With a birth rate well below the replacement rate, the Republic of Korea’s population could halve in just 50 years. Other countries must take note.
Among the global megatrends today, from climate change to rapid urbanization, demographic transition does not often get the attention it deserves. However, one of the greatest challenges facing humanity in the coming century is that we simply don’t have enough young people.
Despite the world population topping 8 billion in 2022, global fertility is projected to fall from 2.3 children per woman in 2021 to 2.1 (the replacement rate) in 2050. Across the OECD (a group of 38 mostly high-income countries), the population aged 65 and over is projected to spike from 17.4% in 2017 to 27.1% by 2050. This means that one in ten people will be over the age of 80. Meanwhile, the expanding BRICS bloc of countries with emerging economies must navigate the challenge that their members “will be old before they are rich".
The burden of supporting this swelling aged population, as it stands, will fall on the ever-shrinking number of working-age people.
South Korea, with the lowest fertility rate in the world and a rapidly aging population, is the canary in the coal mine of this global challenge. South Korea’s fertility rate hit its lowest-ever point of 0.72 births per person in 2023. That’s far below Japan, which currently sits at around 1.2 births per person, and well below the fertility replacement rate of 2.1.
Fitch Ratings warned in 2022 that “demographic pressure presents headwinds to potential growth over the long run”. “Headwinds” is an understatement.
Manuel Garcia Huintrón, a demographics expert who sits on several pension advisory boards and co-founded pension start-up company Nuovalo, said, “With the 0.7 rate, it will take South Korea 50 years to halve its population—and then another 50 years to halve it again”.
The problem is exacerbated by an aging population, he explained, which raises health and social care burdens and stresses traditional mechanisms like pensions. It upends the intergenerational assumption that a larger working-age population will support a smaller retired populace—and receive, in turn, the same level of care when they retire. For the first time in history, that assumption no longer applies in many countries worldwide.
The extent of the societal consequences is unclear but intergenerational pressures are emerging. For example, younger buyers are losing out in the competition for limited housing stock, a phenomenon that contributes to the fertility crisis due to the lack of housing fit to raise a family.
For South Korea and other countries like it, one option to slow demographic change is to bring in young workers from abroad.
“Immigration can be part of the solution,” said Garcia, caveating, however, that there are “societal changes that need to take place, so people really need to start to start welcoming immigration”.
Other countries are already leveraging immigration. The UK, for example, sits at a fertility rate of 1.6 but brings in hundreds of thousands of workers every year to maintain its taxpaying population; this is not without significant political and social consternation. Korea has already begun to loosen restrictions on foreign workers in the country, but immigration “cannot be the whole solution,” Garcia said. Fertility rates are set to decline worldwide. Even in Africa, where fertility rates are highest, fertility is beginning to fall just as demand for immigrants to plug economic holes is growing.
Gender dynamics play a critical role in the fertility decline, so improving gender equality is another potential solution. Korean women have the highest educational attainment level among OECD countries, but they are underrepresented in management and leadership across nearly all sectors.
According to Korean Labor Minister Lee Jung-Sik, “a key solution to the fertility, aging, and productive problem is helping women raise children happily without having to worry about giving up jobs”.
Minji Hong, a producer at one of the country’s most popular YouTube channels, MMTG, is one of those high-achieving Korean women faced with a difficult decision.
“I want to have a family and baby, but must think about my career,” she said, explaining that having a child can often sound the death knell on a woman’s career. This takes a toll on her: “I have to deny myself a child if I want to continue to be successful.”
One problem, she said, is attitudes toward women in the workplace. “Feminism is used as an insult in Korea,” she said, and “in Korean society, company or government decision-makers: they’re male”.
For example, Korean women are technically entitled to days off work when they get their periods, but if they choose to take this time, Hong says, “male workers say: ‘you’re just on vacation’”.
These attitudes filter through to the fertility rate. When women are forced to choose between their careers and having children, they have fewer children and they have them later in life, which carries potential additional health challenges for both mother and child.
There is no easy solution to the fertility crisis, but countries facing their own demographic-economic time bombs are trialling various solutions. Hungary offers major tax breaks to working women, particularly young ones, who have children. Singapore is poised, in 2024, to increase the amount of money it pays new mothers to around $2,250. Sweden has seen success in increasing fertility rates by removing rules that financially penalized parents for having children too close together, ensuring mother-friendly policies that help them remain in the workforce, and encouraging fathers to take extended parental leave.
For Garcia, in addition to smart policies that encourage parenthood, technology will inevitably play a role, alleviating the pressure on young workers by bolstering their productivity.
“If the number of workers we have halves, but the productivity of those workers doubles, then your productive capacities are kind of the same,” said Garcia.
Could artificial intelligence be part of a solution? “Absolutely,” he said.
AI could help us achieve productivity gains, but “we must have the right policies and regulations in place” to leverage those economic advantages against the disadvantages of demographic changes.
“It is exciting, and it’s scary,” said Garcia. “What happens in the coming decades depends on the policies we are setting up now".
This article was featured in our digital publication, which includes more coverage from the KFAS-Salzburg Global Leadership Initiative program on "Uncertain Futures and Connections Reimagined: Connecting Generations."
The KFAS-Salzburg Global Leadership Initiative is a multi-year program that annually brings together an international, intergenerational, and interdisciplinary network of Korean and global thought leaders to create new connections and tackle global challenges.
