From Boom to Bust: How South Korea's $38,000 Baby Incentive Fights a 60-Year Decline in Birth Rates!

South Korea is facing a demographic crisis that has reached alarming proportions, with its total fertility rate (TFR) plummeting to just 0.72 children per woman in 2023—the lowest in the world. This stark decline has prompted the government to take drastic measures, including a new initiative offering married couples $38,000 to encourage childbirth. Understanding how South Korea arrived at this critical juncture requires a deep dive into its historical context and the socio-economic factors at play.

Let's begin from the origin: Put your bags down for a moment and don't book the flight yet!

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After the Korean War between 1950-1953, South Korea experienced a significant population boom. The government encouraged high birth rates as part of its nation-building efforts to rebuild what had been destroyed by thee war and as a result fertility rates in South Korea soared during the 1960s and 1970s, and even reached a peaking level in 1965 when South Korean women averaged over six children each.

However, as South Korea transitioned from an agrarian society to an industrial powerhouse, certain social and economic conditions forced the South Korean government to start implementing family planning policies in the early 1960s which was aimed at controlling population growth and encouraging lesser child birth rate. One prevailing condition that led to this government policy decision was:

• Economic challenges: The best way to understand the impact of this factor is to picture South Korea immediately after the war. They had just emerged from a bitter war and the government had encouraged them to re-populate their lineage, a call that they all heeded given the existing realities that had emerged as a consequence of the war. However, as they began to re-populate, it meant that they also needed their economic structures and existing social infrastructures like schools and hospitals to equally become more capable of catering to the needs of this growing population. Unfortunately, this was not the case. The growing population placed a great pressure on the Korea's social institutions and as such forced thee government to begin discouraging new births.

The governments child birth control policies worked as expected because by 1983, the total fertility rate(TFR) in South Korea fell below the replacement level of 2.1, signalling the beginning of a long-term decline in births.

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Think of the TFR of any country like a crystal ball that is capable of predicting how many babies a woman might have during her entire reproductive life, based on the current baby-making trend. For any country to at least maintain its population size across a generation, they must have a TFR that is at least 2.1 - Every woman of child bearing age, on average, should be able to give birth to at least two kids within her entire child bearing circle.

South Korea's TFR is currently the lowest in thee world at 0.72 which means that an average South Korean woman is only currently expected to have less than ONE child in her entire lifetime. In South Korea's case, the extremely low 0.72 TFR signals a potential demographic crisis, where fewer babies are being born than needed to replace the current population.

At this rate, if things don't change, South Koreas population would be reduced by half after every 50 years. As of 2023, South Korea had an estimated population of 51 million people. At the current TFR value of 0.72 by the year 2073, South Korea would have an estimated population of only 25.5 million!. 50 years after 2073, if things remain unchanged, South Koreas 25.5 million people populace would become only 12.75 million people.

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$38,000 is one of South Korea's many attempts at shaking up things.

Currently, the initiative is being piloted in only one district in South Korea, the Saha District, in Busan. This localized approach allows policymakers to test the effectiveness of this "birth encouraging policies" before rolling them out nationwide. It is widely believed that by focusing on one district, authorities can closely monitor outcomes and gather data on what works and what doesn’t so as to make better informed decisions and craft better data backed policies that hopefully addresses this challenge sustainably.

According to the current policy, couples who marry can receive up to $38,000 if they agree to have at least one child. The plan also includes extending parental leave allowances and providing housing support for families with newborns.

Despite these incentives, experts are warning that merely throwing money at the problem may not yield results. Over $200 billion has already been spent on various similar initiatives that were also aimed at increasing birth rates over the past two decades without any significant success.

For most young people in South Korea, marriage is currently the least of their priorities, especially amongst women who believe that child bearing limits their career progression and aspirations in so many ways that the Korean government has continuously failed to address, such as the salary gap between men and women.

Also, South Korea is currently the most expensive country to raise a child in as the costs for schooling and childcare is way beyond the pay grade of most young South Koreans.

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