Low birth rate - from driving force to drag on South Korea's economy

A drop in birthrates once contributed to South Korea's economic miracle, but a reluctance to have children is now a challenge for growth.

On December 19, 2023, 100 South Korean men and women gathered at a hotel near Seoul in their best clothes to participate in a dating event organized by Seongnam City.

In an effort to revive the plummeting birth rate, the Seongnam government is determined to organize dates with red wine, chocolate, free makeup services and even background checks for singles. After five rounds of events, they expect 198 of the 460 participants to find partners. If successful, they will marry and have children.

Seongnam Mayor Shin Sang-jin said spreading a positive view of marriage would help boost the birth rate, stressing that dating events were just one of many policies to reverse the plunging birth rate. "The low birth rate cannot be solved with just one policy. The city's mission is to create an environment where people who want to get married can find a partner," Shin said.

A member attends a dating event in Seongnam city on December 19, 2023. Photo: Reuters — A participant at a dating event in Seongnam City on December 19, 2023. Photo: *Reuters*

Falling birth rates affect most developed countries in East Asia and Europe, leading to rapidly aging populations. However, nowhere is the situation as severe as in South Korea, which has had the world's lowest birth rate for many years.

In 2021, the country's total fertility rate (the total number of children per woman of childbearing age) was 0.81. China's rate is 1.16; Japan's 1.3; Germany's 1.58; Spain's 1.19. More importantly, South Korea has had a fertility rate below 1.3 for two decades.

The latest figures show a further decline. In the third quarter of 2023, South Korea’s birth rate fell to a record low of 0.7, according to the National Statistics Office. There were 56,794 births in the period, down 11.5% from the same period in 2022 and the lowest since records began in 1981.

Behind the economic miracle

In the 1950s, South Korea was one of the poorest countries in the world. By 1961, its annual per capita income was only about $82. But growth accelerated in 1962, when the government launched a five-year economic development plan and a family planning program to reduce the nation’s birth rate.

The government has set a target of 45% of couples using contraception, and many families have found that having fewer children improves their standard of living. As a result, the dependent population – young and old – is increasingly smaller than the working-age population.

The demographic shift set in motion an economic miracle that lasted until the mid-1990s. Increased productivity, combined with an expanding workforce and falling unemployment, helped drive annual GDP growth of 6% to 10% for many years. Today, South Korea is one of the richest countries, with a per capita income of $35,000.

Much of the transformation from a poor country to a rich one is due to the demographic dividend of falling fertility. But the demographic dividend only has a short-term effect. Meanwhile, a long-term decline in fertility is often disastrous for a country's economy, according to the research magazine The Conversation .

And it has happened. South Korea has seen a chronic decline in births as many young people choose to delay or forgo marriage or childbearing to conform to changing social norms and lifestyles.

Along with that, research by Jisoo Hwang, Professor of Economics at Seoul National University, said that the extreme situation of birth rate in Korea can be partly explained by extremely high costs of education and housing.

Meanwhile, the jobs and salaries of a segment of young people are unstable, making them unable to afford to start a family. In the third quarter of 2023, the number of marriages also dropped to a record low of 41,706, down 8.2% compared to the same period in 2022.

With a critically low birth rate, South Korea is losing population every year, and the once vibrant nation is becoming home to more elderly people and fewer workers. If this trend continues and millions of immigrants are not welcomed, the current population of 51 million will fall below 38 million in the next four or five decades.

Race to avoid negative growth

The lack of children poses long-term risks to the economy, as it reduces the size of the workforce, which is also a consumer. Welfare spending on an aging population is a budgetary burden that could be used to boost business, research and development.

A study by the Bank of Korea (BoK) last year predicted that if the birth rate stays on its current trajectory, the country could see negative growth starting in 2050. The calculation is based on growth trends, excluding short-term economic fluctuations. In short, the size of the Korean economy will inevitably shrink if the population declines.

South Korean children wearing traditional costumes at an event in Seoul on March 1, 2016. Photo: Reuters — South Korean children wearing traditional costumes at an event in Seoul on March 1, 2016. Photo: *Reuters*

In an effort to stave off a demographic nightmare, the South Korean government is offering financial incentives to couples who have children and increasing monthly subsidies for parents. President Yoon Suk Yeol has set up a policy team to boost the birth rate. Since 2006, South Korea has spent more than $200 billion on programs to boost the birth rate, with little success.

Even matchmaking initiatives like the one in Seongnam have had mixed reviews. Seoul, the capital, considered a similar event but shelved the plan after facing criticism that it would be a waste of taxpayer money without addressing the underlying issues of high housing and education costs.

Jung Jae-hoon, a professor of social welfare at Seoul Women's University, said it was "nonsense" to hope that dating events would improve birth rates. "You need to spend more money on pregnancy, childbirth and child-rearing support to call it a policy to increase birth rates," she said.

The BoK study also pointed out that high living costs, unstable employment and child-rearing costs, and soaring real estate prices contribute to anxiety, making it impossible for couples to have children.

The solution, according to the BOK, is to reduce population concentration in the Seoul area, which is exacerbating competitive pressures, while taking action to stabilize housing prices and household debt and improve the labor market structure. In addition, the government needs to increase spending to share the burden of child care.

The Conversation argues that the real way for South Korea to turn this around is through immigration. Migrants are typically younger, more productive, and have more children than natives. But South Korea has a very restrictive immigration policy, and to become a citizen or permanent resident, immigrants must marry a Korean.

By 2022, immigrants will number just over 1.6 million, or about 3.1% of the country’s population. By contrast, the United States relies on immigration to boost its workforce, which currently accounts for more than 14% of the population. For immigration to offset South Korea’s falling birthrate, the foreign workforce would need to increase tenfold.

Without that, South Korea's demographic fate will see the country continue to lose population every year and become one of the oldest countries in the world, according to The Conversation.

Phien An ( according to Reuters, Le Monde, Conversation)

Source link