The government and ruling Saenuri Party reached an understanding to give child rearing allowances to all babies under age two starting next year to expand welfare coverage, sources said Sunday.

Saenuri sources said the new plan is a move in the right direction and could make it easier to deal with soaring costs of looking after babies.

South Korea has one of the lowest birthrates in the world. Low birthrates can hurt the country’s growth potential down the road and fuel rapid population aging.

At present Seoul gives assistance up to the second-lowest income bracket or roughly 15 percent of all people with babies under two years of age. Initially, the government, citing financial restraints, said it could increase monetary support to 70 percent of all people, but this idea was opposed by the ruling party.

Once implemented, all newborns under age 1 will get 200,000 won ($177) a month regardless of household income, while the total will fall to 100,000 won for 2-year-old toddlers.

The ruling party is currently engaged in a move to strengthen the country’s welfare system ahead of this year’s presidential election slated for Dec. 19.

“Most of the deal has been ironed out with only minor details needing to be settled,” a party official said.

He said the only difference remaining is whether to give assistance to all people with babies or leave out the top 10 percent income earners who really do not need financial assistance.

“Because most people who need it will get benefits, the understanding reached so far effectively means everyone in the country will receive assistance,” he said.

The Saenuri official added that the only other issue remaining is whether to give child rearing allowances to parents with kids who are 3 and 4 years old.

The latest move comes as local administrators claimed they did not have the budget needed to give out childcare allowances this year.

This shortfall has made it necessary for the central government to play a more direct role in meeting public demands.

Besides allocating more state funds to help with child rearing, the government and Saenuri reached a deal to give childcare support to all babies under two from next year onwards.

Childcare cost cover expenses incurred when parents have to send babies to daycare centers and other support institutions.

Childcare outlays are generally more costly than child rearing with spending averaging 280,000 won to 400,000 won per month. (Yonhap News)