Child Allowances in Different Countries and its

Introduction into Korea

Sunju Lee, Fellow, KWDI

Sunyoung Park, Fellow, KWDI
Eunjung Kim, Guest Researcher

Korean society as a whole is responsible for taking care of children who are
precious resources of the future. However, children have never received enough
political attention and there has not been many policies designed for children. But
there has been growing political interestson children due to the current low birth rate
in Korea. The low birth rate phenomenon is expected to heavily influence the
availability of workforce and social welfare system such as pension and annuity in the
future. Despite the on-going debate in South Korea on whether child allowance will
improve the birth rate, it is hard to empirically prove the relationship between the two
factors. Importance of child allowance system can be viewed differently if it is
observed from a perspective of total infrastructure establishment for child support or
if it is understood as a type of cash wages. This research provides the grounds for
promoting child allowance system based on the correlation among realization of child
welfare, support on families for child support, and socio-demographic change. In
addition, we analyzed the implications on adopting child allowance into South Korea
in comparison to the child allowance systems of different countries, and suggested
policy proposal for implementing child allowance system in South Korea.
Most welfare countries differ in terms of management ofhow they manage the
system, or relative importance given to the policy based on differences in emphasis
given for the policies, change in policies since 1996, and circumstances surrounding
social welfare system. However, paying complete wages for the following six
categories are being carried out: Guaranteed initial care through fully supported
maternity leave, child care leave, family medical leave, guaranteed nurturing and
education, guaranteed medical care, guaranteed housing, cash support and
tax deduction support, and guaranteed income supplement through public
assistance program. In case of South Korea, support policy for children is being

expanded based on and . Wage from and used for child support is very
small, and of the wages belonging to , tax support is virtually nonexistent. Child
allowance system is not being implemented as a cash support system but is being
considered as a policy. For , many new wage systems have been established since
2000 to guarantee basic livelihood of the entire family, and the recipient selection
process has become more inclusive. But there is no wages paid to guarantee basic
livelihood to help child welfare by considering number of children and their age.
Structure of child allowance is consisted of system design, application range, financial
resources, recipient eligibility, wage, and administrative office. Each country has its
own type of child allowance system and has adjusted the system along the way based
on its political, economic, and social environment. For example, in 1994, Finland paid
higher cash wages for child allowance regardless of income, and abolished tax
benefits for families instead. In 1997, France adopted child allowance system based on
asset investigation but readopted universal child allowance policy in 1998 after facing
strong opposition. Finally, Japan's child allowance system pays wages based on the
selection where income limits apply. Income is limited in paying child allowance since
Japan's system has characteristics of income guarantee. In case of Japan, child support
deduction was partially abolished and spouse deduction was completely abolished
from income tax to secure financial resources for child allowance system. Child
allowance system differentiates eligibility (age) and wages. Eligibility differs for each
country but is generally determined by child's education and age (15 - 18). And
wages differ according to the number of children and their birth rank. There have
been small and big changes in child allowance of major countries since 1990. It is
hard to explain on what basis each country links child allowance with income or use
general criteria without involving income because type and application of child
allowance reflects unique political, economic, and socio-demographic situations of
each individual country.
If South Korea adopts child allowance based on the types of child allowance used
in other countries, the proposed system can be divided into three: universal type,
income type, and birth support type.

1. Universal type
Universal child allowance system does not consider employment status or income
and pays wages to all the families with children. This type extends the rights of every
child and allows them to exercise social rights before they become adult members of
the society. Universal type pays 50,000 won monthly to children under the age of 15
irrespective of birth rank. Total expected annual budget for universal type is 5,986,775
million won.

2. Income type
Child allowance based on income provides economic support to families with
children selectively. This type of child allowance excludes high income families and
focuses wages on families in need of child support. Income type is also proposed as
paying 50,000 won monthly to children under the age of 15 regardless of birth rank.
Expected budget for this type considering support per household is 2,591,038 million
won throughout the year. If the number of children is considered, 2,925,281 million
won will be consumed instead.

3. Birth support type

Birth support type focuses on quantity and quality of the future workforce. There
are two proposals for birth support type based on the eligibility and wage amount for
children may differ according to birth rank. First, 50,000 won is paid monthly to the
second child and children born after the second child regardless of their birth rank.
Only children under the age of 15 are eligible for the allowance as well. Annual
budget required for birth support type is estimated to be 2,996,749 million won.
Second, child allowance is paid to the first child and children born after the first
child. Wages is be differentiated by birth rank. First child is eligible for 50,000 won,
second child is eligible for 70,000 won, and third child and children born after will
receive 100,000 won. Children under the age of 15 are eligible. Budget for the second
type can change depending on how the birth rank is reflected in the statistics
available. If third child and children born after is included for birth rank, annual
budget of 7,513,930 million won will be needed while 7,498,836 won will be needed
if first child is included.