Effect of universal child care subsidy on child-rearing costs by mothers’ working status in South Korea

Abstract

This study aims to investigate the effects of universal child care and early education subsidy on child-rearing cost burdens, and examine the extent to which this association differs depending on mothers’ working status in South Korea. Using the Korea Welfare Panel Study (KOWEPS) and a fixed effects panel model, we found that child care and early education subsidy usage is associated with a reduction of total child-rearing costs, but not much out-of-pocket child care expenses. Furthermore, the introduction of universal child care and early education subsidy is likely to benefit households with part-time working mothers in terms of reducing total child-rearing cost burden, but it increased out-of-pocket child care cost in households where mothers were not working. The child care and early education subsidy achieved the aim of reducing household financial burden associated with parenthood, and enabling parents to combine their paid work with parenthood—in particular for mothers with part-time jobs. However, full-time working mothers are limited in enjoying the benefits of the subsidy. Our findings regarding South Korea’s child care and early education system provide important insights for emerging and developing economies that are increasingly showing an interest in instituting new child care and early education systems.