The Cause of Low Birth Rates in Korea and Related Economic Impact
Published on 8 October 2018
Published by Population & Strategy Analysis Division of the Economic Analysis Department
The total fertility rate and number of births recorded in Korea in 2017 reached a new historical low, at 1.05 children per woman and 358,000 children, respectively. Korea remains the only country with super-low birth rates among OECD member states.
This report analyzes the socio-economic factors that affect low birth rates in Korea and forecasts the impact on the economy should the current trend continue.
In Chapter II, the socio-economic factors behind low birth rates are categorized into demographic factors, employment and marriage choices, working hours and childbirth as well as childcare facilities and plans to have additional children. An analysis of the impact of each factor on childbirth and marriage has been conducted through a linear probability model. Demographic factors related to low birth rates for women aged between 15 and 49 include the sharp decrease in the number of women in their late 20s and early 30s, older age at first marriage and lower average rates of childbirth among married women. An empirical analysis of employment and marriage choices indicated a gap in the chance of marriage based on the type of employment and wage level. Full-time and regular workers had a 1.1~4.4%p higher likelihood of getting married than temporary/daily or irregular workers, and those with a higher starting salary and higher average monthly pay had a higher chance of getting married. An analysis of the relation between working hours and childbirth concluded that if a married woman’s total working hours per week increased by one hour, she is 0.3%p less likely to become pregnant within one year, and if a woman works overtime (after hours or on weekends), she is 3.7%p less likely to get married within one year. As for childcare facilities and plans to have additional children, when support for childcare programs for children aged 0-5 years old is increased by 10%p by local governments, households residing in such jurisdictions have a 1.13%p higher chance of contemplating having another child.
Chapter III offers analyses of the macroeconomic ripple effects of a decrease in birth rates, the contribution of demographics to growth, and the effects of measures to increase the working population. An analysis using the Overlapping Generations Model concluded that if the current state of low birth rates continues, Korea’s GDP in 2060 is expected to fall by 3.3-5.0% compared to the predicted 2060 GDP if the population meets the Estimation of the Population Median conduced by Statistics Korea. After analysis of the contribution of Korea’s declining population to economic growth through growth accounting modelling, it is estimated that the contribution of labor to economic growth will decline to –0.7%p in the 2020s, and the decline in labor will act as a detriment to the economic growth rate.
Even in a scenario where a larger senior population participates in the labor market, women’s employment rates match those of men’s, and foreign labor inflows increase by 40 to 50 thousand people every year, the estimated economic growth rate of 2050 was predicted to be around 1.5%.
In Chapter IV, policy implications were provided by noting the need for a mid-to-long term policy response, the development of an institutional infrastructure for balancing work and family, the expansion and improvement of childcare infrastructure, and measures to increase the medium-term working population to alleviate the falling economic growth rate caused by a population decline, until the recovery of birth rates in Korea.