South Korea’s 2020 Population Decline Portends Economic Adversities

South Korea’s 2020 census data reported a disturbing anomaly on January 4. The East Asian nation posted a negative population growth for the first time in its history. The country—which already holds the world’s lowest fertility rate—recorded 307,764 deaths and 275,800 births in the past year, marking a decline in the birth rate from 2019 by over 10%. Statistics forecast that by 2066, the South Korean population will drop from its current 50.8 million to 37.9 million, a size similar to its population in 1980. Overall, Korea has surpassed Japan to become the world’s foremost “super-aging” society, with the largest portion of its population consisting of those in and above their 50s. This snowballing population decline portends a long-term crisis for Asia’s fourth-largest economy.

Researchers have warned for years that South Korea would experience a rapid population decline facilitated by a multitude of factors. According to the Bank of Korea, the ongoing Covid-19 pandemic has had “a negative impact on the nation’s marriage and birth rate, leading to an acceleration of aging in the population.” Secondly, an emerging social phenomenon titled “The Sampo Generation” has seen young people forgo courtship, marriage, and children in favor of economic prosperity. Particularly discouraging is the economic pressure of raising a child for prospective parents, including high real estate prices and private education costs. Many South Korean women have begun to gravitate away from sexist cultural values that expect women to balance familial responsibilities with work. As a result, South Korea falls below the replacement level sufficient to stabilize the population without immigration. 

South Korea’s falling birthrate is one of its most vexing economic hurdles, according to the Bank of Korea Governor Lee Ju-yeol. While a 2020 study by the Korea University revealed that the majority of South Korean “baby boomers,” or those born after the Korean War, will retire within a decade, the low replacement rates do not ensure enough young workers to substitute for the retired. With these labor vacancies left unfilled, the nation’s labor shortage gap will continue to widen in the future. Indeed, the number of employed persons in South Korea declined for the tenth consecutive month in December—a 2.3% decline year-on-year—based on data from Statistics Korea. Meanwhile, a growing population of retired workers has placed increased pressure on government spending. Many are demanding changes in current pensions and healthcare systems. Without adequate government resources and welfare, South Korea’s suicide rate of citizens over the age of 65 ranks among the highest in the world. Together, labor shortages, higher welfare spending, and lower revenue are substantial issues that spell out a long-term economic crisis, threatening budget deficits in government spending as well as declines in economic growth.  

In response, the South Korean government has scrambled to turn the tide with issued inducement packages. Since 2006, the government has spent $135.65 billion in subsidies to promote the fertility rate. The latest of a series of policies launched by President Moon Jae-in’s special committee offers a monthly package of 300,000 won ($274) for families with newborns up to the age of one, starting in 2022. The government also will offer 1 million won ($916) of “congratulatory allowances” to pregnant women. 

The financial perks, however, have failed to boost birth rates in the past and neglected to address societal gender inequalities. South Korea is the worst place to work for women in countries included in the Organization for Economic Cooperation and Development (OECD), despite women ranking among the top organizations for being the best educated and more highly so than men. Since 2019, President Moon, a self-proclaimed feminist, has turned his attention squarely to gender inequality. South Korea released new plans to remove several disincentives for employing women, such as allowing both parents to take parental leave simultaneously and for longer periods. New fertility treatments also prioritize single women and unmarried couples. 

While the falling birthrate in South Korea spells economic difficulties for one of the world’s largest economies, other developed countries face similar problems. Twenty countries, including Japan and Germany, have struggled with negative population growth since 2019. Like South Korea, some countries have planted financial incentives in attempts to promote childbirth, while others have relied on immigration to compensate. The impacts of the latter, however, are short-lived. As more countries turn to face falling birthrates without effective solutions, labor shortages, and a diminishing tax base will pose threats to economies around the world. 

South Korea’s 2020 census is only the beginning.

By Mia Xiao