A demographic disaster

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A demographic disaster

Korea is destined to arrive at a demographic cliff, according to the Korea Statistics census report for 2017. The low birth rate has begun to cut into the labor force and is likely to threaten economic growth in the future. Without a systematic solution, a demographic disaster is unavoidable.

Only 350,000 babies were born last year, bringing down the total fertility rate to 1.05 births, far below the replacement threshold of 2.1. Already at the bottom among the Organization for Economic Cooperation and Development, Korea’s fertility rate fell to 0.97 in the second quarter. At the current pace, Korea’s fertility rate could soon become zero. With births becoming so scarce, the Korean population is likely to start declining in 2027.

Lower birth inevitably lead to a smaller working population. The population of people of working age, between 15 and 64, declined for the first time last year. The number of people aged 65 and older reached 7.11 million, passing the 14 percent threshold that puts Korean society in the “aged” category.

A thinning working population and oversized elderly population paint a bleak future for Korea. The economy will sag due to weakening growth potential. Every factor moving the economy — investment, production and consumption — will sag. The national pension will run out funds as retirees will overwhelm contributors. Tax revenue will fall from lackluster economic activities to further burden and dissuade young people from starting a family.

Presidential candidates all vowed to address demographic dangers, but no government has succeeded. Over 126 trillion won ($114 billion) was spent to promote birth over the last decade. The money was wasted because they were mostly makeshift measures of rewarding births or supporting childcare. About 70 to 80 percent of previous spending was in the form of financial incentives.

Births cannot increase unless the conditions and the future of potential parents improves. Measures should be taken to stop the population decline as much as possible. Immigration and unconventional forms of family such as cohabitation should be encouraged. In France, which succeeded in combating a low birth rate, 57 percent of newborn babies come from unmarried couples. They nevertheless get the same family benefits from the state. The fate of Korea hinges on the battle against the low birth rate and aging.

JoongAng Ilbo, Aug 29, Page 30
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