Korean economy to start shrinking by 2050 if low birthrate unaddressed: BOK report

Newborn babies are seen in cribs at a postpartum care center in Anyang, Gyeonggi Province, July 27. Newsis

If Korea fails to raise the current birthrate — the lowest in the world — with appropriate policy measures, the country's growth rate may fall below zero percent by 2050 with its population dropping below 40 million by 2070, the central bank warned in a report.

According to the report released by the Economic Research Institute of the Bank of Korea (BOK) on Sunday, the young generation's growing uncertainties over employment, housing and childcare are analyzed to be the primary causes of the country's severe low birth rate.

Korea's total fertility rate — the average number of expected births per woman aged 15 to 49 — is 0.81, as of the first quarter of this year, which is the lowest figure among OECD member countries. The rate of decline is also the fastest out of 217 countries and regions around the world.

If the current trend continues, Korea is expected to become a super-aged society with the proportion of people aged 65 and older reaching 20.3 percent of the population by 2025. By 2046, it is projected to become the country with the highest proportion of the elderly among OECD member countries.

The report's analysis of the fertility rate trend without factoring in any policy interventions shows that there is a 90 percent chance that the total population could fall below 40 million by 2070. Additionally, the same analysis model warns that there is a 68 percent probability that Korea's growth rate falls below zero percent by 2050.

Structural policies required to address low birthrate

The paper identified structural policies as the most crucial measures to address the low birthrate of the country. Such structural policies include measures on the labor market, stabilizing housing prices, household debt and easing concentration in the metropolitan area, as well as alleviating competition in the education system.

As of 2022, the employment rate for people aged 15 to 29 in Korea stands at 46.6 percent, which is significantly lower than the OECD average of 54.6 percent. When compared with the employment rate for individuals aged 25 to 39, Korea's figure — 75.3 percent — is much lower than the OECD average of 87.4 percent.

The quality of youth employment is also worsening with an increasing prevalence of non-regular jobs. The proportion of non-regular workers among wage earners aged 15 to 29 has increased from 31.8 percent in 2003 to 41.4 percent in 2022.

The percentage of employed people intending to get married (49.4%) exceeded that of the non-employed (38.4%). However, for non-regular workers, their intention to marry (36.6%) was even lower than that of non-employed individuals.

Based on data of 35 OECD countries from 2000 to 2021, the report highlighted that Korea's birthrate can improve considerably if the country's various economic and social factors were to improve to the average level of OECD countries.

For instance, if Korea's urban population concentration (431.9%) drops to the OECD average (95.3%), the total fertility rate would increase by 0.414 births from the current level. Likewise, if Korea's employment rate for those aged 15 to 39 increases to the OECD average, it is anticipated that the birthrate can further increase by 0.119 births.

Furthermore, the total fertility rate could be raised by a maximum of 0.845 births, when the country's key indicators, including the rate of the actual utilization of parent leaves, government expenditure on family support, and the real housing price index, are to be improved to the average levels of OECD countries.