© YONHAP News

Recent statistics show that the so-called demographic cliff is becoming more of a reality in Korea. According to the demographic outlook projected by Statistics Korea on June 27th, the working-age population in the nation will decrease by nearly 12 million from the years 2017 to 2047. Meanwhile, people aged 65 or older in eight major cities and provinces will account for more than 40 percent of the total population in their regions in the next three decades. Here is Lee Sam-sik(이삼식), head of the Institute of Aging Society at Hanyang(한양) University, to discuss the demographic cliff characterized by low birthrates and a rapidly aging population. 

The population in Busan, the nation’s second-largest city, already began to decrease in 1996. The capital of Seoul began to see its population fall in 2010, while Daegu started in 2012 and Daejeon in 2015. Statistics Korea says that the population in South and North Jeolla provinces and Ulsan and North Gyeongsang Province also started to drop in 2017 and that South Gyeongsang Province will experience the same situation this year. In other words, a population decline that started in large cities is spreading to local regions. But the situation is different in Sejong, a newly founded city that houses the government complex and has an increasing number of young people. The statistics agency forecasts that Sejong will be the last to see a population decrease.  

Statistics Korea predicts that the population in 11 cities and provinces will experience a population decline between 2017 and 2047. Fourteen years from now, the number of deaths will exceed the amount of newborns in all regions, except for Sejong. Mr. Lee now explains some factors behind the shrinking working-age population. 

These days, young people find it increasingly difficult to tie the knot. Before getting married, they need to get stable jobs that guarantee a steady income and also secure homes to live in. Unfortunately, the job market remains sluggish. Even if they find jobs, many of them work as temporary employees, and even if they land decent jobs, they just can’t afford to buy or rent homes due to skyrocketing housing prices. As a result, many young people delay or even give up on marriage altogether, leading to low birthrates. Married couples, for their part, are reluctant to have children due to the high cost of private education, and many working moms struggle to find reliable daycare centers for their children. For these reasons, many couples prefer to have just one child. 

Young people avoid getting married and having children due to various factors, including cultural and economic ones. According to a study from the Korea Institute for Health and Social Affairs, unmarried men and women cited “economic conditions” and “social and cultural values associated with marriage”, as the main reasons for staying single. The dwindling population is a complicated problem involving the economic slowdown, unstable employment, the housing price burden and inadequate childcare facilities. Unfortunately, a decreasing working-age population will place a significant burden on the economy and society. 

The government secures necessary welfare funds from the working-age population who contribute to the tax, pension and health insurance. The increasing ratio of older people and the decreasing productive population will inevitably put a heavier burden on the remaining working-age population. Welfare benefits for senior citizens could also be reduced. It means both the younger and older generations may suffer from the deteriorating quality of life. 

The economically-active population between the ages of 15 and 64 began to decline in 2017. Currently, they make up 73 percent of the population but that number is estimated to fall to 45 percent, or less than half of the population, in 2067. On the other hand, the number of senior citizens ages 65 or older is forecast to surpass 10 million in 2025 and account for 46.5 percent of the total population in 2067. 

A drop in the working-age population means a drastic increase in the younger generations’ burden of supporting seniors and children. In 2017, every 100 working-age people supported 36.7 older people and children. But that number is expected to shoot up to 120.2 in 2067. South Korea is moving closer to a demographic cliff, which could severely rattle the economy. 

At present, young people have a hard time finding decent jobs. In ten to 15 years, however, there will be more jobs than jobseekers due to the diminishing workforce, causing a major disruption in the labor market. The senior population tends to consume less because of insufficient incomes. While the productive population is eager to spend money, the falling population itself will result in a decline in consumption overall. This is bad news for companies, as the number of people consuming their goods and services will decline. Some manufacturers may go out of business and the economy will lose its vitality. 

If the current trend continues, the Korean economy will end up in a vicious circle of low birthrates, a declining population, sluggish domestic demand, economic contraction and falling birthrates again. In this undesired scenario, consumption and investment will decrease overall, leading to less employment and lower productivity. Manufacturers will choose to move their production bases overseas, accelerating industrial hollowing-out. Citizens will pay more taxes to make up for increasing welfare costs, while the education and real estate sectors will go through a structural shift as a result of the demographic change. As a whole, the Korean economy is expected to lose steam. Under these circumstances, the government needs to come up with a more feasible plan that should appeal directly to the younger generation. 

This is a difficult problem, indeed. Currently, companies are reluctant to hire young people, especially in the aftermath of the introduction of the 52-hour workweek and the steep increases in the minimum wage. It is necessary to address the issues of youth unemployment and temporary employment from the viewpoint of the younger generation. If the labor market manages to adjust various elements like job security and temporary jobs for young people in a proper way, it will have a positive effect in boosting the nation’s fertility rate, as seen in the cases of Sweden and Japan. 

The Korean government plans to announce a detailed plan aimed at tackling the nation’s chronically low birthrates and fast-aging population. The plan should hopefully include more realistic and comprehensive measures to reduce economic uncertainties about the future and better reflect the needs of the younger generation.