[The Falling Korean Economy, Solution] ③ "Establishing a Bold Population Policy Control Tower... 'Package Reform' Needed for Low Birthrate and Aging"

In-Depth Survey of 12 Experts from Industry, Economic Research Institutes, and Academia
"Population Reform Must Be a Package"... Need for a Pan-Governmental Control Tower with Budget and Authority
Maintaining Women's Careers: Key to Solving Low Birthrate and Mitigating Labor Supply Decline
Expanding Paternity Leave... SME Childcare Rights and Senior Participation in Childcare
Superfast Aging... Speed Needed for Expanding Reemployment and Reverse Mortgages after Retirement

Just as urgent as industrial structural reform is the need for "population structure reform." The complex demographic crisis caused by ultra-low birthrates and rapid aging is eroding South Korea's growth potential. Since 2012, as the proportion of the working-age population began to decline, the contribution of labor to economic growth has also decreased. This trend is expected to intensify in the future.

Experts unanimously agreed that maintaining women's careers should be a key focus in addressing the low birthrate issue, and that policies promoting work-life balance (work-family compatibility) must be strengthened to make this possible. In addition to expanding paternity leave, they also mentioned concrete measures such as support for childcare rights targeting small and medium-sized enterprises with weak infrastructure, and the establishment of local childcare networks. In response to the other pillar of the demographic crisis?aging?there is a growing call for a shift in perceptions and discussions on how to enable continued employment among the elderly. Above all, experts commonly analyze that, since population issues are intertwined with various areas such as housing and education, rapid implementation is more important than developing new measures. The need for a population policy control tower that combines budget and authority was also repeatedly emphasized.

'Lowering School Entry Age and Fostering Regional Hubs... Education, Housing, and Labor All as Population Policy'

In 2024, South Korea's total fertility rate stands at 0.75, the lowest in the world. There are bleak forecasts that, even if the total fertility rate improves, the structural decrease in population is inevitable as the number of women of childbearing age (15-49) continues to decline. To reverse the trend of low birthrates, groundbreaking changes are needed in various fields?including strengthening work-life balance systems in the workplace, as well as in housing, childcare, and education.

Specifically, most experts emphasized the need for more practical measures to maintain women's careers, that is, to prevent career interruptions. This is because such measures can not only address the low birthrate issue but also help mitigate the reduction in labor supply, which puts downward pressure on South Korea's GDP growth rate. In particular, regarding parental leave, it was argued that, in addition to institutional support to increase the actual usage rate among women, measures such as recognizing career experience during parental leave and expanding paternity leave are needed to change workplace culture and atmosphere from the ground up.

Some also argued that the social structure that delays marriage and childbirth should be examined. Kwon Namhun, President of the Korea Institute for Industrial Economics and Trade, emphasized, "To lower the age at marriage and childbirth, comprehensive measures to stabilize housing and employment for young people are needed," and added, "Policies that encourage young people to enter society earlier?such as lowering the school entry age, reducing the total education period, utilizing military service periods, and shortening job preparation time?are necessary."

"Population Reform Must Be a Package"... Need for a Pan-Governmental Control Tower with Budget and Authority

Just as important as creating an environment conducive to childbirth is creating an environment conducive to raising children. Experts believe that efforts must also focus on alleviating the burden of childcare and education costs. Kang Sungjin, Professor of Economics at Korea University, pointed out, "It is urgent to build childcare infrastructure that enables the coexistence of work and parenting," and added, "There must be a significant expansion of public daycare centers in regions where they are lacking, and institutional mechanisms must be established so that parents can leave their children until the evening without burden." Lee Insil, President of the Korea Future Population Institute, suggested specific measures such as the introduction of personal care accounts, support for childcare rights in small and medium-sized enterprises, local childcare networks, senior participation in childcare, and integrated care certifications.

To reduce the burden of education, some argue that improving quality of life must start with easing excessive competition. The Bank of Korea proposed fostering two to six regional hub cities and strengthening proportional admission systems for universities by region as ways to ease the concentration in the Seoul metropolitan area and stabilize housing prices. Park Yangsoo, President of the Sustainable Growth Initiative (SGI) at the Korea Chamber of Commerce and Industry, said, "Easing the concentration in the Seoul metropolitan area and the resulting competitive environment must be considered from a more long-term perspective." There was also the idea that "transportation experts" should be sought to solve the youth housing problem. Kim Jeongsik, Professor Emeritus of Economics at Yonsei University, emphasized, "Rather than simply increasing housing supply, the solution should be found in expanding transportation infrastructure that allows people to commute from the greater Seoul area to jobs in Seoul."

Experts unanimously agreed that a comprehensive population response must be implemented as soon as possible. Because population issues interact across various fields?such as housing, labor, education, and welfare?a piecemeal, project-based approach is insufficient; instead, a "package" of structural reforms as comprehensive social policy is needed. To this end, they argued, a control tower that combines budget and authority should lead population policy with strong driving force. Lee Insil stated, "A dedicated ministry or control tower is needed to drive population policy in a bold, long-term, and sustainable manner," and added, "At the very least, the population policy planning functions and budgets scattered across ministries should be consolidated so that focused and cost-effective policies can be implemented without interference."

Superfast Aging... Speed Needed for Expanding Reemployment and Reverse Mortgages after Retirement

Superfast aging is another pillar of the demographic crisis. In December 2023, the proportion of people aged 65 or older in South Korea exceeded 20% of the total population, marking the country's entry into a "super-aged society." It took only seven years to move from an "aged society" in 2018 to a "super-aged society." This is the fastest pace among OECD countries that have already entered a super-aged society. According to Statistics Korea's population projections, by 2070, the proportion of the elderly will reach 47.5%, surpassing the working-age population (15-64 years) at 46.0%, which will sharply increase the old-age dependency burden.

Experts believe that, along with efforts to improve the population structure to boost the working-age population, efforts to increase the efficiency of labor utilization must be pursued in parallel. The most representative example is continued employment for the elderly. The Bank of Korea, in its report "Super-Aged Society and Continued Employment of the Elderly," emphasized that "rehiring after retirement" is more necessary than simply extending the retirement age. The report estimated that if continued employment until age 65 is possible, the growth rate could rise by 0.9 to 1.4 percentage points over the next ten years, or by 0.1 percentage point annually, and suggested a gradual approach such as imposing reemployment obligations on companies step by step. A shift in perception regarding continued employment for the elderly is also necessary. Kim Kyungjin, Vice President of the Institute for Global Economics, stated, "Society as a whole must recognize that the working age has increased, and active campaigns are needed to make retraining and reemployment more natural."

Experts also believe that the new government's plan to improve reverse mortgages should be expanded to include private sector reverse mortgages. Reverse mortgages are financial products that allow homeowners to use their homes as collateral to receive lifelong pension payments while continuing to live in their homes. Currently, they are available to homeowners aged 55 or older with homes valued at 1.2 billion won or less, and are mainly implemented by the Korea Housing Finance Corporation. If reverse mortgages are revitalized, more than one-third of South Korea's elderly poor could escape poverty, but as of October 2023, the subscription rate was only 1.89% among eligible households. Experts suggest that reverse mortgages should be promoted to alleviate elderly poverty by reflecting housing price changes, relaxing inheritance requirements, and expanding tax benefits. There are also calls to ease regulations so that commercial banks' reverse mortgage products can play a complementary role.

Kim Kyungjin emphasized, "To improve the quality of life for the elderly, not only should various pension system reforms be considered, but also retraining for better job quality and expanded medical services." He added, "Policies should be developed to foster various service industries, such as startups, to improve the quality of life for the elderly."

Survey Participants (in alphabetical order)

▲Kang Sungjin, Professor of Economics, Korea University ▲Kwon Namhun, President, Korea Institute for Industrial Economics and Trade ▲Kim Kyungjin, Vice President, Institute for Global Economics ▲Kim Jeongsik, Professor Emeritus of Economics, Yonsei University ▲Kim Hakgyun, Head of Research Center, Shinyoung Securities ▲Park Yangsoo, President, Sustainable Growth Initiative (SGI), Korea Chamber of Commerce and Industry ▲Lee Jaewon, President, Economic Research Institute, Bank of Korea ▲Lee Jeongdong, Professor, Graduate School of Engineering Practice, Seoul National University ▲Lee Insil, President, Korea Future Population Institute ▲Jang Min, Senior Research Fellow, Korea Institute of Finance ▲Jeong Heesu, Director, Hana Institute of Finance ▲Joo Won, Head of Economic Research Division, Hyundai Research Institute