The current population projections for South Korea are pretty dire (as we’ve discussed before on this blog). With a fertility rate of about 1.2 children per woman, South Korea has one of the lowest birth rates in the world and is the fastest-aging country in the OECD. By 2026, one-fifth of the country is expected to be over theage of 65 years.
Not only will this radically change the make up of Korean society, it also will have an impact on the country’s economy. This is of concern for all in the region as South Korea is the fourth largest economy in Asia. It is also of concern for the South Korean government. And so now the Government will announce “a new package of measures late this year to cope with the country’s chronically low birthrate and aging population”. In a speech at an economic development seminar in Seoul, the country’s Vice Finance Minister, Joo Hyung-hwan stated that there “is a need to make fundamental changes in the economic system to tackle the problems at hand”. Although we do not yet know the extent of the announcements to be made later in the year, such language suggests that they will not be mere tinkering at the edges. As Joo explained “A drop in labour quality and consumption is all going to influence the country and its industries”.
Having said that, this will not be the first attempt by the Government to reverse South Korea’s aging population and low birthrate. In the past the Government has implemented two sets of measures which have included: cash payments to families that have many children; more comprehensive child care services and expanding welfare for senior citizens. However, such measures seem not to have had much impact, and it seems as if Korean women just don’t want to have children. Thus, it will have to be a fairly impressive set of measures to adequately comabt this trend. Perhaps the Government recognises the unliklihood of success since it also seems to be concerned with mitigation of future demographic changes. At the end of the year, the Government will announce a mid- to long- term economic development plan to compensate for demographic change down the line.
On a related note, South Korea’s neighbour across the Sea of Japan/East Sea, Japan, is in the midst of an even more advanced aging phenomenom. So it is no surprise that the goods that make up its consumer price index basket are changing to reflect that demographic shift. In the latest reshuffle of the 500-odd goods that are used to measure the country’s inflation, items on the kids’ menu (like Happy Meals) are being removed and replaced by hearing aids. This reflects the fact that the Japanese society is buying fewer meals for children and more hearing aids for the elderly.