Korea's consumption drops amid aging population, subdued income growth

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Korea's consumption drops amid aging population, subdued income growth

Published: 02 Jun. 2025, 10:21 Updated: 02 Jun. 2025, 19:04

Audio report: written by reporters, read by AI

As projections indicated that the number of self-employed businesses closing this year would exceed 1 million, a passerby walks past shuttered stores in the underground shopping arcade at Jonggak Station in Jongno District, central Seoul. According to Korea Credit Bureau’s latest report on small businesses, a total of 3.619 million businesses received private business loans as of the first quarter, and 13.8 percent of those were found to be closed. [NEWS1]

Elderly citizens are seen at the Tapgol Park in Jongno District, central Seoul, on May 27. [NEWS1]

Young people can't and older people won't — Korea’s overall consumption is declining due to demographic shifts, subdued income growth among younger generations and cautious consumer sentiment, according to new reports from the Bank of Korea (BOK) and the Korea Chamber of Commerce and Industry.

A report released Sunday by the BOK analyzing the impact of demographic change on consumption patterns found that the average propensity to consume — the ratio of consumption to income — fell from 76.5 percent during the 2010 to 2012 period to 70 percent between 2022 and 2024.

The central bank attributed this drop largely to the rapid rise in the proportion of older people in the population. The share of those aged 55 to 69 climbed from 14 percent in 2010 to 23 percent last year.

“The older the age group and the shorter the time horizon to prepare for retirement, the sharper the decline in their consumption propensity,” the bank said in its report.

Older adults not only tend to save more due to retirement needs, but also have less disposable income than younger, working populations. Many also hold their assets in real estate rather than cash, reducing liquidity. According to the central bank, consumption drops by an average of 9 percent when people move from their 50s to their 60s.

Elderly citizens wait in line for the free meal distribution at the Tapgol Park in Jongno District, central Seoul, on May 12. [NEWS1]

The shrinking working-age population — those between the ages of 15 and 64 — has further dampened household spending.

The report notes that this demographic change weakens labor input, reduces household income generation and lowers the economy’s growth potential. Additionally, growing government social welfare expenditures are displacing personal consumption, and the rise of single-person households, especially among older and low-income groups, is contributing to the trend.

The central bank estimated that from 2013 to 2024, demographic changes reduced annual consumption growth by 0.8 percentage points on average. This accounts for half of the overall 1.6 percentage point slowdown in consumption growth during the same period.

The BOK forecasts that between 2025 and 2030, the drag on consumption growth from aging and depopulation could widen to as much as 1 percentage point annually.

An empty street in central Seoul's Jongno District on Dec. 31, 2024 [YONHAP]

Separate findings from the Korea Chamber of Commerce and Industry (Korcham) based on Statistics Korea’s household survey data from 2014 and 2024 also show declining consumption across all age groups despite rising incomes — except for those under 40, whose income and spending both fell.

The average propensity to consume fell to 70.3 percent in 2024 from 73.6 percent a decade earlier. The most dramatic decline occurred among people in their 60s, where it dropped 6.9 percentage points to 62.4 percent.

“People in their 60s, being retired or near retirement, tend to shift toward savings and safe assets, while still bearing housing-related interest payments, which inevitably lowers their consumption,” said Kim Min-seok, a policy team leader at the chamber.

People under 40 reported a 90,000 won ($65.20) drop in monthly spending over the past 10 years, with average disposable income also decreasing slightly. The chamber attributed this to delayed marriage and childbirth, leading to weaker demand for big-ticket categories like food and education.

Empty seats at a restaurant in Seoul on April 8 [YONHAP]

Spending patterns also shifted. Those under 40 reduced their food and beverage spending from 13.2 percent to 9.3 percent of total expenditures but spent more on dining out, leisure and entertainment. In contrast, middle-aged consumers spent more on self-indulgent items such as gym memberships, beauty devices and home decor.

The chamber warned that unless consumer confidence recovers, Korea may face a prolonged consumption slump regardless of improvements in income distribution or demographic policy. It emphasized the need to reduce the burden of home ownership among younger and middle-aged people to free up real disposable income.

“This is not a typical cyclical downturn,” said Jang Geun-mu, head of the chamber’s distribution and logistics institute. “It’s a structural shift driven by changes in demographics, income distribution and consumer sentiment. Tailored policies that reflect generational characteristics are crucial to restoring sustainable growth momentum.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM NAM-JUN, NOH YU-RIM [[email protected]]