Korea mulls raising maximum parental leave benefit to minimum wage level

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South Korea’s income replacement rate for parental leave benefits provided by the government stands at44.6 percent, placing the country in the low rankings among the Organization for Economic Cooperation and Development (OECD) nations.

According to the OECD on Sunday, Korea’s income replacement rate during parental leave was 44.6 percent last year, ranking 17th among the 38 OECD member countries, including 27 that have similar systems to Korea’s.

Estonia, Slovenia, and Chile had the highest rates at 100 percent, followed by the Czech Republic at 88.2 percent and Lithuania at 77.6 percent. Japan’s rate was 59.9 percent.

Korea was also at the bottom of the list in terms of actual use of parental leave.

According to the National Assembly Research Service, the rate of parental leave users per 100 births was the lowest among the 19 OECD countries with available data, with 21.4 for women and 1.3 for men.

There is also an issue related to parental leave being funded by the employment insurance fund, which excludes self-employed workers, freelancers, and special employment workers who are not covered by employment insurance.

According to Statistics Korea’s 2021 parental leave data, 71 percent of male parental leave users and 62.4 percent of female users were employed in large companies with 300 or more workers.

Analysts attributed the low rate of actual use to the low rate of income replacement and narrow eligibility for parental leave.

The Presidential Committee on Ageing Society and Population Policy, which oversees the country’s birthrate policies, in the meantime, is considering raising the parental leave benefits, which is capped at 1.5 million won ($1,125) per month, to the minimum wage level of 2.01 million per month for 209 hours of work.

Given that this year‘s minimum wage for 209 hours of work is 2.01 million won per month, and next year it will be 2.06 million won, if the maximum benefit amount is raised to the level of the minimum wage, the monthly amount received through parental leave benefits would increase by more than 500,000 won.

The committee plans to hold a discussion on October 10 to seek ways to finance the expansion of parental leave benefits.

“We believe that raising the parental leave benefits by about twice as much as it is now can change the environment related to the declining birthrate,” said Hong Seok-cheol, a senior standing committee member of the committee. “There needs to be a discussion about where to secure the necessary funds.”

The committee recently commissioned a research project to analyze the problems with childcare support policies.

“We will comprehensively analyze the support system that varies at different stages from newborns to elementary school age,” said another official from the committee.