Kim Moon-soo, the People Power Party presidential candidate, has pledged to implement asset formation policies for children and adolescents. The intent is to broaden the beneficiary base of policy finance released by previous governments, such as the Youth Leap Account, to capture public sentiment. This time, the focus is again on fiscal soundness. The estimated budget required is expected to range from at least 30 trillion won to nearly 90 trillion won, equating to the level of annual budgets for government ministries.
According to political sources on the 28th, the People Power Party published its policy pledge book for the 21st presidential election on the 26th. Among the key pledges in the childbirth and childcare sector within this pledge book is the 'first step account.' The first step account is a product in which if participants aged 0 to 17 deposit money monthly into a savings account, the government provides a matching amount as a subsidy. Participants can receive up to 200,000 won per month in government support when they are 0 to 1 years old, and thereafter up to 100,000 won per month. If participants save 200,000 won per month for the first year and 100,000 won per month thereafter, they can accumulate a principal of 24 million won along with an additional 24 million won in government support after an 18-year term. If 48 million won earns interest at the basic rate of 4.5% from the Youth Leap Account, the total amount will be 50.16 million won.
This project is estimated to require a budget in the tens of trillions of won. The People Power Party did not impose any separate age-related eligibility criteria when announcing the first step account pledge. The pledge book also mentions 'all children' and specifies that government support will change only according to age and contribution amounts. Assuming actual products are launched next year with new subscriptions only for five years, and that the annual birth rate is maintained at 240,000, the total eligible population is about 7.5 million. If these individuals receive government support at the maximum level and complete the 17-year term, the budget allocated for government support could approach 90 trillion won. Given that the subscription rate for the Youth Leap Account is 33% in relation to the youth population, applying this same rate indicates a budget requirement of approximately 30 trillion won. This exceeds the Ministry of Science and ICT’s annual budget (19 trillion won) and is slightly below the level of the Ministry of Employment and Labor (35 trillion won).
The first step account is a pledge created by mimicking the success of the Youth Hope Savings and Youth Leap Accounts. However, the budget required far exceeds these two examples. The budget allocated for the Youth Leap Account over the past three years from 2023 to this year is around 1.1 trillion won. The size of government support and the term are significantly larger than previous policies, resulting in evident differences in budget size. The government support for the Youth Leap Account is 21,000 to 33,000 won per month. The term for receiving government support is five years. In contrast, the first step account features a maximum government support of 200,000 won per month and a term of 18 years.
A budget in the tens of trillions of won hampers the feasibility of implementing the policy. Currently, the Ministry of Economy and Finance is wary of the large budget required for asset formation projects. The Financial Services Commission increased the size of government support for the Youth Leap Account this year, but attempted to retroactively apply it to the contributions of existing subscribers, which was unsuccessful due to opposition from the Ministry of Economy and Finance, citing budget concerns.
Experts also express concerns that this policy could potentially undermine fiscal soundness. An economics professor, who requested anonymity, noted, "If it overlaps with the already implemented Youth Leap Account or housing purchase benefit policies, it could only worsen fiscal soundness." The professor added, "If approached from a welfare perspective, instead of simply creating accounts, we need to review support systems based on income and life cycles," and emphasized, "The more money parents contribute, the more support they receive, raising equity issues whereby low-income families receive less benefit should also be examined."