NABO Industry Trends and Issues (Issue No. 2)
I. Employment, Population Trends
(Employment) Although the number of employed increased YoY in October 2017, there were 52,000 fewer employed young adults (15-29 years old) in the same month compared to the previous year, and the young adult unemployment rate rose to 8.6%, 0.1%p higher than the same month in the previous year. By industry, employment in the manufacturing industry increased 0.6% YoY and 0.6% YoY in the service industry.
(Population) As of September 2017, the total Korean population was 51.762 million, 98 thousand higher than the previous year. However, the number of births from January to September was 278,200, 12.2% lower than the same period in the previous year. The total fertility rate in 2016 was 1.17, showing evidence of a continued trend of super-low birth rates (total fertility rate below 1.3) since 2001. A shorter fertile period is cited as the reason for a lower birth rate, due to higher age at first marriage, a larger unmarried population, and later period of first childbirth after marriage.
Ⅱ. Analysis of the Effect of Child Allowances in Other OECD countries on Birth Rate
In order to strengthen the national accountability of child rearing, the government plans to introduce child allowances in July 2018, according to which a monthly allowance of 100,000 Korean won will be granted to children between 0 and 5 years of age. A child allowance subsidy is provided by all OECD countries other than the US, Turkey, Mexico and Korea as an attempt to boost birth rates by offering cash incentives. An empirical analysis revealed that when an OECD member state raised its child allowance to GDP ratio by 1%, its total fertility rate increased by 0.02%, proving that a child allowance has a statistically meaningful effect on enhancing birth rates. However, various factors should be considered when introducing a child allowance system such as the scope of recipients, beneficiary criteria and its relevance to other child support systems.
Ⅲ. The Effect of Increased Unemployment Allowances on Production, Value-Added Growth and Employment
The unemployment allowance, which takes effect in 2018, will be raised to a minimum of 54,216 won (from 46,584 won in 2017) and a maximum of 60,000 won (from 50,000 won in 2017). The wage replacement ratio—the extent to which unemployment allowance replaces an unemployed person’s previous income—has been steadily increasing over the past decade (46.4% in 2006 → 51.5% in 2015), proving that the allowance’s function as a social safety net for unemployed households is improving. Yet, it is lower than the average OECD wage replacement ratio which was estimated at 63.4% as of 2014. In terms of “maintaining the purchasing power of unemployed households, thereby preventing a decline in domestic consumer demand,” a raise in unemployment allowance has a positive effect on domestic consumer demand. It was found that the consumption of minimum allowance recipients has a higher effect on inducing production and value-added growth, while maximum allowance recipients’ consumption has a higher effect on employment inducement.