paid paternity leave and raise the monthly salary cap during parental leave to a maximum of 2.1 million KRW. The Democratic Party proposed a 100 million KRW loan with a 10-year maturity for newlyweds.

The government is also working on system improvements to address the income replacement rate issue. Starting this year, if both parents with children under 18 months take parental leave, the ordinary wage guarantee rate will be raised to 100%, and the monthly cap will be increased to 4.5 million KRW through the '6+6 Parental Leave System.' The government judged that the earlier '3+3 Parental Leave System,' which increased the income replacement rate for the first three months of parental leave for each parent from 2022, led to a more than 30% increase in fathers' participation compared to the previous year, showing significant effects.

However, these measures face various limitations, including funding. The burden the government will have to bear in the future may increase if relying solely on the Employment Insurance Fund, existing tax revenues, and general account transfers. Therefore, the argument that companies leading a culture of work-family balance by actively encouraging male parental leave should be incentivized to encourage corporate participation is gaining traction.

Some companies are proactively providing paid paternity leave and parental leave for male employees. Foreign companies' Korean branches also actively allocate resources for paid paternity leave and parental leave for men. Lego Korea grants 8 weeks of paid paternity leave to caregivers. They guarantee 100% of the usual monthly salary by paying base salary, regular bonuses, and allowances. Ferring Pharmaceuticals Korea institutionalized 26 weeks of paid paternity leave regardless of gender. In addition to the parental leave allowance paid by the government, the company compensates the amount equivalent to the existing salary. Among domestic companies, Lotte is representative, mandating one month of male parental leave and guaranteeing 100% of the ordinary wage.

Looking at overseas cases, higher income replacement rates for parental leave correlate with more active male participation in parental leave and higher birth rates. According to the report 'The Effect of Parental Leave Income Replacement Rate: Conditions and Challenges for Male Parental Leave Use (2021)' by the National Assembly Research Service, Sweden's monthly income compensation cap for male parental leave is 10.3 million KRW, Norway's is 7.04 million KRW, and Iceland's is 5.47 million KRW, levels close to their previous incomes. The birth rates in these countries were recorded as 1.7 in Sweden, 1.5 in Norway, and 1.8 in Iceland.

Special Investigation Team 'K-Population Strategy - Gender Equality is the Answer'

Reporters Yuri Kim, Hyunju Lee, Hyunjin Jung, Aeri Boo, Byungseon Gong, Juni Park, Seungseop Song
Editor-in-Chief Pilsoo Kim (Economics and Finance)