2026-08-13 17:19:12
Files : 
260813_briefE.pdf
260813_briefE.pdf
The recent rise in birth rates is a cruel parallax illusion:
principle of application must be abolished
Son, Sook-mee
Chairperson, Gender Equality Committee
Hansun Foundation
< Table of Contents >
1. The “Echo Generation” Illusion
2. A Painful Reality: The Harsh Reality of Child-Rearing in SMEs and the
Boomerang of Overburdened Coworkers
3. A Control Tower Without Budgetary Authority
4. Lessons from the West: Sweden’s Smart, Market-Oriented Design of the Parental Leave Quota
5. Exceptional Market Incentives Instead of the Stick: Designing a Korean Model
6. Ending the Burden of an Application-Based System and Moving Toward Automatic Entitlement
Recent increases in the number of births and the total fertility rate have led some in government and academia to voice optimism that Korea may finally be beginning to emerge from the prolonged period of ultra-low fertility. Indeed, after falling to a record low of 0.72 in 2023, the total fertility rate began to rebound in 2024 and rose to approximately 0.8 in 2025. However, this is not the result of structural improvement. Rather, it is a harsh “time-lag illusion” created by Korea’s demographic structure.
1. The “Echo Generation” Illusion
The recent increase in the fertility rate is largely attributable to a temporary rise in the absolute number of women of reproductive age, as the so-called “echo generation” the children of the baby-boom generation, born in the early to mid-1990s has entered its prime years for marriage and childbirth.
The current situation does not mean that Korea as a whole has become a more favorable society in which to have children. Rather, it is more appropriately understood as the result of a cohort effect and demographic time lag created by the population concentration of the echo generation, which has sharply concentrated childbirth among people in their early thirties.
The real crisis lies just ahead. Once this wave of childbirth among the echo generation subsides after 2030, Korea’s population of reproductive age will decline at a historically unprecedented pace. Only a few years remain in the golden window before 2030.
Now, while the final effects of this demographic bonus are still at work, Korea must substantially raise its fertility rate by fundamentally strengthening its childcare and labor systems. If it fails to do so, the country could enter an irreversible spiral of demographic decline after 2030.
This is why Korea must decisively break with failed policy inertia and put forward an entirely new paradigm capable of confronting the dual structure of the labor market head-on.
2. A Painful Reality: The Harsh Reality of Child-Rearing in SMEs and the Boomerang of Overburdened Coworkers
One of the most serious vulnerabilities underlying Korea’s low-fertility problem is the polarization between large corporations and small and medium-sized enterprises (SMEs) in other words, the dual structure of the labor market. Although more than 80 percent of employees work at SMEs, the extensive childcare-support programs promoted by the government have, in practice, largely become benefits enjoyed by employees of large corporations and public enterprises with sufficient organizational and staffing capacity.
The reality facing SMEs is far more difficult. The law states that both male and female employees are entitled to take one year of parental leave, but that entitlement often proves difficult to exercise in practice.
For an SME already struggling with financial constraints and chronic labor shortages, the moment one employee takes extended leave, the resulting workload is often transferred directly to the coworkers who remain. Burdened by guilt toward colleagues, concern about disrupting the workplace, and unspoken pressure from employers, many SME employees find it difficult even to submit an application for parental leave.
As a result, many female employees at SMEs manage to take only the legally mandated three months, or 90 days, of maternity leave before reluctantly returning to work without ever taking parental leave. Others leave the workforce altogether and experience career interruption.
The situation facing male employees is even more difficult. Patriarchal attitudes such as “Why would a man take parental leave?” combine with the practical logic that “If you leave now, the factory will stop,” effectively blocking men’s participation in childcare from the outset.
Young people who observe this reality are likely to conclude that, under such a system, having children amounts to putting their own livelihoods at risk.
3. A Control Tower Without Budgetary Authority
Why, despite being aware of these realities, has the government continued to produce policies of limited effectiveness? Part of the answer lies in the institutional limitations of Korea’s national policy control tower.
The Presidential Committee on Aging Society and Population Policy has its own secretariat, but it remains essentially an advisory body without independent budgetary authority or administrative power to direct government officials.
Ministers may gather to voice their commitment to addressing demographic challenges, but once they leave the meeting room, each ministry tends to return to protecting its own institutional interests.
Beginning on September 10, 2026, the Committee is scheduled to be officially reorganized as the Population Strategy Committee. Its status will be significantly strengthened: it will be granted the authority to conduct prior consultations with ministries on population-related budgets, and the number of participating ministries will be expanded to 14.
Nevertheless, it will still lack independent authority to execute its own budget.
Meanwhile, plans to establish a ministerial-level Ministry of Population Strategy and Planning, originally envisioned as a new government ministry, have been delayed because the proposed amendment to the Government Organization Act has yet to pass.
Japan offers a notable contrast. Although Japan entered its demographic crisis earlier than Korea, it continues to record a higher total fertility rate.
In 2023, Japan established the Children and Families Agency, a full-fledged administrative agency under the Prime Minister. The agency has its own budget and possesses strong statutory authority to recommend policy changes, backed by the authority of the Prime Minister. With support from the highest level of government, its budget is also better protected from arbitrary reductions.
More recently, Japan has strengthened its parental-leave support so that when both parents take childcare leave, benefits can effectively replace up to 100 percent of their income.
4. Lessons from the West: Sweden’s Smart, Market-Oriented Design of the Parental Leave Quota
Proposals occasionally raised in Korea to make parental leave fully mandatory for men would be difficult to implement given the realities of the Korean labor market.
If even women’s parental leave cannot always be effectively guaranteed because of staffing shortages, it is worth asking how realistically the law could mandate parental leave for men as well. Regulation and punishment alone cannot change behavior in a market economy.
A model that deserves closer attention is Sweden’s Parental Leave Quota, often referred to as the “daddy quota.”
In Sweden, too, even when parental leave was formally available, men were often reluctant to use it because of workplace pressures, and the male take-up rate remained at only 9 percent.
Rather than simply requiring fathers to take leave, the Swedish government allocated a portion of the total parental-leave period individually to each parent and introduced a non-transferable “use-it-or-lose-it” rule.
If a father does not use the portion allocated to him, the corresponding paid benefit and leave entitlement expire rather than being transferred to the other parent.
This carefully designed system created powerful incentives for both households and workplaces. It gave male employees a practical justification for telling their employers, in effect, “If I do not take this leave, my household will lose a substantial amount of income.” At the same time, it contributed to creating a social environment in which employers became more accepting of men taking parental leave.
Crucially, however, the system was supported by a high income-replacement rate that reliably preserved more than 80 percent of an employee’s previous earnings.
The success of such Western models was therefore not simply the result of compulsion. It reflected a carefully designed system of economic incentives that made taking leave the rational choice, backed by substantial public financial support.
5. Exceptional Market Incentives Instead of the Stick: Designing a Korean Model
Some may question whether the Japanese and Swedish approaches can realistically be applied to Korea.
Japan faces severe labor shortages across much of its labor market, making corporate reputation an increasingly important factor in attracting workers, while Sweden is a high-welfare state. Korea, by contrast, is characterized by intense competition among young people seeking jobs at large corporations, where barriers to entry remain extremely high.
This is a perceptive, albeit troubling, observation.
The defining feature of Korea’s labor market is a peculiar dual structure in which intense competition for jobs at large corporations coexists with chronic recruitment difficulties among SMEs.
Large corporations can attract long lines of applicants even without strengthening their childcare benefits, while SMEs have become resigned to the belief that young people will not seek employment with them anyway.
In such a deeply fragmented labor market, the invisible pressure of corporate reputation means little to SME owners.
A Korean solution must therefore rely not on prestige or reputation, but on concrete market incentives tied to profit and business survival. For the system to work, the government must directly address the practical constraints faced by businesses.
First, Korea should introduce a mandatory parental-leave quota for both mothers and fathers, allocating three non-transferable months to each parent.
SMEs that implement the quota and introduce allowances for coworkers who assume additional duties should be given substantial management incentives, including reductions in corporate income tax and lower interest rates on government policy loans.
Business owners will begin to act only when they become convinced that supporting employees’ families can also improve the company’s cash flow.
For the mandatory three-month period, the government should guarantee a 100 percent income-replacement rate. It should also provide replacement workers to SMEs when employees take mandatory leave and promptly provide financial support to the employers concerned.
Where replacement workers cannot be secured, the government should establish a system under which substantial workload-sharing allowances are automatically paid to coworkers who take on the absent employee’s duties.
Second, resources from the funds contributed by large corporations for shared-growth cooperation with SMEs should be redirected toward protecting the incomes of SME employees who take parental leave.
Korea currently has cooperation funds worth trillions of won that have been financed by large corporations. Yet these substantial resources are largely directed toward manufacturing productivity measures such as technological development and smart factories, while the workforce gaps caused by childbirth and childcare?which can threaten the very survival of SMEs receive far less attention.
What use is advanced technology if a company is forced to close because there is no one left to work?
When young SME employees take parental leave, the government should supplement its own support by matching it with resources from these cooperation funds. Through such a public-private mechanism, Korea should create an environment in which SME employees can receive 100 percent income replacement, comparable to the level of security enjoyed by workers at large corporations.
This would give SMEs a powerful recruitment message: “Even if you work for our company, you can raise a child with the same degree of financial security as you could at a large corporation.”
Such a system could help SMEs overcome chronic recruitment difficulties, while giving young people greater confidence to build their futures at smaller firms rather than competing exclusively for the limited number of positions available at major corporations.
Korea urgently needs to move beyond desk-bound policy prescriptions that fail to recognize the asymmetries of its labor market and instead design a finely calibrated, Korea-specific incentive system capable of changing the actual behavior of businesses.
6. Ending the Burden of an Application-Based System and Moving Toward Automatic Entitlement
If employees are too concerned about their employer’s reaction even to submit an application for parental leave, the company has not legally “refused” the leave. As a result, the government has no basis for imposing a penalty.
As long as the state leaves this legally permissible blind spot untouched, Korea will never succeed in reversing its low-fertility trend.
It is time to end an application-based system that places the entire burden on individual employees to come forward.
To implement a mandatory parental-leave quota for both men and women, one of the most effective ways to eliminate this critical loophole would be to automatically grant three months of parental leave upon notification of childbirth, without requiring a separate application.
Given the staffing structure of SMEs, where it is particularly difficult for male employees to be absent for extended periods, a three-month absence represents a manageable psychological threshold, provided that workplaces are supported through effective internal coordination and substantial allowances for coworkers who take on additional duties.
If a father chooses not to use the three months allocated to him, the corresponding paid benefits and leave entitlement should permanently expire rather than being transferred within the household.
Furthermore, following Japan’s precedent, legislation should require employers, once informed of an employee’s pregnancy, to proactively confirm the employee’s intention regarding parental leave. This would remove at the source the barrier created by a system that requires employees themselves to initiate the process.
Only when male SME employees can make the practical calculation that “If I do not use this leave, my household will suffer a significant financial loss” will they have a strong enough justification to take parental leave without constantly worrying about their employer’s reaction.
Requiring fathers to participate in childcare for three months during the early period after childbirth, when childcare demands are at their highest, through this carefully designed market-based mechanism may be the most realistic catalyst for ending the severe childcare difficulties faced by SME employees and substantially lowering the barriers to men’s participation in childcare.
Only when the highest level of government assumes responsibility and provides SMEs with concrete incentives for survival will young people feel secure enough to decide to have children.
The future of the Korean community ultimately depends on whether policymakers are prepared to make the finely calibrated policy decisions necessary to change economic incentives where they matter most on the ground.
※ The views expressed herein may differ from those of the Hansun Foundation.
