Lee Pledges Comprehensive Parental Leave Support... Securing Funding Remains a Challenge [New Administration Policy Issue]

Parental Leave Programs to Be Included in National Policy Agenda
Expanding Support Raises the Challenge of Securing Financial Resources
Number of Parental Leave Allowance Recipients Up 18% in Five Years
This Year's Budget Surges 56% Compared to Last Year
Government Considering Shift to General Account
Suggestions Include Using Lottery Funds and World Surplus Fund

The new administration is actively considering a variety of parental leave support programs to help reconcile work and family life as part of its efforts to address the low birth rate. As the likelihood of expanding parental leave-related programs increases under the current administration, just as it did under the previous one, securing financial resources has emerged as an urgent task. Experts are advising that, instead of relying on the employment insurance fund as before, the government should consider covering these costs through the general account or by establishing a separate fund.

According to the National Policy Planning Committee, the Ministry of Employment and Labor, and the Ministry of Economy and Finance on July 17, the new administration plans to include several parental leave-related programs in its national policy agenda aimed at guaranteeing state support for childrearing and promoting work-life balance. President Lee Jaemyung has proposed a variety of pledges related to parental leave, and with several related bills already submitted to the National Assembly, there are expectations that the main focus will be on legislative amendments. Discussions within the National Policy Planning Committee have already progressed to a certain extent, and the details are expected to become clear once the national policy agenda is announced.

Previously, President Lee pledged to: ▲ expand parental leave allowances for small business owners and self-employed individuals; ▲ introduce an 'automatic parental leave system' that can be initiated without explicit employer approval; ▲ promote a 'work-life balance premium' benefit for low-income workers in relation to childbirth and parenting; ▲ provide support for retroactive national pension contributions for those on parental leave; and ▲ promote the hiring of substitute personnel to encourage parental leave among researchers. Since overcoming the low birth rate is an urgent issue and there is little disagreement between the ruling and opposition parties, both inside and outside the government believe that, if there is strong government will, these initiatives can be implemented swiftly.

Securing financial resources is cited as a challenge in the process of expanding parental leave-related programs. Currently, funding for maternity protection benefits, including maternity leave and parental leave allowances, comes from the unemployment benefits account within the employment insurance fund. The employment insurance fund is based on contributions paid by both workers and employers, with the government supplementing it with some budget from the general account. However, as the employment insurance fund is limited, improvements to the parental leave system are increasing the number of recipients and the amount of allowances, leading to a rapid rise in demand for maternity protection benefits.

According to a report titled "The Impact of Maternity Protection and Childcare Support Programs on Public Finances," published by the National Assembly Budget Office in March, the number of recipients of parental leave allowances increased by 18.29%, from 112,038 in 2020 to 132,535 last year. During the same period, the budget for maternity protection benefits surged by 64.84%, from 1.5614 trillion won to 2.5738 trillion won. This year, the budget increased by 56.29% in just one year, reaching 4.0225 trillion won. Of this, transfers from the general account accounted for 13.7% (550 billion won).

A government official stated, "Since the birth rate needs to improve, maternity protection benefits are likely to continue increasing," adding, "The National Policy Planning Committee will be most concerned about securing financial resources." The official also explained, "If the government provides parental leave allowances at the national level to small business owners and the self-employed, it could raise fairness issues with workers who pay employment insurance premiums to receive parental leave allowances." In addition, the official noted, "There are both criticisms that the state's share of the burden is too low and demands that maternity protection benefits be paid from the general account."

The Ministry of Employment and Labor appears to be leaning toward providing payments from the general account. Kim Younghoon, the nominee for Minister of Employment and Labor, stated in a written response to a National Assembly confirmation hearing that "it is appropriate to switch the funding source for maternity protection expenditures from the employment insurance fund to the general account." He also said, "Making the general account responsible for maternity protection benefits, which are a policy tool for addressing the low birth rate, should be a top priority for fiscal stabilization." However, if the funding is shifted to the general account, it would require a significant increase in the budget at once, which could place a considerable fiscal burden on the government.

The "Policy Recommendations for Addressing Blind Spots in the Parental Leave System," a collaborative research series published this month by the National Research Council for Economics, Humanities and Social Sciences (NRC) under the Prime Minister's Office, states that "securing stable financial resources is essential to ensure the sustainability of maternity protection and childcare support programs." The report suggests that "it is possible to consider separating a dedicated account within the employment insurance fund and establishing a separate program fund." It also explains that, to establish a separate fund, about 8% of employment insurance fund revenues could be used as transfers, and the use of lottery funds or the world surplus fund could be considered.