Low growth in the 1% range, population decline? "We still have 20 years of golden time left".

■ Broadcast: YTN Radio FM 94.5 (09:00-10:00)
■ Host: Reporter Cho Tae-hyun
■ Air date: January 10, 2025 (Friday)
■ Talk: Lee Chul-hee, Professor of Economics at Seoul National University (Director of Population Cluster at the National Institute for Future Strategy)

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information.

◇Cho Tae-hyun: Low birth rate, aging population, decreasing production population. These are the words that always come up when we talk about the population problem in Korea. The population issue is a very important issue. But there's no visible change right away. It is also observed that it is getting worse. In the new year this year, I would like to point out the population crisis that our economy should pay attention to in the vivid economy. He's been working on this for a long time. We invited Lee Chul-hee, a professor of economics at Seoul National University, to the studio. Please come in.

◆ Lee Cheol-hee, professor of economics at Seoul National University (hereinafter referred to as Lee Cheol-hee): Yes, hello.

◇ Cho Tae-hyun: As you know well, there is a meme that became a hot topic on the Internet. It's a scene where a foreign professor puts a figure on Korea's fertility rate and grabs his head and says, "This country is ruined." How serious is Korea's fertility rate?

◆ Lee Chul-hee: As you know, it's the lowest level in the world. Last year, we recorded about 0.7, which is about one-third of what it takes to sustain the population. That's why

◇ Cho Tae-hyun: Are you talking about the total fertility rate?

◆ Lee Chul-hee: A total fertility rate of 0.7 means that after a generation, a person born is given a third. In addition, as the female population is also decreasing, the number of births is decreasing at a very rapid rate compared to the previous generation in a very short time.

◇ Cho Tae-hyun: As you said, 0.7 means that the population will be reduced to less than half after a generation. We've seen this decline in fertility rates for quite some time, but when did this trend begin to continue?

◆Lee Chul-hee: In the case of developed countries, the fertility rate has already begun to decline in the long term since the late 19th century. So, there is a brief baby boom in the middle, but the long-term downward trend began a long time ago. In the case of Korea, it has already started to decline rapidly since the 1960s. In fact, the average number of children born in 1960 was about six, which falls below this by 1983. So, in about 20 years, Korea's fertility rate has already decreased by a third, and since then, it has steadily decreased, falling below 1 and recently falling to 0.7.

◇ Cho Tae-hyun: If it falls below two, of course, it means population decline, but as you said, it decreased by one-third from the 60s to the 80s. What do you see as the background of Korea's rapid low birth rate problem?

◆ Lee Chul-hee: The factors of low birth rate are very diverse and multi-layered. As in the case of developed countries, the cost of raising children increases over time, the cost of raising children increases, the income decreases, and the degree of preference for children decreases over time. There are a lot of factors that have led to that change. Among them, if we want to pick one of the fundamental factors, I think there is a change in which competition in the labor market has intensified very much over the past two to 30 years. This affects childbirth through a number of channels. First of all, when competition in the labor market intensifies, the younger generation itself gets married and gives birth becomes a big handicap. Even so, there may be such concerns that it will be more difficult if I get married and have children even though competition is severe.

◇ Cho Tae-hyun: We have to take care of children and spend time there.

◆ Lee Chul-hee: That's right. Also, when such inequality in the labor market intensifies, you will be very worried about what will happen to the child later when he or she raises his or her child. There may be such anxiety that if you raise your child incorrectly, you may become a second or third citizen. Therefore, the pressure to raise your child well somehow will lead to more spending on private education, which will increase various financial and psychological costs of raising your child. Inevitably, this competition in the labor market leads to educational competition. In the process of raising a child well, these difficulties will arise, and the various joys and pleasures of raising a child will disappear. Because you have to push your child into competition and raise your child early on, it seems that it is becoming a society where some benefits or preferences for children are lowered, and it is increasingly difficult to have children through this path.

◇ Cho Tae-hyun: Competition in the labor market is leading to competition in education. In fact, there are things like recruiting medical classes at academies that my son is going to be in the second grade of elementary school. I think this is also a very serious problem, but as you said earlier, the population of developed countries began to show a trend of low birth rates in the late 19th century. Overall, there seem to be quite a few countries facing a low birth rate, not only in Korea, but what do you have in common with Korea?

◆ Lee Chul-hee: There are other cases of countries with very low birth rates, but the Asian countries that experienced rapid growth in the 60s and 70s and 80s are now showing a very similar situation to Korea. Hong Kong, Singapore, Taiwan, and so on. In Hong Kong, the birth rate is actually very similar to that of Korea. It was 0.7 in 2022. Taiwan recorded 0.87 and Singapore also fell below 1 for a while. So the characteristics of these countries are those countries that eventually experienced compressive growth at a very rapid rate. Then, in recent years, especially in countries such as Korea and Taiwan, the growth rate has decreased as they experience stagnant growth. But what kind of problems will a society that has grown compressed and then faces a wall of growth face now? Next, these three problems. In the case of the younger generation, according to the hypothesis of an American scholar named Easterlin, deciding when to give birth to a child, how long to give birth, and when to marry is not determined by the current income, but by the gap between one's expectations and what one can actually realize. The way such expectations and such things should be decided is that they make decisions while looking at their parents' generation. However, in Korea, the average annual growth rate in the 1980s, when the younger generation of parents was young, is usually about 7.5%. However, in the 2010s, the average annual growth rate sank to 12.3%. So from the perspective of young people, the outlook for the future is very bad. Compared to the rapid growth of their parents' generation, the reality they face is not very bright, and the future prospects are very dark, so they have a very negative view of getting married or having children.

◇ Cho Tae-hyun: The first one is the young man

◆Lee Chul-hee: Second, from the perspective of the parent generation, they have that kind of experience of high growth, so they want to pass on that kind of social status to their children. But that's not the reality. Because competition is severe and it is more difficult to live in such a state, the competition that I mentioned earlier becomes even more intense. Next, countries that have grown compressed experience cultural changes very quickly. Especially, among other things, the attitude toward women in gender roles and the status of women change very quickly. Therefore, if you look at Korean society now compared to other advanced countries, you are in a society where generations with severe cultural differences coexist. As such, any social and cultural conflicts are severe, and these are acting as such factors that make marriage difficult for women and giving birth to children.

◇ Cho Tae-hyun: In a way, this is an inevitable problem in a country that has grown compressed. What about this part?

◆ Lee Chul-hee: It's an experience that I'm generally sharing.

◇ Cho Tae-hyun: Okay. We have some things in common because of these problems. But looking at the latest population statistics, There was news that the fertility rate had rebounded in nine years. So first of all, you can say this is good news, but of course, we shouldn't do it, right?

◆ Lee Chul-hee: I think the rationale for this to be a trending rebound is still very weak. Even if you look at past cases, there are cases where the fertility rate has risen for a short time, and this has been trending for several years. Also, the rebound in fertility rates after 2003 is a case in point. At that time, the fertility rate fell very quickly for a few years after that, but rose after 2003 or 2005, so it went up a little bit over the years. The number of births also increased by about 50,000 over the next five years. However, the rebound that occurred after 2013 and 2014 simply stopped within a year, and there have been cases where the fertility rate has continued to fall for eight years since 2015. So, it will be very difficult to predict what the rebound in the fertility rate that happened last year will look like in the future. Many people agree, but there is an opinion that a slight rebound in the fertility rate that occurred last year was a time when people did not get married during the pandemic and delayed giving birth to children and implement what they had put off. If so, it is difficult to know at this time whether the fertility rate will continue to rise after it is over.

◇ Cho Tae-hyun: We can evaluate it only after we pass, but for now, it is difficult to say how we are going well only with a short-term rebound. As the current population decline proceeds rapidly without notice, it is evaluated that it is leading to economic imbalances. What does this mean?

◆ Lee Chul-hee: Most of the time, a social system or something like that is often geared towards how many people are born each year and then what is the population at a certain age. But if the population suddenly decreases or the population of a certain age decreases, we have no choice but to talk about the imbalance between any existing system or system. For a close example, if you have an obstetrician or a hospital bed, it is very difficult to maintain the facility when the number of children discharged suddenly decreases, so these things happen in many places across society, causing imbalances and causing various costs.

◇ Cho Tae-hyun: Shouldn't we say that these imbalances and things like this hurt our economy as a whole?

◆ Lee Chul-hee: Ultimately, it will hurt you overall, but not now. The impact of
population change is not so much done in general, but rather it has to affect a particular region or a particular sector first. In fact, the overall size is not given that fast right now. So, feeling what the total population or the total labor force gives can be felt in about 20 years or so. However, certain age groups decline very quickly. So the number of babies born is decreasing at a very rapid pace. When the number of births decreases, the school year population decreases rapidly, and then the youth population decreases, and the impact comes first. Such a shock comes first, and then partly, some areas are not particularly short of people, but others may be short of people.

◇ Cho Tae-hyun: What areas are likely to be like that?

◆ Lee Chul-hee: For example, if the youth workforce is greatly reduced, those areas where young people are mainly dependent on young people and many young people are employed will be affected. There are such dates that it is difficult to replace young people with other personnel. So, for example, it could be the same for broadcasts where you have to work all night or run with heavy equipment. In this field, no matter how old the elderly are, there is a problem that cannot prevent the reduced youth. Next, the regional imbalance is also very serious. Some areas are growing in population, some are decreasing very rapidly, and the imbalance between regions is also very serious because it does not happen to move to areas where the population of the growing area is decreasing. So first of all, I would like to say that the impact of population change will affect the whole country and affect everyone in China, but in the short and medium term, it can hit certain areas even harder.

◇ Cho Tae-hyun: Then let's take a look at these two. I'm going to look at the region first, but we actually deal with real estate. But polarization is the most common thing we talked about in real estate last year. So, are these problems that are crowded in the metropolitan area, and the provinces are empty? Are these problems found in other countries?

◆ Lee Chul-hee: A common phenomenon that has occurred all over the world over the past two to 30 years is that people flock to large cities. In particular, it is common for young people to flock to large cities. The reason is that because of various changes in industrial structure or technological changes, the so-called economy of accumulation has been greatly strengthened. That's why it's so-called. It works well when you stick together. That kind of thing gets bigger. So the focus on cities is a common phenomenon all over the world, but Korea is more special. What's special about it is that the phenomenon appears more strongly. So the movement to the city is much stronger, and the second is unipolarization. Other countries like the U.S. go to big cities, but in the U.S., big cities that are popular are

◇ Cho Tae-hyun: There could be many.

◆Lee Chul-hee: But in the case of Korea, the phenomenon of concentration in the metropolitan area centered on Seoul is too strong. So these things are making the situation in Korea different from other countries, and Korea is experiencing a very serious low birth rate problem. So, there is a difference in that such an imbalance occurs due to population movement and the population decreases nationwide, especially because the youth population decreases.

◇ Cho Tae-hyun: Actually, I want to live in a leisurely place, but when I tried to move, I had to work in Seoul and educate my child in Seoul, so there was no way to move. But if fat is reduced like this, won't these things be a fatal blow to the local economy?

◆ Lee Cheol-hee: Yes, that's right. This is still bad, but what I'm concerned about is that as the population decreases, the vicious cycle of population imbalance begins. So, in order to maintain specific infrastructure or services in a certain area, minimum demand is required. However, when the population of the area is removed and reduced, it becomes very difficult for such infrastructure to be maintained in the area. So that's the beginning of the collapse of such infrastructure. As I said earlier, if a child is born less and escapes, the delivery room will disappear, the childcare facility will be closed, and the school will now be closed.
◇ Cho Tae-hyun: Then he won't come.

◆Lee Chul-hee: That's right. Even the people who were there thought it was difficult to live here, so they went out to other areas. If that happens, the population decreases, and the infrastructure collapses, and that vicious cycle begins, and that can be said to be a very big problem. Furthermore, as the youth population decreases, there is a problem that the fertility rate in the region falls further. Because it is mainly the child-bearing class, such problems arise, and for many such companies, excellent youth talent is a very important resource. So it's also a vicious cycle. So, if there is a lack of excellent youth manpower in a certain area, good companies do not want to enter, and if good companies do not enter, young people leave due to lack of jobs, and such a vicious cycle begins. Then finally, the financial situation of local governments in the region deteriorates very much. So, when the population ages and decreases, the tax revenue decreases, but among them, the efficiency of fiscal expenditure decreases a lot. Therefore, such a problem of deteriorating the finances of local governments can have a significant negative impact on any finances of the entire central government nationwide. I can tell you this.

◇ Cho Tae-hyun: Okay. So far, I've looked at the problems of the region in general, but I think this part was also discussed to some extent a while ago. I think we should also look at the issue of the labor force. Is the Korean labor market also aging a lot?

◆ Lee Cheol-hee: Yes, that's right. First of all, the entire population is aging a lot. It's progressing very quickly right now, and it's expected to proceed very quickly in the next 20 to 30 years. So, the proportion of the population aged 65 or older is usually about 20%. Of course, this is not low, but there are many countries that have a much higher ratio than Korea right now. However, in about 30 years, Korea will change to the country with the highest proportion of the population aged 65 or older among all OECD countries. So it means that there will be a huge change in about 30 years. So after about 50 years or so, almost half of the population is expected to turn into a population over the age of 65.

◇ Cho Tae-hyun: There are more people to be supported than there are to be supported.

◆ Lee Chul-hee: Because of this situation, of course, the workforce is aging a lot. So, currently, about a third of the total workforce is over 55 years old. However, in the next 50 years or so, half of the workforce is expected to be over 55 years old.

◇ Cho Tae-hyun: If that happens, eventually this will eventually lead to an aging population and a shortage of people to work. There's also a prospect like this. What do you think of the professor?

◆ Lee Chul-hee: If you look at the distant future, eventually the workforce will be reduced. But the basis for this concern is that the working-age population, or the population aged 15 to 64, is decreasing at a very rapid rate. So it's shrinking even now. So, in the next 20 years or so, it will decrease to 80% now, and after 50 years, it will decrease to 45% now, and it will decrease very quickly. That's why I'm worried that the workforce will decrease for this reason. To actually measure that workforce more accurately, that's no longer the case. The actual economically active population, so if you look at people who are working or looking for work, if the current participation rate in economic activities is maintained, the overall economically active population will not decrease that quickly. After about 20 years, it is likely to maintain about 90% of the current level, and then the labor input that adjusted productivity, that is, a certain academic background of the labor force, continues to become highly educated. Now, that has the effect of improving productivity. On the one hand, productivity decreases a little as we get older, but productivity increases as our educational background increases. When you look at it together, it appears that the effect of increasing academic ability is stronger. So, in my opinion, even if nothing changes after about 25 years, it is expected that the labor input will be maintained at about 90% of what it is now. And if, for example, women's participation in economic activities and the population's participation in economic activities last year increase, it will remain at 95% after about 25 years. So, the labor force will not decrease that much in the near future. However, I can tell you that after 20 years and 25 years, the labor force will decrease at a faster rate from then on. It depends on these times.

◇ Cho Tae-hyun: Even if the labor force does not decrease, as you said earlier, there are tasks that cannot replace young people. And recently, for example, AI and quantum computers are more advantageous for young people than for the elderly. In this respect, isn't it a situation that can lead to the deterioration of competitiveness that is invisible?

◆ Lee Chul-hee: Just because there is no shortage of labor in the total amount doesn't mean that the imbalance in the labor gap doesn't occur. It's just that the workforce is all different. So, it's different depending on the industry and the job that the person works in and the level of skill. Other personnel are not replaced by each other. So, even if there is no imbalance overall, there can be a significant imbalance in certain areas and at certain skill levels. The main cause of that imbalance is the reduction of young people, as you just said. So the number of workers under the age of 35 is expected to halve in the next 20 years. It's very fast. But in some areas, there are areas that rely entirely on young people. Those areas, even if they don't have a shortage of labor as a whole, they're going to face a significant labor shortage. Industries and industries where many young people worked can be hit. So secondly, the entire labor market could be hit. Because the function of the labor market is to quickly redistribute labor into areas where labor remains and productivity is a little low, or areas where labor is scarce and quite high. But who can do it best is young people can do it best. It's because it's highly mobile, you can adapt well and learn quickly, and now it's this kind of manpower. If the number of young people decreases and the proportion decreases in the overall labor force, the function of the labor market does not work well, which can cause various problems, decrease industrial competitiveness, and decrease overall growth.

◇ Cho Tae-hyun: Since you mentioned the growth rate, the Bank of Korea has suggested the 1% level by next year in addition to this year's growth forecast. The economic situation is very difficult, but if there is a problem with the lack of a young population like this, shouldn't it be said that there is a high possibility that this low-growth phase will become fixed in the future?

◆ Lee Cheol-hee: It's not just a day or two that Korea's growth rate has been falling a lot, but it's been falling very steadily. The reason why the growth rate has been particularly low recently seems to be due to not only mid- to long-term and structural factors but also various short-term external factors and political unrest. But what I want to say is that it is difficult for Korea to enjoy the rapid growth of the population again after the rapid growth it has enjoyed in the past. Even so, it's hard to say that the future has been decided. Depending on how we do it now, I think we can at least be better than we are now, and then we can achieve the full potential that we can achieve. I think it's too pessimistic to say that it's stuck. At least there's plenty of room to do better than this. I would like to say that if we implement better or more efficient policies, we are not very hopeless.

◇ Cho Tae-hyun: The working population may decrease. It could be less competitive. That's why we need to increase the retirement age. We need to actively introduce foreign personnel. You need to immigrate, too. There are many alternatives. Do you think these measures are necessary for economic growth?

◆Lee Chul-hee: I think it's a necessary measure to make good use of all the manpower in the long run. In the case of raising the retirement age, I think we need to approach it very carefully. As I said earlier, there is no shortage of labor in the total amount for the next 20, 25 years. The imbalance by field or skill level is a big problem, but I don't think extending the retirement age is a way to solve such a problem. The retirement age is a policy that increases the employment of everyone who is older, regardless of the field or someone's skill level. However, when looking at which areas will lack labor, most of them are social services, transportation, and retail. However, this industry is actually a field where retirement age is meaningless. Increasing the retirement age does not mean that the employment of industries that are lacking over the next 20 years will increase. So it's difficult to solve this imbalance problem. Second, the most important issue is the reduction of the youth workforce, and there are also doubts about whether the elderly can replace the youth workforce. Also, it has already been revealed when the retirement age was extended to 60 last time. So it can have a negative impact on the employment of young people. Businesses can be a burden. Because of these concerns, there is no need to increase employment of people in the short term, so in the mid- to long-term, the use of the elderly, especially those with high productivity and high education levels, should be increased, and then approached in a way that can increase industrial competitiveness overall. I think there will be a lot to prepare for that, and there will be a problem of changing the wage structure, and on the other hand, it is necessary to extend the retirement age in a way that guarantees retirement income and allows the most productive people to remain in the labor office, and the same is true for external personnel. There is no need for mass immigration right now. If so, I think it is very important now to closely understand which areas of our industry are lacking and what types of people are lacking, and to select and bring in foreigners who can fill them. If we look at it for a long time, we don't know how long we will keep the situation where a lot of foreign workers come in. Because many of Korea's sending countries are also experiencing economic growth, there is a high possibility that it will change from a country that sent manpower to a country that imported manpower as Korea did in the past. And then when the competition with other countries intensifies, so Japan, Singapore, and Taiwan are all trying to secure excellent human resources because of the overall shortage of human resources, and such competition is very severe, so we should bring in the human resources that need foreign human resources and make the best use of them, but we depend on foreigners for essential human resources. I think this is a very dangerous strategy from a distance.

◇ Cho Tae-hyun: Okay. So far, I think we've mainly talked about dark stories and dark stories. But the professor said that the future has not been decided among what he said. But the professor said that the future has not been decided among what he said. In the second part, I'll look for hope. We'll listen to the commercial in a little while and continue in the second part.