South Korea's Demographic Implosion  Kwang-Hee Jun

Coping with diminishing fertility.

Since the 1960s, South Korea's fertility rate has dropped sharply, from 6.0 to 1.75 births per capita in 1995. In 2002, South Korea entered the era of record-low fertility rates, falling even further to below 1.0 under the watch of the current Moon administration. This low fertility rate has resulted in a higher proportion of elderly in the population and increased fears of the elimination of the rural population. 

In the mid- to long-term, total population and age structure will change, leading to other social issues such as youth employment, housing and real-estate price changes, fewer pupils in schools, regional conflicts, and welfare states that provide pensions and health insurance. Demographic policy’s ripple effects cannot be completely separated from policies relating to women, tax policy, labor policy, housing policy, education policy, pension policy, and regional policy.

As the post-war baby boom era ended in Europe due to slowing economic growth in the 1970s, rising marriage age, falling fertility rate, and fear of population decline all emerged. This led to birth promotion policy measures such as child allowances and maternity leave. Policies began to use market incentives and transitioned from coercion to education or public relations. Recently, in the era of labor reduction, discussions over whether economic growth can be possible through technological innovation such as artificial intelligence have emerged, taking the fourth industrial revolution as an opportunity. 

In addition, feminism and the improvement of women's education continue to push ahead with the softening of population policies that increase women's employment and reconcile work-family balance.

In many countries including Korea, demographic issues increase the need for new policies. As of 2020, for example, the post-demographic-transition era in developed countries in Europe and Asia has intensified the issues of low fertility rates, aging population, decreasing population and international migration. Some countries in East Asia and Eastern and Southern Europe have entered record-low fertility phases with fertility rates falling under 2.1 and closing in on 1.0. 

These countries face a time bomb of exponential population decline. Added to this, the effect of population migration at the local level results in a precipitous drop in the rural population. The threat to the very existence of the rural population increases the need for policy intervention. In addition, life expectancy continues to rise. Many countries are now becoming super-aged societies where the elderly, those aged 65 or higher, comprise more than 40 percent of the total population. This change will result in increased fiscal burdens due to care, medical, and pension expenses as well as the rapidly widening gap between generations. Institutional and policy reforms are required.

History and Structural Reality

South Korea's demographic issue is unique in that the fall in fertility rate was very steep, due to the family planning project of the Park Chung-hee administration between 1961 and 1979, which came after the chaos of liberation, division and civil war between 1945 and 1960. In 1965, South Korea’s fertility rate was 5.63, slightly above the world average of 5.02. But in 1990, the fertility rate fell to 1.70, far below the global average of 3.04. The reason for this sharp drop in Korea is not only the rapid growth of the "Miracle on the Han River," but also upward movement in social status and improvement of educational standards. 

Although the fertility rate dropped to 2.1 in 1983, the inertia of the government-led family planning project kept rates up until the mid-1990s. The 1997 Asian Financial Crisis pushed fertility rates down further, reaching 1.18 during the Roh Moo-hyun administration between 2003 and 2008. This alerted the South Korean government and forced it to consider this record-low fertility rate as a grave demographic issue. 

Since the inauguration of the Moon Jae-in administration in 2017, South Korea declared itself a feminist administration and stated it would pursue demographic policy that advances basic human rights and subsequently increased the budget for these policies. However, the related policies did not have any clear impact and the fertility rate kept on falling, reaching 0.9.

According to the National Statistical Office's 2017 special estimate of future population, South Korea's total population is expected to peak at 51.94 million in 2028 and fall below 40 million by 2067. In 2019, a natural decline began, with more deaths than births. The working-age population will decrease to 45 percent in 2067, the youth population (0-14 years old) to 8 percent in the next five decades, and the proportion of elderly (over 65) will surge to 47 percent in 2067, making South Korea the world's top super-aged country alongside Japan.

Urbanization began at 20 percent in the 1950s, rising to virtually 85 percent in the 2020s, almost the same as the US and Canada. Likewise, the population in the Seoul metropolitan area comprised less than 30 percent of the population in the 1970s, but represented nearly half as of 2018. Despite agglomeration economics, overcrowding in the Seoul metropolitan area is becoming a huge social problem, leading to desolation in rural areas and a spike in housing and real estate prices in the Seoul metropolitan area. 

There are concerns about the extinction of the rural population and small and medium-sized cities where population outflow is high, in addition to the record-low fertility rate and aging population. Since the 1980s, worry over local extinction began to increase following the hollowing out of schools in rural areas. A study warned that forty percent of 3,482 townships would face extinction risks after 2045.

Why did Demographic Policy Fail?

Policymakers and some scholars wrongfully tend to view South Korea's population policy failures since the 2000s as the paradox of Icarus. They point to the tragic consequences of Korea's long push for family planning projects, which have plunged the fertility rate to the lowest level in the world. Despite massive fiscal input to halt further decline in the fertility rate and reverse the trend, the tragic reality is that these efforts have been in vain. 

However, policymakers’ failure cannot be excused with a paradox. They failed to exert fiscal power to serve the stated policy goals properly, as they adopted policy tools that were developed in Europe to cope with post-demographic transition without a thorough understanding of the dynamics of the demographic transition at hand.

Policymakers failed to understand or cope with the momentum of the 30-year-long plunge in the fertility rate. New demographic policies in the 1990s did not have a clear policy goal as the momentum disconnected the fertility rate from population growth. Population management through birth control or birth promotion were ruled out despite the fact that total population cannot be separated from population quality, such as the gender imbalance caused by preference for male babies. Such limited policy meant that South Korean demographic policy was virtually absent in the 1990s.

After new policy was set by the Kim Young-sam administration in 1996, the 1997 Asian Financial Crisis hit Korea. Due to economic policies enacted to manage the crisis during the Kim Dae-jung administration from 1998 to 2003, unemployment soared. Then another economic crisis hit, caused by credit card insolvency. Because of this, South Korea’s population regime entered its record-low fertility rate period with the wave of globalization and neo-liberalism, with the fertility rate falling below the 1980s level of 1.4 or 1.5, along with southern European countries such as Italy, Spain, and some Northeast Asian countries.

With the start of the Roh Moo-hyun administration in 2003, efforts began to respond to the demographic transition. However, the administration thought of demographic policy as a part of welfare policy and thought that the fertility rate needed time to bounce back regardless of policy tools, whether they took the form of direct provision of services, in kind provision, or cash handouts. The Roh administration established the first basic plan to cope with low-fertility and the aging society by establishing strategic objectives with five-year intervals. The plan was to realize a sustainable society by reforming the entire socio-economic structure by 2020.

However, the goal was not to pursue policies that would promote births but rather to reverse the decreasing fertility trend. Policies aimed at establishing an environment friendly to birth and nurturing. More specifically, stronger social responsibility towards birth and nurturing, the cultivation of a family-friendly and gender-equal social culture, and the promotion of a healthy future generation were set. 

Furthermore, to “increase policy effectiveness and create an environment to respond to low-fertility and aging society,” education, promotion, the establishment of a policy community and the inducement of social consensus, strengthening of national and local government connections, and the establishment of policy achievement management were promoted. However, utilizing the budget for measures that fall short of the main policy goal of recovering from the decreasing fertility rate, rather than simply focusing on recovering from the already low fertility rate, resulted in a failure to meet that goal.

Policy Suggestions, Second-Best Options

The current demographic problem in South Korea may prove a time bomb without an escape if the record-low fertility rate persists. A slowly decreasing population can have positive effects, such as less competition for jobs, easing overcrowding, alleviating the fear of rising housing and real estate prices, allowing more space for living, and diversifying land usage, especially in cases such as South Korea where the landmass is relatively small. Per-capita income can even grow with gradual population decrease, given that productivity growth thanks to technological innovation may surpass the productivity contraction due to labor shrinkage. 

As necessity is the mother of invention, a low fertility rate and an aging and shrinking population can stimulate technological innovation. Population decrease can also be welcomed in terms of the environment and food supply. Furthermore, when the population is decreasing gradually, fertility can rise gradually in low-density regions or regions with insufficient labor, leading to population recovery. 

However, a drastic population drop poses a severe threat to sustainability. If the people share the fear of uncertainty, a record-low fertility rate can worsen. In addition, the threat of functional and demographic extinction of rural areas or small and medium-sized cities that are located far from mega-cities will begin, increasing the possibility that the issues can spread to metropolitan areas.

The Moon administration’s fourth basic plan to address low fertility and an aging society focuses on welfare policy that merely responds to symptoms and aims to halt further drops in fertility. It’s likely that this plan will not be able to escape from the pitfalls of populist policy. The basic plan of the Moon administration should utilize a more aggressive strategy and refer to the successful improvement of the fertility rate by the Merkel administration’s birth incentive policy in Germany.

Since 2002, South Korea has been a low-fertility society, with the rate remaining below 1.3 for two decades. Fertility has now fallen below 1. One point of relief is that the population decrease is still gradual. In this period, a policy tool that aims to recover the fertility rate should be developed to combat the trend of a drastically decreasing population. A fundamental transition from existing populist population policy is necessary. South Korea should clearly stipulate institutional and financial support to promote fertility recovery as a mid- to long-term policy objective, such as setting aside a certain percentage of GDP for policies to cope with low fertility.

South Korea needs to restore a demographic policy that respects individual choice and responsibility in the era of the market economy. A short window of time remains, about a decade, where society is not yet aged and the population decrease is not too steep. Within this window, South Korean business, society, and households should work together to advance labor productivity through technological advances and innovative growth. These can result in not only individual and household prosperity but also to an increase in the fiscal capacity of the national budget, particularly social insurance. 

The national government, businesses, and local governments should establish a cooperative structure to prepare for demographic change. The state should utilize its budget to serve the goal of pulling the fertility rate up. Strict evaluation of policy efficacy should be constantly and systematically conducted, and an elaborate action plan should be drafted. The best policy against low fertility rate problems is actively attacking the fundamental issue, not passively responding to it. To deal with the time bomb of a drastic decrease in population, South Korea should establish a clear control tower supported by new legislation and revise related basic laws and plans.

Coping with diminishing fertility.

Since the 1960s, South Korea's fertility rate has dropped sharply, from 6.0 to 1.75 births per capita in 1995. In 2002, South Korea entered the era of record-low fertility rates, falling even further to below 1.0 under the watch of the current Moon administration. This low fertility rate has resulted in a higher proportion of elderly in the population and increased fears of the elimination of the rural population. 

In the mid- to long-term, total population and age structure will change, leading to other social issues such as youth employment, housing and real-estate price changes, fewer pupils in schools, regional conflicts, and welfare states that provide pensions and health insurance. Demographic policy’s ripple effects cannot be completely separated from policies relating to women, tax policy, labor policy, housing policy, education policy, pension policy, and regional policy.

As the post-war baby boom era ended in Europe due to slowing economic growth in the 1970s, rising marriage age, falling fertility rate, and fear of population decline all emerged. This led to birth promotion policy measures such as child allowances and maternity leave. Policies began to use market incentives and transitioned from coercion to education or public relations. Recently, in the era of labor reduction, discussions over whether economic growth can be possible through technological innovation such as artificial intelligence have emerged, taking the fourth industrial revolution as an opportunity. 

In addition, feminism and the improvement of women's education continue to push ahead with the softening of population policies that increase women's employment and reconcile work-family balance.

In many countries including Korea, demographic issues increase the need for new policies. As of 2020, for example, the post-demographic-transition era in developed countries in Europe and Asia has intensified the issues of low fertility rates, aging population, decreasing population and international migration. Some countries in East Asia and Eastern and Southern Europe have entered record-low fertility phases with fertility rates falling under 2.1 and closing in on 1.0. 

These countries face a time bomb of exponential population decline. Added to this, the effect of population migration at the local level results in a precipitous drop in the rural population. The threat to the very existence of the rural population increases the need for policy intervention. In addition, life expectancy continues to rise. Many countries are now becoming super-aged societies where the elderly, those aged 65 or higher, comprise more than 40 percent of the total population. This change will result in increased fiscal burdens due to care, medical, and pension expenses as well as the rapidly widening gap between generations. Institutional and policy reforms are required.

History and Structural Reality

South Korea's demographic issue is unique in that the fall in fertility rate was very steep, due to the family planning project of the Park Chung-hee administration between 1961 and 1979, which came after the chaos of liberation, division and civil war between 1945 and 1960. In 1965, South Korea’s fertility rate was 5.63, slightly above the world average of 5.02. But in 1990, the fertility rate fell to 1.70, far below the global average of 3.04. The reason for this sharp drop in Korea is not only the rapid growth of the "Miracle on the Han River," but also upward movement in social status and improvement of educational standards. 

Although the fertility rate dropped to 2.1 in 1983, the inertia of the government-led family planning project kept rates up until the mid-1990s. The 1997 Asian Financial Crisis pushed fertility rates down further, reaching 1.18 during the Roh Moo-hyun administration between 2003 and 2008. This alerted the South Korean government and forced it to consider this record-low fertility rate as a grave demographic issue. 

Since the inauguration of the Moon Jae-in administration in 2017, South Korea declared itself a feminist administration and stated it would pursue demographic policy that advances basic human rights and subsequently increased the budget for these policies. However, the related policies did not have any clear impact and the fertility rate kept on falling, reaching 0.9.

According to the National Statistical Office's 2017 special estimate of future population, South Korea's total population is expected to peak at 51.94 million in 2028 and fall below 40 million by 2067. In 2019, a natural decline began, with more deaths than births. The working-age population will decrease to 45 percent in 2067, the youth population (0-14 years old) to 8 percent in the next five decades, and the proportion of elderly (over 65) will surge to 47 percent in 2067, making South Korea the world's top super-aged country alongside Japan.

Urbanization began at 20 percent in the 1950s, rising to virtually 85 percent in the 2020s, almost the same as the US and Canada. Likewise, the population in the Seoul metropolitan area comprised less than 30 percent of the population in the 1970s, but represented nearly half as of 2018. Despite agglomeration economics, overcrowding in the Seoul metropolitan area is becoming a huge social problem, leading to desolation in rural areas and a spike in housing and real estate prices in the Seoul metropolitan area. 

There are concerns about the extinction of the rural population and small and medium-sized cities where population outflow is high, in addition to the record-low fertility rate and aging population. Since the 1980s, worry over local extinction began to increase following the hollowing out of schools in rural areas. A study warned that forty percent of 3,482 townships would face extinction risks after 2045.

Why did Demographic Policy Fail?

Policymakers and some scholars wrongfully tend to view South Korea's population policy failures since the 2000s as the paradox of Icarus. They point to the tragic consequences of Korea's long push for family planning projects, which have plunged the fertility rate to the lowest level in the world. Despite massive fiscal input to halt further decline in the fertility rate and reverse the trend, the tragic reality is that these efforts have been in vain. 

However, policymakers’ failure cannot be excused with a paradox. They failed to exert fiscal power to serve the stated policy goals properly, as they adopted policy tools that were developed in Europe to cope with post-demographic transition without a thorough understanding of the dynamics of the demographic transition at hand.

Policymakers failed to understand or cope with the momentum of the 30-year-long plunge in the fertility rate. New demographic policies in the 1990s did not have a clear policy goal as the momentum disconnected the fertility rate from population growth. Population management through birth control or birth promotion were ruled out despite the fact that total population cannot be separated from population quality, such as the gender imbalance caused by preference for male babies. Such limited policy meant that South Korean demographic policy was virtually absent in the 1990s.

After new policy was set by the Kim Young-sam administration in 1996, the 1997 Asian Financial Crisis hit Korea. Due to economic policies enacted to manage the crisis during the Kim Dae-jung administration from 1998 to 2003, unemployment soared. Then another economic crisis hit, caused by credit card insolvency. Because of this, South Korea’s population regime entered its record-low fertility rate period with the wave of globalization and neo-liberalism, with the fertility rate falling below the 1980s level of 1.4 or 1.5, along with southern European countries such as Italy, Spain, and some Northeast Asian countries.

With the start of the Roh Moo-hyun administration in 2003, efforts began to respond to the demographic transition. However, the administration thought of demographic policy as a part of welfare policy and thought that the fertility rate needed time to bounce back regardless of policy tools, whether they took the form of direct provision of services, in kind provision, or cash handouts. The Roh administration established the first basic plan to cope with low-fertility and the aging society by establishing strategic objectives with five-year intervals. The plan was to realize a sustainable society by reforming the entire socio-economic structure by 2020.

However, the goal was not to pursue policies that would promote births but rather to reverse the decreasing fertility trend. Policies aimed at establishing an environment friendly to birth and nurturing. More specifically, stronger social responsibility towards birth and nurturing, the cultivation of a family-friendly and gender-equal social culture, and the promotion of a healthy future generation were set. 

Furthermore, to “increase policy effectiveness and create an environment to respond to low-fertility and aging society,” education, promotion, the establishment of a policy community and the inducement of social consensus, strengthening of national and local government connections, and the establishment of policy achievement management were promoted. However, utilizing the budget for measures that fall short of the main policy goal of recovering from the decreasing fertility rate, rather than simply focusing on recovering from the already low fertility rate, resulted in a failure to meet that goal.

Policy Suggestions, Second-Best Options

The current demographic problem in South Korea may prove a time bomb without an escape if the record-low fertility rate persists. A slowly decreasing population can have positive effects, such as less competition for jobs, easing overcrowding, alleviating the fear of rising housing and real estate prices, allowing more space for living, and diversifying land usage, especially in cases such as South Korea where the landmass is relatively small. Per-capita income can even grow with gradual population decrease, given that productivity growth thanks to technological innovation may surpass the productivity contraction due to labor shrinkage. 

As necessity is the mother of invention, a low fertility rate and an aging and shrinking population can stimulate technological innovation. Population decrease can also be welcomed in terms of the environment and food supply. Furthermore, when the population is decreasing gradually, fertility can rise gradually in low-density regions or regions with insufficient labor, leading to population recovery. 

However, a drastic population drop poses a severe threat to sustainability. If the people share the fear of uncertainty, a record-low fertility rate can worsen. In addition, the threat of functional and demographic extinction of rural areas or small and medium-sized cities that are located far from mega-cities will begin, increasing the possibility that the issues can spread to metropolitan areas.

The Moon administration’s fourth basic plan to address low fertility and an aging society focuses on welfare policy that merely responds to symptoms and aims to halt further drops in fertility. It’s likely that this plan will not be able to escape from the pitfalls of populist policy. The basic plan of the Moon administration should utilize a more aggressive strategy and refer to the successful improvement of the fertility rate by the Merkel administration’s birth incentive policy in Germany.

Since 2002, South Korea has been a low-fertility society, with the rate remaining below 1.3 for two decades. Fertility has now fallen below 1. One point of relief is that the population decrease is still gradual. In this period, a policy tool that aims to recover the fertility rate should be developed to combat the trend of a drastically decreasing population. A fundamental transition from existing populist population policy is necessary. South Korea should clearly stipulate institutional and financial support to promote fertility recovery as a mid- to long-term policy objective, such as setting aside a certain percentage of GDP for policies to cope with low fertility.

South Korea needs to restore a demographic policy that respects individual choice and responsibility in the era of the market economy. A short window of time remains, about a decade, where society is not yet aged and the population decrease is not too steep. Within this window, South Korean business, society, and households should work together to advance labor productivity through technological advances and innovative growth. These can result in not only individual and household prosperity but also to an increase in the fiscal capacity of the national budget, particularly social insurance. 

The national government, businesses, and local governments should establish a cooperative structure to prepare for demographic change. The state should utilize its budget to serve the goal of pulling the fertility rate up. Strict evaluation of policy efficacy should be constantly and systematically conducted, and an elaborate action plan should be drafted. The best policy against low fertility rate problems is actively attacking the fundamental issue, not passively responding to it. To deal with the time bomb of a drastic decrease in population, South Korea should establish a clear control tower supported by new legislation and revise related basic laws and plans.

Kwang-Hee Jun is a professor at Chungnam National University. This is printed courtesy of the East Asia Foundation, a Seoul-based think tank. The views expressed are those of the author.

This article was published in Asia Sentinel dated 26 November 2020. Republished with permission from Asia Sentinel.