The Effects of Increasing Parental Leave Benefits and Expanding Childcare Subsidies for Under Three in South Korea on Women's Work Retention after Childbirth: Focusing on Income Differences

Background and Purpose

Korea's work-family reconciliation policy, such as parental leave and public childcare service, has expanded significantly since the 2000s.

Parental leave benefits were introduced in 2001, benefits have been increased steadily since 2001(2001: 200,000won per month, 2002: 300,000won, 2004: 400,000won, 2007: 500,000won, 2011: 40% income replacement rate, 2017: 80% income replacement rate (first 3 months). However, since the benefit was introduced as employment insurance, only parents who actually meet the eligibility can receive it.

Childcare subsidy under three, which supported only for children in the low-income family in the 1990s, has changed sliding subsidy according to household income since the 2000s, and from 2011 to 2013, the subsidy was phased in to provide free childcare for all preschoolers (universal childcare subsidy).

Existing empirical studies on work-family policies report that both policies (parental leave benefits and public childcare service) have positive effects on reducing the motherhood penalty. However, by not focusing on eligibility, it has not demonstrated that the policy outcome may be different for different groups within women, such as income level or work status.

This study aims to analyze how Korea's work-family reconciliation policy’s changes since the 2000s affect women's work retention after childbirth according to the women's income level.

Methods

Focusing on the major policy's developments since 2000(increase of parental leave benefits, expansion of childcare subsidy), we divided four periods 1) 2000-2005: Introduction of parental leave benefits and low flat rate, selective childcare, 2) 2006-2010: Increase of parental leave benefits (flat rate), selective childcare, 3) 2011-2015 40% parental leave benefit, universal childcare, 4) 2016-2020: parental leave benefits (80% for first 3 months), universal childcare.

Using the Korean Labor and Income Panel Study, this study examines 1) whether the use of the parental leave and childcare service under three had a positive effect on women's work retention up to 36 months after giving birth, and 2) whether the policy’s effect varied by women's income level, applying a Cox proportional hazards regression model.

Results

The analysis shows that the use of parental leave during the 2016-2020 period (parental leave benefit increased up to 80% during first three months) increases the probability of women's work retention during 36 months after giving birth (exp(0.42)=1.52, p<.05). Also, in the period 2011-2015 and 2016-2020(universal childcare), the use of childcare increases the probability of women's work retention (2011-2015: exp(0.59)=1.80, p<.05, 2016-2020: exp(0.32)=1.38,p<.01).

The policy effect on women's retention did not differ by women's income level in the all four period. However, in terms of parental leave, that higher income levels are associated with higher parental leave utilization among women, showing the possibility that the policy effects are differentiated due to differences in ‘the utilization rate' of parental leave by income group.

Conclusions and Implications

The results of this study can provide evidence to support the expansion of parental leave benefits and childcare subsidy, in terms of the performance on women's work retention. Also, this study raises the question in the perspective of ‘equity’ in development of the family-reconciliation policy.