Why Experts Say South Korea Shouldn’t Just Throw Cash at Its Low Birth Rate Problem

A social worker cares for a baby at the Jusarang Community Church in southern Seoul on May 24, 2017. Credit – Jung Yeon-je—AFP/Getty Images

South Korea—the world’s poster child for demographic decline—has spent some $280 billion over the past 18 years to address its diminishing birth rate, which recently dropped to a new record-low of 0.72 babies per woman in a lifetime. It’s a result of a confluence of factors but mostly comes down to young Koreans’ frustrations with high costs of living and low quality of life. But while cash handouts have been the government’s go-to approach, experts say that just throwing money at the problem isn’t necessarily the best solution.

Since April 2022, South Korea’s government has handed out vouchers worth 2 million won (around $1,500) to parents who produce their first child, with another 3 million won dispensed for every additional child. In an effort to further subsidize the cost of childbearing and childrearing, the government has continued to increase its budget for family cash assistance. The monthly stipend parents receive for a newborn’s first year also increased in 2024 to a million won (around $740) from 700,000 in 2023. And since 2018, parents receive a 100,000 won ($74) handout every month for each child’s first several years. For a child born in 2024, parents are expected to receive—over eight years—at least 29.6 million won, or about $22,000, from the government.

Private companies have joined in on the campaign to boost birth rates via cash incentives, with some offering thousands of dollars for employees who reproduce—incentivized themselves by tax benefits and other government support measures for such programs.

“It’s just so much simpler to go to the cash incentive, to use that policy tool,” Jisoo Hwang, associate professor of Economics at Seoul National University, tells TIME. “I think for any government, that has been the easier way to address the low fertility problem.”

But Hwang and other analysts tell TIME that while handouts help, a better approach would be to focus on policies and programs that would address and improve broader quality-of-life issues. Such measures would bring their own unrelated benefits as well as indirectly help foster an environment where young people feel more inclined to have and raise children.

Hwang says policymakers should consider redirecting funds from handouts for individuals to the improvement of social services that benefit a larger…