Let the central bank handle the reform

Lee Sang-ryeol
The author is a senior editorial writer of the JoongAng Ilbo.

Caregiver assistance is commonly added to the top 10 campaign platforms by the governing People Power Party (PPP) and majority Democratic Party (DP), registered with the National Election Commission for handouts before the April 10 parliamentary elections, which are set to become Korea’s first election in which senior voters outnumber their cohorts in their 20s and 30s. The rivaling parties both promise national insurance coverage for caregiver hiring at nursing homes. The move is welcomed in a country nearing a hyper-aged status, but the question is how to fund them. The Ministry of Health and Welfare estimates the additional coverage could cost at least 15 trillion won ($11.2 billion) a year. So how can the government pay the astronomical cost? The parties beat around the bush. They say the money can come from reducing other costs and extra tax income. In short, the campaign promise may never see the light of day.

The Bank of Korea (BOK) recently issued a straightforward report on caregiver burdens. It estimated caregiver hiring for Koreans averaged 3.7 million won a month last year, which would take up 63 percent of the median income of 5.88 million won for people in their 40s and 50s who typically would have someone who needs care. The central bank projected 2.12 million to 3.55 million Koreans would have to take turns in the caregiving role by 2042 because they cannot afford outside help. The cost from the labor loss could reach 46 to 77 trillion won by then, amounting to 2.1 to 3.6 percent of the estimated GDP. Families are looking at caregiving hell, translating to a doom for the nation plagued with a thinning working population from the ultralow birthrate.

The BOK proposed allowing foreign migrants to work in home care and paying them outside the statutory minimum wage to ease the cost for families who need them. It could be a win-win solution as Koreans can save on home care costs while migrant workers can earn more than what they would in their home country. But making an exception in the application of the minimum wage is strongly protested by the labor sector. But the opposition may not reflect the thoughts of all Korean workers. The caregiver cost can feel heavier for low-income individuals, and most of them cannot dream of seeking paid help. The government so far has been passive in differentiating the rate system in the minimum wage ordinance. Politicians also can hardly be eager. If the two major parties are serious about fixing the caregiver issue, they should put bipartisan effort in employing foreign workers.

The two parties also gave their prescriptions to address the birthrate. The PPP proposed a mandatory one-month paid leave for new fathers and increase in their paid leave. But the measures can hardly change the stubbornly low birthrate. It is not that companies do not provide paid parental leave. Employees refrain from using the leave for fear of losing their job. The use of parental leave in Korea averages at 19.8 percent, the lowest among OECD members.

The DP promises a 10-year loan in 100 million won to newlyweds. The loan will become interest-free if they have one child; half of it will be written off if they have a second; and it will be entirely exempted if they have a third. When applying to last year’s 194,000 wedded couples, as much as 19 trillion won would be needed to finance the loans. Both parties have missed the point in Korea’s birth dearth.

Why young people avoid starting their own family is clear. The primary reasons are a lack of jobs, housing security and child care. The BOK estimated that if such conditions are improved to the OECD average levels, the birthrate could go up to 0.85. When population density in the capital is diffused to the OECD average, the birthrate could rise by 0.41, according to the BOK study.

Because people and money are concentrated in the capital region, housing is too pricey and competition is too intense, boding badly for increased fertility rates. When the youth employment rate rises to the OECD level, the birthrate also can go up by 0.12. Those working in firms with decent pay and welfare benefits tend to be more open to marriage and childbearing. The share of big companies in Korea’s labor market stops at 14 percent, the lowest among OECD members: one-fourth of the 58 percent in the United States and one-third of the 47 percent in France. The data is the fallout from longstanding constraints on big companies in Korea.

Care for the elderly and babies is an issue stifling the Korean society. But politicians want to solve it simply through tax money. Differentiating the minimum wage based on sectors, alleviating the population concentration in the capital region, and job increase in large employers can be fixed if they set their mind to it. BOK Gov. Rhee Chang-yong stressed that structural reform through social consensus is imperative to address the country’s demographic woes. It is the duty of politics to persuade the people and draw out a grand consensus. Sadly, we can hardly expect it from our politics.