Korea’s Falling Birthrate Raises Concern
Published August 29, 2022
The steep decline in Korea’s fertility price has created concern. In 2020, the variety of deaths exceeded the variety of births for the primary time, in accordance with census knowledge from the Ministry of Interior and Safety. The Ministry acknowledged that “amid the rapidly declining birthrate, the government needs to undertake fundamental changes to its relevant policies.” The fertility price, which was 6.0 in 1960, was 0.81 in 2021, solely half of the common of the 38 OECD international locations (Figure 1). The newest decline might have been partly because of COVID-19. The Bank of Korea acknowledged that the pandemic would exert “a negative impact on the nation’s marriage and birthrate, leading to an acceleration of aging in the population.”
The low birthrate, mixed with rising life expectancy, is projected to sharply improve Korea’s aged dependency ratio (the aged as a share of the working-age inhabitants). In 2020, Korea’s ratio was the sixth lowest amongst OECD international locations, however is projected to be the very best in 2060 at 83% (Figure 2). In different phrases, the variety of working-age individuals per aged is anticipated to fall from 4.5 to 1.3. The demographic transition is more likely to pose critical socio-economic points, together with excessive fiscal prices.
Government insurance policies to spice up the birthrate
Korea has applied numerous “Basic Plans on Low Fertility and Aging Society” because the mid-2000s to counter the autumn within the birthrate.
- The First Basic Plan (2006-10) launched measures to advertise work/life stability, supplied monetary help for childcare for low-income households and strengthened staff’ rights for maternity and parental depart. In addition, it supplied monetary help for infertility therapy and medical help for pregnant girls.
- The Second Basic Plan (2011-15) included the introduction of free childcare providers for all households no matter their revenue degree. However, capability didn’t improve sufficiently to accommodate all youngsters, forcing some to depend on dearer non-public care. Still, public spending on early childhood training and care elevated from 0.1% in 2001 to 1.0% by 2016, a determine exceeded by solely the Nordic international locations and France.
- The Third Basic Plan (2016-20) aimed to spice up households’ way of life by addressing the excessive price of housing and training. In addition, a baby allowance of KRW 100,000 (USD 75) per 30 days per youngster as much as age six was launched in 2018.
- The Fourth Basic Plan (2021-25) supplied a month-to-month bonus of KRW 300,000 (USD 225) to households with youngsters below 12 months beginning in 2022, with it rising to KRW 500,000 by 2025. Couples anticipating a child obtain a KRW 2 million money bonus beginning in 2022, and the KRW 600,000 medical expense help for pregnant girls was elevated to KRW 1 million.
Korea stands out in worldwide comparability by permitting employed moms and dads coated by the Employment Insurance System to every take as much as 12 months of paid parental depart. However, the take-up has been comparatively low, particularly for fathers. In 2018, lower than 100,000 mother and father claimed the parental depart profit – roughly 30 mother and father per 100 dwell births. Mothers accounted for 82% of the entire, as Korea’s intense work tradition tends to discourage fathers from taking depart. In distinction, in Germany in 2016, there have been roughly 94 moms and 35 fathers claiming parental depart advantages for each 100 dwell births. To encourage extra fathers to make use of parental depart, Korea launched a so-called “Daddy Month” in 2014 and prolonged it to 3 months in 2016. Under this rule, if each mother and father take parental depart, the second guardian (often the daddy) can declare a better profit for 3 months. In 2019, the profit was elevated to 100% of the guardian’s earnings as much as a ceiling that’s equal to about 60% of common full-time earnings.
Changing social views have affected the fertility price
The growing monetary advantages provided for youngsters, nonetheless, haven’t achieved the specified improve within the fertility price within the face of shifting views about household and marriage. Among girls aged 50 and above, a 2016 authorities ballot discovered that two-thirds agreed that “marriage is a must-do for everyone” in comparison with lower than 40% for ladies aged 18-29 (Figure 3). The common age of ladies at first marriage has elevated considerably from 24.8 years in 1990 to 30.8 years in 2020. In addition, the wedding price has fallen by half since 1980. Delayed marriage and the growing share of ladies who stay single has a significant affect on the fertility price, as lower than 2% of births happen exterior of marriage in Korea.
The significance hooked up to marriage is decrease for ladies with larger training (Figure 3), who account for a rising -share of the inhabitants. In the 25-29 age group, the share of ladies who’re college graduates surpassed males in 2012 and is now 9 proportion factors larger. As larger training has elevated labor market alternatives for ladies, conventional household roles have much less attraction for a lot of girls. Mothers particularly have been anticipated to dedicate vital time to the training of their youngsters, which is tough to mix with a full-time profession. In addition, girls proceed to shoulder most of unpaid work – housekeeping and childcare. Indeed, girls spend a median of three.5 hours per day in comparison with 49 minutes for males. Consequently, there’s vital strain on girls to depart the labor market as soon as they’ve youngsters. Highly-educated girls particularly are likely to postpone having youngsters in view of the big alternative price or stay childless.
Many youth seem pessimistic about their prospects
Moreover, a big share of younger folks seem annoyed by the challenges of training, employment and housing. Young Koreans are also known as the “sampo generation,” which accurately means “giving up on three” — relationship, marrying and having youngsters. Young folks face super strain to achieve larger training, which allows them to acquire common employment and excessive wages, typically seen as a prerequisite for household formation. Such employment alternatives are most prevalent in giant corporations and within the authorities. Not surprisingly, two-thirds of younger folks (ages 13-34) wish to work at giant corporations or the general public sector. In distinction, solely 4% wish to work for small and medium-sized enterprises (SMEs), reflecting the exceptionally giant productiveness and wage hole between giant corporations and SMEs in Korea’s polarized economic system. Indeed, staff at corporations with 300 or extra staff earn practically twice as a lot as these at corporations with 10-99 staff.
Higher training additionally reduces the chance of non-regular employment, which is precarious and comparatively low-paid. In 2022, 42% of younger folks (aged 15-29) have been non-regular staff. Hourly wages of non-regular employees are solely 72% on common of these of standard employees. Moreover, the share of non-regular employees enrolled in social insurance coverage techniques, notably the National Pension System, National Health Insurance and Employment Insurance, in addition to in company pension techniques, is far decrease than for normal employees.
Labor market situations contribute to the sturdy emphasis on training in Korea. Nearly three-quarters of highschool graduates advance to varsity or college, which will increase the possibilities of working in giant corporations and the general public sector. However, giant corporations and the general public sector don’t generate sufficient jobs for the big variety of tertiary graduates. Many younger folks queue for well-paid common jobs, somewhat than settle for SME and non-regular jobs, leading to a youth employment price that’s considerably beneath the OECD common (Figure 4). Consequently, the speed of NEETs – individuals who’re neither employed, nor engaged in formal training or coaching – is comparatively excessive amongst Korean youth, particularly those that are college graduates.
Conclusion
The Korean authorities’s has taken steps in the fitting route to spice up the fertility price by selling work/life stability, offering free childcare and growing public help for households. However, elevating the fertility price towards the OECD common (1.5 youngsters) and the substitute price (2.1 youngsters) additionally requires basic reform of the Korean economic system. First, it’s important to make it simpler for ladies to mix employment and having youngsters via additional decreasing working hours, sharing family work extra equally and decreasing the excessive prices associated to training and housing. Second, Korea wants to cut back the dualism within the product market (between giant corporations and SMEs) and within the labor market (between common and non-regular employees). This would increase youth employment and scale back revenue disparities, offering extra younger folks with the monetary basis to create households.
Randall S. Jones is a Non-Resident Fellow on the Korea Economic Institute of America. The views expressed listed below are the writer’s alone.
Photo from Alexey Matveichev’s photostream on flickr Creative Commons.