South Korea's education funding system outdated as student numbers halve

A senior researcher at the Korea Development Institute (KDI) has criticized South Korea's system for allocating funds to local education budgets, arguing it is no longer suitable for the current demographic reality. Kim Hak-soo highlighted the issue at a forum on reforming the local education finance grant system.

Kim used an analogy to illustrate the problem: imagine parents with two children, a high schooler and a middle schooler, automatically transferring one-fifth of their monthly salary to an education account. If the older child enters university, the parents might expect their automatic transfer to decrease. However, due to a recent salary increase, the parents are now transferring more money than when both children were in middle and high school, even though only one child remains in the K-12 system.

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Consider parents with two children in middle and high school, automatically transferring one-fifth of their monthly salary to an education account. The first child entered university this spring. Although there is now only one child in middle or high school, they are automatically transferring a larger amount than when the first child was in high school, simply because their salary increased. Would you leave this automatic transfer as is, or would you pause it and carefully consider how much education expenses the second child actually needs?

He questioned whether parents would continue this automatic transfer without re-evaluating the actual educational costs for their remaining child. This scenario reflects the current state of the education finance grant system, which allocates a fixed percentage (20.79%) of national tax revenue to local education budgets. The system was introduced in 1972 when the population of children aged 6 to 17 exceeded 10 million, and schools and teachers were scarce.

Today, the number of school-aged children has fallen below 5 million. Despite this demographic shift, the funding mechanism remains largely unchanged, leading to inefficiencies and potentially misallocated resources. The KDI researcher's comments underscore a growing debate about the need to reform the education finance system to align with the declining student population and evolving educational needs.

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This system was first introduced in 1972 when the population of 6- to 17-year-olds attending elementary, middle, and high school exceeded 10 million. At that time, schools and teachers were insufficient.