In the course of coping with the demographic challenges of low birthrates and population aging, and of weathering the recent global pandemic, Korea has seen cash benefits take root as a familiar policy instrument within its social security system. Whereas cash assistance was previously aimed at guaranteeing a minimum standard of living for socioeconomically vulnerable groups, it has of late become universal in scope, provided by both central and local governments through an increasing number of programs. What is noteworthy about cash assistance is that now it is used not only as an income supplement but also as a policy tool to elicit behavioral changes among individuals and households. To be sure, the effect of cash assistance programs has been to stabilize people’s daily lives and restore consumer confidence, but there is also a need to find ways to keep them financially sustainable and enhance their effectiveness.
We have put together the November issue of Health and Welfare Forum to examine the impact of key cash assistance schemes currently in place, such as the baby bonus, the Child Allowance, and the EITC. Provided by local governments, the baby bonus serves as a financial incentive for childbearing-age couples to have children, with a view to mitigating low-birthrate trends. Through the Child Allowance, a monthly payment scheme, the central government seeks to ease the financial burden parents face in raising children. The EITC is an exemplary income support program aimed at encouraging labor force participation among low-income households. The articles included in this month’s Health and Welfare Forum examine these programs from the perspective of their policy goal―namely, bringing about changes in individual and household decision-making―and offer suggestions for how they could be improved in design and operation down the line.
In the course of coping with the demographic challenges of low birthrates and population aging, and of weathering the recent global pandemic, Korea has seen cash benefits take root as a familiar policy instrument within its social security system. Whereas cash assistance was previously aimed at guaranteeing a minimum standard of living for socioeconomically vulnerable groups, it has of late become universal in scope, provided by both central and local governments through an increasing number of programs. What is noteworthy about cash assistance is that now it is used not only as an income supplement but also as a policy tool to elicit behavioral changes among individuals and households. To be sure, the effect of cash assistance programs has been to stabilize people’s daily lives and restore consumer confidence, but there is also a need to find ways to keep them financially sustainable and enhance their effectiveness.
We have put together the November issue of Health and Welfare Forum to examine the impact of key cash assistance schemes currently in place, such as the baby bonus, the Child Allowance, and the EITC. Provided by local governments, the baby bonus serves as a financial incentive for childbearing-age couples to have children, with a view to mitigating low-birthrate trends. Through the Child Allowance, a monthly payment scheme, the central government seeks to ease the financial burden parents face in raising children. The EITC is an exemplary income support program aimed at encouraging labor force participation among low-income households. The articles included in this month’s Health and Welfare Forum examine these programs from the perspective of their policy goal―namely, bringing about changes in individual and household decision-making―and offer suggestions for how they could be improved in design and operation down the line.
This article examines the effects of local government baby bonuses and other key factors on household fertility decisions from the perspective of lifetime consumption smoothing. The findings indicate that short-term cash transfers have only limited impact, as decisions about having children are shaped by long-term financial planning. More effective policies would therefore focus on structural measures―such as housing support for newlyweds and youth employment programs―rather than one-off cash allowances.
This article presents an empirical analysis of the impact of the Child Allowance on the structure of household expenditures. The changes were more pronounced in the composition of expenses than in the total amount spent, with a common trend across households being increased direct spending on children’s clothing, recreation, and books and stationery items. The effect, however, varied across socioeconomic classes. Among low-income households, spending on children’s education and food increased, suggesting that for this group the Child Allowance serves as both a supplement to living expenses and an investment in children. Middle- and high-income households, as well as one-child families, showed an increase in savings through installment plans. All this aligns with the household-level tendency to view the Child Allowance as funds earmarked exclusively for children’s needs, thus bringing changes in both spending priorities and structure. The allowance scheme illustrates how a stable, predictable source of income flow can contribute, more effectively than mere cash transfers, to the development and welfare of children. To improve the program, policymakers should consider expanding the coverage of the Child Allowance to include a broader age range, while also seeking to reduce disparities by combining tiered support with tailored services in a detailed manner.
To examine whether, and to what extent, the Earned Income Tax Credit (EITC)―an indirect cash transfer scheme―affects low-income households’ labor supply, this study employs an intention-to-treat approach, estimating the effects based on the maximum possible EITC benefits each household is eligible for, rather than the treatment-on-the-treated approach that calculates the effects of actual EITC receipt. Our analysis of microdata from the Survey of Household Finances and Living Conditions for the years 2017 to 2023 indicates that the effects of the EITC changes (expansions) during this period, though only marginally significant for household heads, were positive for the labor supply of their spouses. When examined by household type, the effect of EITC expansions was positive for one-person households and married households without dependent children, groups comprising a relatively high share of older adults. These findings suggest the need to further solidify the EITC’s central goal of promoting labor market participation and to discuss more thoroughly whom to include in its target group and how to improve the system.
The Child Welfare Act amended in August 2023 and its implementation in February 2024 laid the groundwork for the central or local governments to support individuals whose out-of-home protection has ended, or who have been discharged from an applicable facility before turning 18, and who are deemed by the Minister of Health and Welfare to need independent living support. This article examines the current state of support for early care leavers on the cusp of transitioning into independent living. The findings suggest that gaps in support coverage remain and silos between involved ministries and agencies persist, hindering the delivery of necessary follow-up services. As ways to address these difficulties, I suggest easing the age criteria, extending support to children returning to their original families, developing an integrated, inter-ministerial information system, systematizing follow-up services, and expanding the dedicated child protection workforce.
