How long can South Korea retain its global economic and technological competitiveness? Will the country maintain credible deterrence and defense postures well into the future? Are existing socioeconomic inequalities likely to worsen with worsening demographic trends? These questions lie at the heart of South Korea’s demographic trajectory.
South Korea’s ability to comprehensively address its demographic transition will affect every facet of its well-being, international image, national security, and even potential post-unification dynamics. This compendium examines various dimensions of South Korean society and the country’s geopolitical influence in light of its unprecedented demographic changes, which are already underway.
A Harbinger of Coming Demographic Shifts
The world as a whole is experiencing a global demographic shift. By 2050, one in six people will be over the age of sixty-five, up from about one in eleven people in 2019. While all societies will experience this transition over the course of the century, South Korea is ahead of the curve. In 2020, South Korea’s population declined for the first time, with the number of births down 10 percent from the previous year. South Korea’s total fertility rate in 2020 was 0.84 births per woman—the lowest figure in the world and well below the replacement-level rate of 2.1. South Korea’s fortunes over the rest of the twenty-first century will be shaped in no small part by how it manages its demographic profile (see figure 1).
As figure 1 shows, South Korea experienced a rapid demographic transition after the Korean War, triggered by the country’s explosive economic development in the 1960s and 1970s. By the 1990s, South Korea had gone from being one of the poorest nations in the world to one of the most advanced, prosperous nations. But over this same period, increased prosperity and influential family planning policies caused a sharp decline in South Korean birth rates from 6.1 children per woman in 1960 to around 1.6 by 1990.
South Korea is not alone in experiencing this trend. At least thirty-four countries globally have populations where senior citizens (sixty-five years and older) outnumber children (under fifteen years), and by 2050 that tally could be ninety. Most of the world will need significant economic, social, and cultural transformations to sustain economic development, provide greater social welfare, mitigate socioeconomic inequality, and ensure a suitable quality of life for the elderly.
The Manifold Challenges of an Aging Population
This collection of pieces examines multiple challenges facing South Korea as it adjusts to a rapidly aging and declining population, but the authors also envision possibilities for positive change in South Korean society. Sook Jong Lee sets the scene by describing the differences between various South Korean generations’ life experiences and outlooks, including how these perspectives could shape the future of South Korea’s democracy and politics.
Increasing immigration is a remedy South Korea must consider to mitigate its demographic woes, but increased immigration will also trigger intensifying discussions on what it means to be a Korean in the twenty-first century. Aram Hur analyzes the impact of immigration on South Korea’s national narrative and democracy, while Erin Chung addresses the impact of immigration policies on South Korean women, including immigrants to the country. Kathryn Botto provides an over-the-horizon glimpse of how South Korea’s demographic fortunes could affect the prospect of Korean unification and the place a unified Korea would have in Northeast Asia.
The effects of population aging will reach nearly every aspect of South Korean society, including the economy and national security. Chung Min Lee assesses how the South Korean military will need to undertake fundamental and bipartisan defense reforms to maintain a strong defense posture while offsetting declining conscription pools. Kyle Ferrier illuminates how South Korea can capitalize on emerging technologies to stave off the negative impacts of a shrinking labor force and declining productivity on the country’s economy.
South Korea’s looming population crisis requires not only a whole-of-government response but also a new social contract and a fundamental reappraisal of how the country seeks to maintain its global competitiveness. Done correctly, South Korea can offer key lessons for other countries that are or will be grappling with similar demographic transitions. Rising social welfare costs must be met even as state revenues decline, and South Korean industry has to be revamped to foster more resilient high-tech supply chains. The country’s military will face widening security threats even as it draws fewer conscripts and recruits.
Failure is not an option. Just as South Koreans engineered the so-called Miracle on the Han River with rapid economic development and restored a vibrant democracy, they must now provide a new governing model that maximizes sustainable growth, more equitable prosperity, and a broader sense of social justice.
This project was made possible with support from the Korea Foundation.
Table of Contents
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Generational Divides and the Future of South Korean Democracy
Sook Jong Lee How South Korean Demographics Are Affecting Immigration and Social Change
Erin Aeran ChungSouth Korea’s Demographic Crisis Is Challenging Its National Story
Aram HurHow Unification Would Affect the Demographics of the Korean Peninsula
Kathryn BottoSouth Korea’s Military Needs Bold Reforms to Overcome a Shrinking Population
Chung Min LeeCan Emerging Technologies Cushion South Korea’s Demographic Downturn?
Kyle Ferrier
Generational Divides and the Future of South Korean Democracy
Sook Jong Lee
South Korea is well known for its rapid economic growth since the 1960s and equally impressive democratization since 1987. But these critical gains will be affected deeply by the country’s wrenching demographic transitions and the accompanying social, political, and economic repercussions. For these reasons, it is important to understand the varying political views that tend to resonate with different generations of South Koreans.
The Demographics of South Korea’s Changing Population
South Korean society can be divided into four major demographic groups, which do not correspond precisely to the baby boomer and millennial labels common in the United States. South Koreans can be grouped into four political generations who have spent their formative years in vastly different sociopolitical conditions. First, there is the country’s rapidly rising elderly population, which includes the generation that came of age during the Korean War and the postwar baby boomers. They are now in their sixties and older. Second, there is the in-between generation known as the Democratization Generation (known in South Korea as the 386 Generation), who were born in the 1960s and gained notoriety for their activism during the country’s democratization in the 1980s. They are now in their fifties.
Third is the first post-democratization generation. Known as Generation X, they are now in their forties. Finally, there is the New Generation of young people in their twenties and thirties who are composed of two subgroups: the older millennials and the younger Generation Z. The younger South Koreans in their twenties and thirties grew up in an affluent South Korean society but face growing economic angst despite their potential to drive technological innovation.
While South Koreans of all ages support democracy in principle, emerging intergenerational conflicts could harm the country’s prevailing democratic consensus. Most immediately, as one of the developed world’s “fastest-aging societies,” South Korea will face rising social welfare costs. Growing problems such as underemployment, youth unemployment, and increasing healthcare costs already are putting enormous pressure on each population group.
Over the long term, South Korea will face declining tax revenues due to a shrinking population, even as these welfare costs rise precipitously. In 2019, South Korea spent 12.2 percent of GDP for social welfare, far less than the 20 percent average among members of the OECD. Spending on healthcare, welfare programs, and unemployment benefits accounted for 35.2 percent of the South Korean government’s 2021 budget, a slight increase from 34 percent in 2019. But demand for welfare programs is growing so rapidly that the South Korean government has had to increase funding for them. While the need for public spending on social welfare services is increasing, population aging and decline are expected to cause significant revenue losses unless the country’s tax system is revamped.
The scale of South Korea’s shifting demographics is quite stark. In 2020, for the first time since the country’s founding in 1948, South Korea registered a net population decline, and a 2021 UN report found that South Korea has the lowest fertility rate in the world. According to the Korean Statistical Information Service, seniors ages sixty-five and over accounted for 15.7 percent of the total population of 51.8 million South Koreans in 2020. That rate is forecasted to rise to 25 percent by 2030, even as the country’s total population is projected to fall.
These demographic shifts are also affecting the composition of South Korea’s electorate. According to reports on the country’s April 2020 parliamentary election, young voters between eighteen and twenty-nine years old accounted for 18.1 percent of the electorate, and voters in their thirties made up 15.9 percent of the votes tallied. Meanwhile, voters who were at least sixty accounted for 27.3 percent of ballots cast. The share of voters over sixty was 6.7 percentage points smaller than the share of younger voters between eighteen and thirty-nine. Middle-aged voters in their forties and fifties accounted for 19 percent and 19.7 percent of the ballots cast, respectively. All told, then, younger voters between eighteen and thirty-nine accounted for just more than one-third of voters, while senior voters in their sixties or older accounted for more than a quarter of them, whereas voters in their forties and fifties each amassed a vote share of just under one-fifth.
Younger voters in their twenties and thirties can have a substantial political impact if a greater share of them vote, especially as time goes on. A smaller share of younger voters tend to vote compared to older groups. Generational gaps in voting participation are often more pronounced in parliamentary elections than in presidential elections. Voting participation rates have increased among almost all age groups over South Korea’s last four parliamentary elections. Nevertheless, the gap between younger and older voters still remains significant. For example, fewer than 60 percent of voters in their twenties and thirties cast ballots in the 2020 parliamentary election, whereas 70 percent of voters in their fifties and 80 percent of voters in their sixties did so.
A Democracy With Differing Generational Political Demands
One major way these demographic changes are poised to reshape South Korean democracy relates to these generations’ contrasting political demands. While the country has experienced income inequality and other stressors such as deep political divides, overall support for democracy remains strong. Since the mid-2000s, South Koreans have displayed an increasingly pronounced preference for democracy over authoritarianism. In 2006, the Asian Barometer Survey found that only 42.7 percent of South Koreans preferred democracy unequivocally, whereas 63 percent did in 2015. A follow-on East Asia Institute survey asked the same question in 2020 and found that 69.6 percent of South Koreans favored democracy, while only 19.6 percent were amenable to authoritarianism.
Despite this encouraging news, there is still cause for concern. After all, one must take into account the future economic well-being of major population groups and how their long-term economic prospects are likely to affect the country’s political choices and interests going forward.
First, consider South Korea’s elderly population. The country’s accelerated economic growth during the so-called Miracle on the Han River in the 1960s was led by a generation of workers who are now in their seventies or older (see photo 1). But South Korea’s poverty rate among the elderly is the highest in the OECD, and the suicide rate among elderly South Koreans is about triple the OECD average. Even so, elderly South Koreans interestingly are also the country’s most ardent supporters of democracy, given their pride in the country’s economic development and democratization. For example, in a May 2020 survey by the East Asia Institute, respondents over sixty years old were more supportive of democracy as a form of government than South Korean young people in their twenties by a difference of around 7 percentage points.1 Their concept of democracy is often understood as a liberal democracy as opposed to the Communist-led single party rule of North Korea.
South Koreans who grew up in the 1950s and 1960s spent their formative years watching the country rapidly industrialize after the Korean War. Their economy underwent a historic transformation ushered in by the central planning of an authoritarian government led by then president Park Chung-hee.
The most influential voters today, however, are those in their fifties who fought for democratization. They tend to be politically progressive, and many student activists of this generation eventually became politicians, civil society leaders, and public officials (see photo 2). But their rise to power has also invited criticism of their confrontational politics and accusations that they have calcified into vested interest groups. Within ten years, this progressive generation will enter their sixties, retire, and potentially turn more conservative as they age. Nevertheless, progressive political reforms remain their main demands for now.
The Democratization Generation was instrumental in defying South Korea’s authoritarian government and unleashing a democratic transformation in the 1980s through student activism and protests, an experience that profoundly shaped this generation’s political outlook.
Meanwhile, South Koreans in their forties, as members of Generation X, are regarded as the first generation to turn away from the traditional mainstays of collectivistic nationalism or hierarchical organizational culture in favor of individualism. This generation serves as a bridge between the two older generations and the younger New Generation. They can be described as the country’s first post-democratization generation. Growing up in a democratic society, they were less active in championing the collective goal of democratization than the generation before them. Politically more pragmatic and more conscious of individual rights, this age group is expected to innovate South Korean politics by replacing the older generation of ideologically divided leaders (see photo 3).
Generation X came of age in a democratic and more developed South Korea. Amid greater freedoms and prosperity, many members of Generation X embraced the countercultural music of artists like Seo Taiji (pictured above), the front man of what is often regarded as the first K-pop group.
South Korean young people in their twenties and thirties are arguably the most important group for forecasting the future of South Korean democracy. Highly educated and technologically adaptable, they represent the country’s most vulnerable generation so far due to increasing job insecurity, unaffordable housing, and rapid automation in workplaces. Many South Korean young people are delaying marriage and children or have given up on such aspirations altogether. The term Hell Joseon (which connotes a hellish reality of intense socioeconomic and class competition) is popular among millennials, and many are motivated to emigrate abroad (see photo 4). They deride what they perceive as the condescending attitudes and hints of presumed superiority of retiring baby boomers in the workplace using the term “kkondae.”
South Korea’s economic ascendance has bred intense socioeconomic competition and severe pressure to excel professionally for millennials and members of Generation Z. The students pictured above brace themselves for high-stakes college entrance exams—an especially punishing rite of passage.
South Korean youth are active online but disconnected from traditional politics. Mistrustful of formal civil society organizations, South Korean young people tend to nest themselves within smaller online communities on social media. When their powerful and rich peers receive differential treatment accessing educational or job opportunities, their anger quickly explodes into off-line protests. Unfortunately, they are poorly represented in the South Korean legislature and isolated from formal politics. That said, sensitive as they are to the issues of fairness and justice, this generation could transform South Korean politics in the next decade by pressing for a more inclusive brand of politics, universal basic income, and higher taxes on the rich. The recent election of Lee Jun-seok, a thirty-six-year-old politician, as a new leader for the opposition People Power Party is a good signal for this kind of change.
Conclusion
South Korea has experienced a history rife with enormous challenges, including national partition, a fratricidal war, and periods of dictatorship followed by extremely rapid economic growth and accelerated democratization amid the sustained pro-globalization policies of the past seven decades. Despite their differing points of emphasis, all generations of South Koreans support democracy strongly. With a sluggish growth rate and the increasing burden of securing the well-being of a rapidly aging society, however, South Korea will likely find its democratic resilience tested in the years ahead.
These pressures mainly are falling on the country’s younger and older generations. Families are no longer serving as a safety net, as the country’s marriage rate is declining and the share of single-member households is increasing rapidly. Young South Koreans with a shortage of decent work prospects cannot provide sufficient tax revenues for the government to expand its welfare spending for the elderly unless reforms are made.
If South Korean democracy is to remain resilient and to withstand the socioeconomic conflicts over these challenges, the country must urgently and comprehensively address two overarching imperatives: providing viable economic futures for young South Koreans and meeting the material needs of the older generations of the world’s fastest-aging population. South Korean politics in the 2020s and beyond will revolve around the monumental task of bridging the gap between these two divergent demographic groups and attending to their differing political demands.
Sook Jong Lee is president emeritus and a senior fellow at the East Asia Institute and a professor at Sungkyunkwan University.
Notes
1 Woo-chang Kang, “South Koreans’ Ideological Identity and Attitudes on Democracy,” in 2020 National Identity of South Koreans: Trends of the Past 15 Years edited by Sook Jong Lee et al. (Seoul: East Asia Institute), 185–186.
How South Korean Demographics Are Affecting Immigration and Social Change
Erin Aeran Chung
Over the past two decades, South Korea’s well-documented demographic challenges have driven a host of policy reforms to encourage more inbound immigration. While these reforms are promising signs of progress, some of these measures risk reinforcing and exacerbating ethnocentric and patriarchal social structures, laws, and policies that actually harm the women they are intended to help. South Korean officials need to think of immigration in more holistic and equitable terms, not merely as a way to achieve population replacement.
Declining Fertility Rates Have Forced Innovation and Adaptation
Since 1984, South Korea’s fertility rate has consistently fallen below the population replacement level of 2.1 children per woman. It reached an all-time low of 0.84 in 2020—the lowest figure in the world that year. That same year, the number of deaths in South Korea outpaced the number of births, and the country’s population contracted for the first time on record. The Korea National Statistical Office projects that the country’s working-age population will drop to 51 percent of the total population by 2050, while the population ages sixty-five or older is expected to reach 40 percent, similar to other countries with rapidly aging and shrinking populations such as Italy, Japan, Spain, and Taiwan.
The South Korean government has tried to address this impending demographic crisis in various ways, including by providing financial incentives for expectant couples, subsidies for childcare and eldercare, and long-term care insurance. But the boldest initiatives have been in immigration policy.
To address growing labor shortages, South Korea implemented a formal guest worker program known as the Employment Permit System in 2004 after years of demands for greater regulation; until then, the system had entailed recruiting informal foreign labor while the country’s borders remained officially closed to unskilled immigrants.
Meanwhile, local governments and agricultural associations in depopulated rural areas around South Korea tried to address the so-called bride famine by brokering arranged marriage meetings between unmarried male residents and potential spouses. These spousal candidates were recruited from a variety of places over time. Early on, they came from urban areas within South Korea. Then, following the normalization of diplomatic relations between South Korea and mainland China in 1992, a later cohort consisted of ethnic Korean women from China. Finally, with the deregulation of the South Korean marriage industry in 1999, marriage migrants from around the world—especially Southeast Asia, China, and Russia—began entering the country in significant numbers. By 2005, international marriages in South Korea reached a peak of 13.5 percent of all marriages in the country (see figure 1). And South Korea’s total foreign population has grown around fourteen-fold from less than 180,000 in 1995 to over 2.5 million in 2019 (see figure 2).
While not without their challenges, these initiatives and policy changes have created opportunities in South Korea. Between 2004 and 2010, South Korea enacted a series of sweeping immigration and citizenship reforms that opened its borders to unskilled immigration, extended local voting rights to permanent foreign residents, and allowed people to hold dual nationality. (Notably, South Korea was the first country in Asia to grant permanent foreign residents local voting rights—something not even Western countries with reputations for more liberal immigration and citizenship policies such as France and Germany have done.)
The South Korean government also invested heavily in social integration programs. After the promulgation of the Support for Multicultural Families Act in 2008, the budget for programs to support immigrant spouses and what are termed multicultural families increased from about $28 million to $498 million in 2020. The law also paved the way for the establishment of over 200 multicultural family centers throughout the country. But the centerpiece of these initiatives—recruiting marriage migrants to address the country’s demographic challenges of low fertility rates and an aging population—offers a short-term solution to underlying social problems that have plagued the country for decades.
Conservative Policy Implementation Has Had Stark Consequences for Women
For all these encouraging signs, the implementation of South Korea’s immigration overhaul has been hampered by conservative, ethnocentric inclinations that have sometimes boxed in the very women these policies are meant to help. It is no coincidence that debates about South Korea’s falling birthrates and rapidly aging population have centered on women as both the problem and the solution. South Korean women are marrying later and having fewer children, or foregoing both, to advance their careers. They are also leaving rural areas to pursue educational and work opportunities elsewhere and, by extension, shrinking the pool of marriage partners for unwed farmers, daughters-in-law to care for aging parents, and mothers of offspring who can continue the family line.
Revealingly, social integration programs for immigrant spouses, meanwhile, have focused on their roles as wives, daughters-in-law, and mothers, according to the country’s traditional patriarchal family structures. These programs offer classes on cooking for traditional holidays, preparing household shrines to honor their in-laws’ family ancestors, and instructing immigrant spouses on Korean linguistic honorifics for conversations with their husbands and in-laws. Immigrant women have limited pathways for permanent settlement outside of marriage to a South Korean national.
The conservative implementation of this seemingly progressive legislation may be perilous for immigrant women and South Korean society more generally. Spousal visas place immigrant women in a highly precarious situation vis-à-vis their sponsoring husbands and in-laws: their legal status and rights are entirely derivative of their spousal status. Reports of growing domestic violence have galvanized public attention and advocacy for immigrant women. The Ministry of Gender Equality and Family introduced a hotline for immigrant women in 2006 and began to include immigrant women and their families (under the heading of “multicultural families”) in its triennial national survey on domestic violence. In 2007, the survey found that 43 percent of multicultural families experienced domestic violence compared to 40 percent of native South Korean families.
The aforementioned 2008 act to support multicultural families came with a provision specifically on the “Protection of and Support for Victims of Domestic Violence.” But these protections do not extend to immigrant women without South Korean children (by citizenship) and those who become undocumented due to divorce or separation (including those who flee their husbands due to domestic violence). Because South Korea has only a handful of visas that allow for permanent settlement—including marriage migrant visas, the Overseas Korean Visa for co-ethnic immigrants, and visas for high-skilled professionals and investors—immigrant women without South Korean children (by citizenship) risk becoming undocumented upon the termination of their marriages.
It was precisely the endemic abuse associated with marriage migration that led women’s organizations and human rights groups to lobby for the April 2010 dual nationality bill, which now provides an alternative pathway to citizenship for immigrant women. The bill nevertheless excludes divorced or separated immigrant women (who entered South Korea as immigrant spouses).
Moreover, subsequent surveys of immigrant spouses have indicated that the bill has not had a perceptible impact on domestic violence: a 2017 report by the National Human Rights Commission of Korea (NHRCK) found that 42 percent of immigrant spouses experienced domestic violence, and the Korea Women Migrants Human Rights Center reported that there were twenty-one cases of immigrant spouses being killed by their husbands between 2007 and 2019. The NHRCK further noted that almost 70 percent of immigrant spouses identified domestic and sexual violence as the primary factor that threatened their residential stability. While the number of international marriages has declined over the past fifteen years—largely due to growing state regulation of the marriage broker industry since the late 2000s, culminating in a 2010 amendment to the Marriage Brokerage Agencies Act—the rates of domestic violence among multicultural families have not dropped.
On the other hand, importing marriage migrants to replace native South Korean women seeking to advance their careers minimizes the societal hurdles that women in South Korea face. South Korea continues to have among the widest gender gaps among OECD countries (and the widest gender pay gap in 2019), especially in terms of economic participation and political representation. Given these facts, the problem of gender inequality in South Korea is as dire as the country’s demographic deficits. Grooming immigrant women to reproduce patriarchal gender roles will not rectify the deep social problems that can be seen as being at the root of South Korea’s demographic challenges.
Immigration Goes Far Beyond Population Replacement
South Korea’s demographic trends and corresponding initiatives to address them have challenged long-held conceptions of nationhood based on claims of ethnocultural purity. Policymakers and ordinary people alike have been forced to rethink definitions of who constitutes a citizen. South Korea could become one of the few countries in the world to get immigration policy right. As other liberal democracies have enacted increasingly restrictive measures to curb both unauthorized and legal immigration, South Korea has liberalized its immigration and citizenship policies (and has kept its borders open even during the coronavirus pandemic). No fewer than three presidential administrations from both sides of the political spectrum have put the integration of multicultural families among their top priorities. Yet immigrant incorporation must go beyond integrating immigrants into existing South Korean social categories because, otherwise, existing social inequalities and hierarchies will be reinforced.
Immigration can provide a powerful tool for addressing South Korea’s demographic challenges. But its value goes beyond population replacement. Immigration policy reform and equitable immigrant incorporation policies that provide all immigrants, including migrant workers and immigrant women without South Korean husbands or children (by citizenship), with paths to permanent settlement and citizenship could revitalize the country’s economy, society, and democracy. In less than a decade, South Korea transformed itself from a “country of non-immigration” with exclusionary immigration and citizenship policies in the early 2000s to an avowedly “multicultural society.” The next step for South Korea is to enact immigration reforms that liberalize entry and settlement policies for more than a select handful of immigrants, so that the democratic principle of nondiscrimination is applied to all immigrants.
In the next decade, South Korea’s bold immigration initiatives may well generate a more vibrant and diverse workforce, civil society, and electorate that will propel much-needed and long-awaited reforms to the country’s welfare, education, and justice systems. Such a development could also strengthen diplomatic, economic, and people-to-people ties with foreign countries—especially other Asian countries—from which a growing portion of South Korea’s citizenry originates.
Erin Aeran Chung is the Charles D. Miller associate professor of East Asian politics in the Department of Political Science at Johns Hopkins University. She is the author of Immigrant Incorporation in East Asian Democracies (Cambridge University Press, 2020) and Immigration and Citizenship in Japan (Cambridge University Press, 2010).
This piece is based on research the author conducted with support from a grant from the Laboratory Program for Korean Studies through the Ministry of Education of the Republic of Korea and the Korean Studies Promotion Service of the Academy of Korean Studies (AKS-2018-LAB-2250001).
South Korea’s Demographic Crisis Is Challenging Its National Story
Aram Hur
The negative economic effects of South Korea’s looming demographic crisis have sparked much alarm. Beyond labor shortages and general economic stagnation, the country’s low fertility rate is also poised to saddle a shrinking generation of young people with the burden of providing for an ever-growing elderly population, about half of which falls below the poverty line. Yet a less obvious but equally important potential consequence of the demographic crisis is its effects on South Korea’s democratic trajectory.
The adjustments needed to accommodate an aging population will require sacrifices. Encouraging citizens in democracies to make such sacrifices is far easier when they feel a strong sense of civic duty. What connects demography and democracy for South Korea is its national story: how citizens are connected to the state through a national narrative, how the country’s demographic crisis challenges that narrative, and how this challenge in turn is shifting the civic foundations of the country’s democracy.
South Korea’s long-held self-conception as an ethnically homogenous nation has been a powerful source of civic duty toward one’s fellow South Koreans and the state that represents them. Yet as immigration becomes an ever more necessary solution to the country’s demographic crisis, that once-unifying national story is fraying. To prevent the kind of tribalism that is tearing many democracies apart, South Korea’s ethnocentric national story will have to evolve carefully to accommodate greater diversity without alienating native South Koreans in the process.
National Stories and Civic Duty
To address its ailing demographic outlook, whether through expanded immigration or higher taxes to bolster the country’s social safety net, South Korea will need citizens to make various kinds of sacrifices on behalf of the state. A strong and widespread sense of civic duty is and will be essential.
Civic duty—the voluntary sense of obligation to be a good citizen, even when doing so is costly—is a key ingredient for sustaining resilient democracies through times of crisis. When resources run low or uncertainty runs high, authoritarian states can ultimately fall back on coercion to force citizens to comply or sacrifice. As a matter of principle, democracies cannot threaten citizens in such ways. Instead, they must rely on a widely shared sense of civic duty.
Civic duty is typically seen as an inherent aspect of culture or character, but in fact, it is powerfully shaped by national stories. These stories, passed down from generation to generation, chronicle a given nation’s history through the eyes of its people. Distinctive elements of such stories may include jointly faced challenges, shared allies, common foes, and mutual feats of perserverance. These relational stories provide a blueprint for what, if anything, one owes to the fellow members of a particular nation.
Civic duty is shaped by a specific relationship, embedded in national stories, between the national people and the state they call home. This relationship gives rise to profound questions of representation. Does the state represent a given citizen’s conception of the national people or a national “Other”? Does the government aim to protect the national people’s best interests or threaten them? National stories provide answers to such questions based on lived experience and shape whether people feel a sense of obligation to their state.
South Korea’s ethnocentric narrative—based on the belief that all Koreans are part of the same bloodline (danil minjok)—has long served as a positive force for the country’s democracy by undergirding citizens’ sense of civic duty. This national narrative framed South Korean democracy as a natural extension of the national body and therefore a worthy object of political duty. Indeed, South Korean citizens have repeatedly shown up for their democracy in times of crisis. Consider the way many South Koreans sacrificed their personal wealth in the national gold drives in 1998 to help the country weather the Asian Financial Crisis, or more recently how citizens dutifully complied with the state’s public health restrictions during the coronavirus pandemic. Such crises can sometimes destabilize democracies, but strong civic duty has served as South Korea’s backbone throughout such periods.
Is South Korea’s National Story Unraveling?
Yet South Korea’s demographic crisis is rapidly fragmenting its once-unifying national story in ways that threaten this rare reservoir of civic duty. The country’s dramatically declining fertility rate has all but necessitated the import of foreign labor and marriage migrants. As of 2019, the Ministry of Gender Equality and Family estimates that over 1 million people in South Korea—around 2 percent of the country’s overall population—are part of multicultural families. More importantly, babies born into such multicultural families accounted for 5.5 percent of all newborns in 2018, a number that grew from 4.3 percent in 2010. As multiracial children from such unions—what Katharine Moon has called the “New Koreans”—are becoming a larger portion of the country’s population, South Korea’s ethnic composition is changing.
In the face of such change, South Koreans are increasingly divided on matters of national identity. According to the 2020 Korean Identity Survey by the East Asia Institute, support among South Koreans for a multicultural country declined from more than 60 percent in 2010 to just 44 percent in 2020. A sizeable 39 percent of respondents still preferred an ethnically homogeneous South Korea. Tellingly, the percentage of respondents unsure about what kind of country South Korea ought to be increased from 2 percent to 13 percent between 2010 and 2020, with the largest increase among younger respondents (see figure 1).
Meanwhile, the South Korean government has taken an inconsistent approach to reconciling the country’s new demographic reality with its ethnonationalist legacy. While the government has urged native South Koreans to support a pro-multicultural (damunhwa) policy shift to be more welcoming of newcomers, it has simultaneously held on to traces of ethnonationalist superiority in implementing such policies. For instance, many so-called multicultural centers for foreign wives are essentially cultural assimilationist training programs, where newcomers are expected to conform to South Korean customs and culture, rather than being appreciated for the diversity they bring. This contradiction between political rhetoric and practice reflects South Korea’s growing national fragmentation.
The splintering of South Korea’s national story could significantly weaken the civic foundations of its democracy over time. For South Koreans who identify with an ethnocentric national narrative, the government’s expansion of multicultural programs at the perceived expense of tax dollars to benefit lifelong native South Koreans could seed the belief that the state serves what they see as a national “Other.” For South Koreans and newcomers who identify with a more multicultural narrative, the government’s failures to live up to this promise could cast doubt on whether the state really upholds the best interests of their vision of the nation. In both cases, feelings of being alienated from the state could weaken a sense of civic duty among South Koreans to sacrifice on its behalf.
As Kyle Ferrier notes in his piece, the economic effects of South Korea’s demographic crisis, like lower productivity and decreased tax revenue, are the most visible and immediate changes the country is undergoing. Yet a less visible but no less alarming effect is that, for many South Koreans, a unifying national story that used to be a significant source of civic duty is unraveling as the country faces an unprecedented demographic challenge.
Conclusion
For South Korea’s democratic future, the question isn’t simply which national story is better. What matters is how well a given national story—whether centered on ethnicity, multiculturalism, or something else—weaves a mutually committed relationship between citizens and the state. For a long time, an ethnocentric narrative accomplished this very effectively in South Korea and generated widespread civic duty for its young democracy. But with South Korea’s demographic crisis ushering in a new era of immigration and interracial marriage, that national story has run its course.
The silver lining is that, like any kind of story, national stories can be reimagined. The demographic crisis, in this respect, presents an opportunity as much as a challenge. Governments—through political leadership and public policies—can proactively shape the direction of their countries’ national stories. In this transitional phase, it will be essential that the South Korean government preempt us-versus-them politics by dovetailing efforts to include newcomers with constructive experiences for native South Koreans. Community programs that build social capital that can act as a bridge between foreign wives and native locals or offer incentives for native-born employers to hire and retain migrant workers are promising starts toward building a broadly inclusive national story. The recognition that South Korea’s demographic shortfall is as much a crisis of nationalism and democracy as it is an economic quandary is perhaps the most important starting point.
Aram Hur is an assistant professor of political science and public policy at the University of Missouri.
How Unification Would Affect the Demographics of the Korean Peninsula
Kathryn Botto
In 2014, former South Korean president Park Geun-hye surprised many observers when she referred to Korean unification as a “jackpot.” Unification of North and South Korea is usually discussed in terms of its exorbitant costs—estimates range from 7 percent of South Korea’s gross domestic product for ten years to $3 trillion or more. However, Park’s pronouncement stemmed from the assumption that South Korea’s technological prowess and capital coupled with North Korea’s natural resources and labor pool would be a winning combination.
But if unification were to happen, the positive economic effects Park described would have to contend with the negative economic and social consequences of South Korea’s most transformational demographic trend—population aging. South Korea’s birth rate is now the lowest in the world, and the country’s population will continue to age, even if unification were to someday infuse some 25 million North Koreans into the equation. This demographic shift is an increasingly essential item on the balance sheet of unification’s benefits and challenges.
As others in this compendium have pointed out, South Korea’s rapidly aging population will bring on economic, social, and security challenges that an influx of young people to the country could mitigate. Estimates indicate that South Korea will need about 15.3 million more working-age immigrants by 2060 to keep the labor force from contracting, and North Korea’s working age population is estimated at around 18 million.1 A redistribution of the peninsula’s age pyramid through unification, then, would at first glance seem to present a fix to the impending crises posed by South Korea’s demographic problem.
But the reality is more complicated. Though unification would add millions to a united Korea’s population, the unpredictable social and economic consequences of unification and their potential impact on North Korea’s fertility rate and life expectancies could limit how readily such a population influx would help ameliorate the impact of population aging in a unified Korea.
The Demographic Profile of a Unified Korea
Projections from the Population Division of the UN Department of Economic and Social Affairs, modeled in figure 1, show that North Korea’s age structure skews younger than South Korea’s, with roughly 91 percent of the North’s population under the age of sixty-five compared to about 84 percent of South Korea’s citizenry.
Yet North Korea’s population is also aging, albeit more slowly. North Korea and South Korea are projected to average 1.86 and 1.08 births per woman, respectively, between 2020 and 2025, though the UN’s population projections have not yet accounted for significant drops in South Korea’s birth rate since 2019. (South Korea’s birth rate plummeted to 0.84 in 2020.) While both countries’ figures are below the replacement rate of 2.1 births per woman, only about 9 percent of North Korea’s population is over the age of sixty-five. By comparison, around 16 percent of South Koreas are over sixty-five—a level that North Korea is not projected to reach until about 2035. By that time, nearly 30 percent of South Koreans will be over sixty-five, while North Korea’s elderly population is not projected to approach 30 percent until 2100. Though North Korea’s birth rate is higher, these differences in population structure are also due to life expectancy. In North Korea, the average life expectancy (as of 2019) is estimated to be 68.6 years for men and 75 years for women, compared to 80.3 years for South Korean men and 86.3 years for .
Despite the relative youth of North Korea’s population, however, unification would not necessarily lead to population growth. As figure 2 shows, even if the Korean Peninsula suddenly unified into a single nation in 2020 and if both countries’ birth rates and life expectancies remained on their current trajectories, the peninsula’s total population would still stagnate by 2025 and begin to decrease consistently starting in 2035. This is because South Korea’s population is nearly twice the size of North Korea’s—its elderly population was equivalent to over 44 percent of North Korea’s total working population (ages fifteen to sixty-four) in 2020, according to UN data. Combining the two countries’ populations in this way would inject new working-age people into the total population of a unified Korea, but it also would add over 2.4 million elderly North Koreans to the tally. If the two Koreas unified tomorrow, over 13.6 percent of the population would still be over the age of sixty-five—only around 3 percentage points less than the proportion in South Korea’s current population.
The Potential Demographic Impact of Unification
The numbers in figure 2 are based on the assumption that the countries’ fertility rates and life expectancies would remain on steady trajectories after unification. In reality, however, unification would be highly likely to disrupt both factors and would probably cause population decline more quickly than figure 2 depicts. In a peaceful unification scenario, North Koreans would have better access to healthcare and means of improving their livelihoods, which over time would improve their life expectancies. For comparison’s sake, after German unification, the life expectancies of men and women in what had been East Germany rose far more rapidly than those of West Germans, increasing by a full three years between 1989 and 1999.
While it might take decades to close the gap in life expectancies between North and South Korea, fertility rates could change almost immediately, depending on how unification occurs. Immediately after German reunification, the total fertility rate among East German women began to plummet. By 1992, East Germany’s rate was 0.8 children per woman—a shockingly low number that likely would have been the lowest-ever recorded fertility rate for a country had East Germany still existed as a separate country. The rapid disruption of political and social life combined with new personal opportunities for career advancement and prosperity led East German men and women to postpone having children. By 2008, East Germany’s and West Germany’s respective total fertility rates had largely evened out. In a scenario where Kim Jong Un’s regime (or even the North Korean state) were to collapse, resulting in Korean unification, North Korea could also experience this sort of “demographic shock,” with no reliable way to predict when birth rates would recover.
Both the figure 2 scenario and the German scenario would result in the two Koreas’ populations being politically and legally unified as one nation. While such scenarios are possible, the South Korean government does not seek the kind of absorption or regime change in North Korea that would result in such an outcome. Instead, South Korean policy conceptualizes unification in terms of economic integration, open people-to-people exchanges, and peaceful coexistence—all of which could hopefully lead to eventual unification in the distant future.
A gradual transformation like this would allow room for adjustments to new conditions that were not available in the German context. But it is unclear in this gradual scenario how much responsibility the South Korean government would bear toward North Koreans in terms of social welfare costs and what South Korea would spend on infrastructure, development, and aid in North Korea. But assuming that North and South Koreans would at the very least be able to participate in one another’s economies, live in each other’s territory, and marry and have children with one another, limited assessments can be made of the social and economic implications of unifying the two Koreas in the face of aging populations.
Integrating North Koreans Into a Unified Workforce
As others in this compendium have noted, population aging is putting pressure on South Korea to reform its immigration policies and attract more migrants to augment the country’s shrinking labor force. But the country’s strong history of blood-based, ethnicity-centered national identity (danil minjok) has made the integration of multicultural immigrants difficult. In contrast, the fact that North and South Koreans share the same ethnicity is often cited by South Koreans as the most compelling reason for unification. South Koreans repeatedly have ranked ethnic ties as the number one reason for unification, followed by prevention of war. When asked which immigrant group they felt closest to in 2010, 2015, and 2020 surveys by the East Asia Institute, South Koreans consistently said they felt closer to North Korean defectors than labor migrants or marriage migrants.
North Korean defectors settling in South Korea are already subject to different laws than immigrants and other asylum seekers, and they are automatically considered South Korean citizens when they arrive in the country. Although the two Koreas have developed cultural, linguistic, and ideological differences after more than seventy-five years of division, North Koreans’ ethnic ties to South Korea could mitigate many of the obstacles to integrating into the South Korean workforce and living long term in the South that non-ethnically Korean immigrants experience.
The experiences of many North Korean defectors, however, indicate that—while acceptance may come more easily for these defectors in some ways—they still face barriers to integration. Even with their special legal status and ethnic ties, North Korean defectors have often had difficulties adjusting to South Korea and have faced discrimination. Since 1998, nearly 34,000 North Koreans have defected to South Korea. The Hana Foundation, the South Korean government’s North Korean resettlement agency, found that nearly one in five North Koreans reported experiencing discrimination over the past year due to cultural differences, prejudice against North Koreans, or lack of job skills.
Of the respondents that said they had experienced discrimination, only 22.9 percent said they had experienced job-related discrimination in the past year. But such discrimination could factor more heavily in a unified Korea, where many North Koreans would likely perform jobs in sectors that have suffered from a labor shortage due to population aging in the early stages of unification. Domestic labor shortages in South Korea in blue-collar sectors like elderly care and agriculture are one of the most compelling reasons for liberalizing South Korean immigration policy.
At the same time, perceived competition between South Koreans and immigrants in these areas is also one of the most commonly cited reasons for opposing multicultural policies. The East Asia Institute’s 2020 South Korean Identity Survey found that 42.7 percent of South Koreans agreed that “foreign laborers threaten the jobs of natives,” and less-educated South Koreans, who are commonly employed in sectors with migrant workers, were more opposed to multiculturalism than any other group. While North Koreans may fit into South Korea’s ethnic-nationalist political narrative, they are not immune from job-based or cultural discrimination. Combining the two populations would still require social and cultural adjustments and education to avoid subjecting North Koreans to many of the barriers to prosperity that many immigrants in South Korea have experienced.
Different Paths to Unification, Different Demographic Fates
Clearly, the impact unification would have on South Korea’s demographic crisis is difficult to predict. The positive and negative demographic impacts of combining the populations of the North and South would depend greatly on the circumstances of such a unification. In a peaceful and gradual unification scenario, the combination of the two Koreas’ populations could be an economic boon for both countries, filling gaps in the workforce and creating new wealth and prosperity for both North and South Koreans. But if unification were the result of conflict, instability, or regime collapse, the demographic cost could be severe. After all, millions died in the Korean War, including an estimated 20 percent of the North’s total population.
Now that South Korea’s population has declined for the first time in its history, any future unified Korea will face the challenges of population aging. A unified Korea has great potential to be economically competitive, but it will need to invest heavily in education and job training for North Koreans to thrive in a labor market where they will compete with South Koreans. This will be especially true as South Korea’s economy shifts its focus to emerging technologies to accommodate its shrinking labor force as its population ages. Closing the socioeconomic gap between North and South Koreans would take decades, and if the two countries’ citizens came to live under a single political system, vast disparities in socioeconomic statuses could manifest in a deep political divide between the two populations. This dynamic would be a daunting test for a democracy that is already growing more fractured due to changes in immigration and social policy necessitated by its aging population.
The intersection of these and other political, social, and economic transformations that unification would trigger, as well as the looming demographic challenges, could have a major impact on quality of life for both South and North Koreans. As South Korea continues to plan for the possible contingencies of unification, the challenges of population aging should be proactively considered.
Kathryn Botto was a senior research analyst in the Asia Program at the Carnegie Endowment for International Peace. Her research focuses on Asian security issues, with particular emphasis on the Korean Peninsula and U.S. defense policy towards East Asia.
Notes
1 Unless otherwise noted, the population figures and population projections mentioned in this piece are based on the author’s calculations from the following data source: “World Population Projections 2019,” UN Department of Economic and Social Affairs Population Division, 2019, https://population.un.org/wpp/Download/Probabilistic/Population.
South Korea’s Military Needs Bold Reforms to Overcome a Shrinking Population
Chung Min Lee
It is no secret that South Korea inhabits a dangerous neighborhood, and the question of whether it can defend itself against key foreign threats looms large. The impending personnel shortages precipitated by the country’s mounting demographic challenges must be addressed head on to prevent these difficulties from eroding the country’s national defense posture.
South Korea doesn’t need nor can it afford another round of defense reforms that results in only marginal changes. The next government, which will enter office in May 2021, must undertake bipartisan defense reforms that look into long-term conflict drivers and likely scenarios; modernize and revamp military training, education, and doctrines; maximize interoperability with U.S. forces; ensure greater joint warfighting capabilities; and lay the foundation for intensified U.S–South Korea defense technology cooperation.
South Korea’s Changing Military
South Korea’s armed forces are shrinking. To offset the military’s dwindling supply of soldiers, the country is reforming its forces to accommodate a necessary reduction from a 599,000-strong force to a size of 522,000 troops by 2022. This figure includes both conscripts and volunteer forces. Out of this 522,000 figure, the military hopes to keep a baseline number of 274,000 conscripts—the number the Ministry of Defense deems necessary to sustain a conscript force large enough to accomplish its objectives. According to media reports of the South Korean Ministry of National Defense’s views, the pool of draftees, which South Korea relies on for nearly half of its total military force, is going to decline “by nearly half over the next two decades.” The forecast of South Korean men that will enlist for their mandatory military service each year—based on the number of twenty-year-old men each year, a typical age for conscription—is slated to fall from 330,000 at the end of 2020 to about 240,000 by 2036, and then the figure is expected to drop further to around 186,000 by 2039. Hence, the South Korean military will face a progressively worsening personnel deficit from the mid-2020s onward if it plans to maintain a baseline force of some 274,000 conscripts in its 522,000-strong force (see figure 1). Presumably, these demographic trends will also somewhat affect the number of volunteers the military is able to secure.
Demographics are not the only changes that South Korea’s armed forces are experiencing. The country’s military is also transitioning to more technologically advanced platforms, downsizing its ground forces, and recruiting more civilian experts. Yet these efforts, while important, have not been enough.
Since North Korea’s army has about 1.1 million ground troops and the bulk of them are located near the Thirty-Eighth Parallel, the South Korean military rightly has focused historically on ground forces. But with North Korea now armed with nuclear warheads and wide-ranging ballistic missiles, including sea-launched ballistic missiles, South Korea’s armed forces must be reconfigured to meet a growing array of asymmetrical threats. Meanwhile, China’s anti-access area-denial capabilities—including sophisticated anti-ship missiles and growing air and naval power—could significantly constrain, deter, or even deny the possibility of coordinated U.S.–South Korean and/or U.S.-Japan military operations in acute crises or wars. Seoul can no longer ignore North Korea’s growing capabilities or China’s relentless military rise.
As the South Korean military grapples with how to mitigate an increasingly acute personnel shortage, it is placing a greater emphasis on air and naval forces that will enable greater operational depth, including long-range ballistic missiles and (circumstances permitting) even nuclear-powered submarines. Such moves are necessitating doctrinal modernization that prioritizes air and naval forces with increasingly complex deterrence and defense mission assignments.
Granted, it is not all about air and naval forces, but they are very strategically important. It would be naïve to assume that a future conflict on the Korean Peninsula could be won primarily by air and naval forces. After all, if North Korea were to stoke another war on the peninsula, South Korean ground forces would still play a central role in mounting counteroffensives. Even so, overarching victory for South Korea could only be assured by achieving air superiority, controlling critical sea lanes, and undertaking unparalleled joint operations.
In the last year of President Moon Jae-in’s administration, significant movement on any of these fronts will be increasingly difficult due to the term-limited president’s waning political influence. All eyes are on the critical March 2022 presidential election, since the ruling party is not going to use its political capital before then to push through massive defense reforms. But regardless of which party wins the presidency, South Korea can ill afford to continue expensive, piecemeal, and service-dominant defense reforms or politically motivated measures (such as downsizing and downgrading military exercises to help foster inter-Korean détente). Unless South Korea’s political and military leadership implements military reforms akin to the massive restructuring of the South Korean economy following the 1997–1998 Asian financial crisis, the military (and especially the army’s leadership) will likely return to its favorite tactic of piecemeal reforms. The South Korean military is increasingly operating advanced weapons systems due to shortages in military personnel and an evolving threat environment. But ultimately, the armed forces will only be as good as its personnel.
The South Korean Military’s Two Major Challenges
Viewing national security more holistically to include economic growth projections and fiscal constraints, it becomes clear that South Korea must cope with twin demographic time bombs. First of all, the rapidly rising costs of caring for an aging population will likely create pressure to curtail defense spending. And second, the looming shortfall of South Korean troops on the horizon will do nothing to improve matters.
On the first point, with a shrinking population that is rapidly aging, South Korea’s social welfare and healthcare costs are poised to sharply increase and potentially constrain the country’s defense spending. According to the OECD, public social welfare costs accounted for 12.2 percent of South Korea’s $1.6 trillion GDP in 2019. The country’s 2019 healthcare costs amounted to 8 percent of GDP. While South Korea spent only about half what the average OECD member did on social welfare in 2018 (11.1 percent versus 20.1 percent), the country’s Ministry of Health and Welfare stated, “with an aging population and low economic growth, social welfare spending is going to increase to about 20.1 percent [of GDP] by the late 2030s and, by 2060, it is expected to account for 28.6 percent [of GDP].”
Meanwhile, South Korea allocated about $48 billion for its 2021 defense budget, or about 9.4 percent of government spending and roughly 2.9 percent of the country’s $1.6 trillion GDP (according to the author’s calculations). However, while the Moon administration has continued to increase the defense budget during its tenure, the ratio of defense spending as a percentage of GDP is highly unlikely to keep growing, given the country’s sharp projected increases in social welfare and healthcare spending.
Second of all, even with all of the defense reforms South Korea has undertaken over the past two decades and the blueprints for further potential reforms throughout the 2020s, the armed forces’ expected personnel shortages and related challenges are likely to persist. The Ministry of National Defense asserts it can cope with significant manpower shortages by transforming the military into a high-tech force, recruiting more civilian specialists, and implementing ongoing force rationalization measures (such as reducing the country’s ground forces to 522,000 in 2022 and recruiting more noncommissioned officers (NCOs). NCOs are vital to ensuring top-level training, management, and leadership throughout the services, especially with the planned downsizing of the officer corps following the continued reduction of South Korean military units.
With only one year left in office, Moon is highly unlikely to focus on military manpower reforms given the enormous efforts that are required. That said, critical changes are long overdue to address rampant sexual harrasment in the armed forces. South Korea’s air force chief resigned in early June 2021 to take moral responsibility for a case involving a female NCO who unfortunately committed suicide following months of inaction by the air force after she reported repeated assaults.
Despite the South Korean government’s and armed forces’ claims that critical defense reforms are being implemented, doubts persist. As noted above, South Korea will face much bigger security threats throughout the 2020s and the 2030s. China’s growing military footprint and growing ability to significantly curtail or even deter South Korean military operations is making Seoul’s security environment tougher with each passing year.
Hence, strengthening South Korea’s air and naval forces and procuring more sophisticated ballistic missiles (including sea-launched ones) will become increasingly critical. But one of the main sticking points is the South Korean navy’s inability to recruit key manpower such as NCOs for long-term duties. For example, in the last decade, due to shortages of personnel tasked with active sea duty, the navy has reallocated 3,700 personnel stationed at naval facilities and bases from land duty to active sea duty, but even with these changes the navy’s personel levels for sea duty still fall 3,000 short. Such naval personnel must be highly skilled, yet many recruits are reluctant to sign up for sea duty given the high demands of life at sea for extended periods of time.
In response to this personnel shortfall, the Ministry of National Defense is contemplating several policies, including the possibility of a gradual shift to a volunteer force. Advocates argue that such a move would help mitigate youth unemployment in the country. Opponents assert that a voluntary force would result in exponential cost hikes. According to figures from a 2019 study by the National Assembly’s Budget Office, a full-on move to a volunteer force between 2021 and 2025 would cost approximately $26.1 billion, while maintaining a conscripted force over the same period would cost just more than half that ($14.2 billion). Again, given South Korea’s sharp projected increases in social welfare spending and healthcare costs and other nonmilitary outlays such as education and housing, securing around $2.4 billion in additional funds each year for five years for the military’s personnel budget would be extremely difficult.
Conclusion
Ultimately, South Korea’s ability to cope with its hugely disruptive and expensive demographic transitions—including in the armed forces—demands an all-of-government response and nationwide reforms. So far, successive governments on the left and the right have not linked the civilian and military effects of the country’s demographic transitions. But among all of the tasks that the next government will face, nothing is arguably more important than putting into place a bipartisan national demographic transition policy with corresponding budgets and policies.
There is still time for South Korea to address the policy challenges of a shrinking and aging population. However, Seoul has to fundamentally rethink how it will retain, or even strengthen, its national security posture. For the future of South Korean national security, nothing is more important than shifting away from an army-dominant organizational culture and related policies by way of bold defense reforms. And equally important, all of the country’s major political parties must agree not to politicize bipartisan defense reform measures.
Chung Min Lee is a senior fellow in Carnegie’s Asia Program. He is an expert on Korean and Northeast Asian security, defense, intelligence, and crisis management.
Can Emerging Technologies Cushion South Korea’s Demographic Downturn?
Kyle Ferrier
Aging populations will pose economic challenges for all G20 counties in the coming decades, but South Korea’s predicament stands out as one of the most daunting. As its population of elderly citizens grows and its labor force shrinks, the dynamic economy is poised to face serious headwinds. To mitigate the effects of this looming crisis, South Korea’s best bet is to make substantial investments in the emerging technologies of the Fourth Industrial Revolution.
Early Signs of Aging in South Korea
South Korea’s demographic decline has already begun to impact the country’s economy, and this trend will only get worse. The number of people ages sixty-five years or older per 100 people of working age is used to indicate the economic burden a country’s workforce faces in supporting an aging population. For South Korea, this figure is now 21.5, below the current average (28) among members of the OECD. Due to the country’s declining birth rate, however, South Korea’s figure is expected to skyrocket to 88.7 by 2060, well above the projected OECD average of 55.6 (see figure 1). Even Japan, Italy, and Germany (the OECD countries with the most-aged populations now) will see this metric rise less drastically—to 79.9, 66.7, and 59.6, respectively. This trend is poised to be a major drag on economic output as South Korea’s labor force is slowly depleted and as public spending to provide for seniors is increased.
Slow population growth has been a key contributor to South Korea’s shrinking potential growth rate as the country’s labor pool stagnates. To compound matters further, the country’s low economywide productivity (ranked thirty-first of thirty-six as of 2018) and its low labor productivity (ranked thirty-second of thirty-six as of 2019) both are near the bottom among OECD countries.1 A smaller, less productive workforce would give South Korea a lower ceiling for future growth (see figure 2).
In addition, welfare expenditures will need to dramatically rise as South Korea’s population gets older. In 2019, public social spending in the country accounted for about 12.2 percent of GDP, well below the OECD average of 20 percent. Under the government’s plans prior to the pandemic, this figure was expected to grow to 25.8 percent by 2060. With new social welfare spending to bolster the economy during the pandemic, this figure could conceivably be revised upward. To be certain, South Korea has an urgent poverty crisis among its elderly population, and senior citizens sorely need more resources. But the country’s diminished long-run growth prospects mean that the South Korean government will presumably have less revenue to fund these new spending needs unless the country’s tax system is overhauled.
Saving up for this looming fiscal burden precipitated by South Korea’s demographic decline has placed downward pressure on the country’s public spending of late. South Korean authorities have been reluctant to increase public expenditures, as encouraged by International Monetary Fund staff in recent years, citing concerns over an aging population alongside the potential costs of someday reunifying North and South Korea as a single country. This apprehension also materialized last fall amid new rounds of stimulus spending to combat the effects of the coronavirus pandemic, with the Ministry of Economy and Finance’s plan requiring the government to cap the country’s debt-to-GDP ratio at 60 percent and the annual fiscal budgetary balance at -3 percent through 2025.
While this was seen as a prudent measure, South Korean public debt is still relatively low, and the projected costs of the economy’s recent reliance on government spending to drive growth is unlikely to strain the country’s balance sheet.
Hopes of a Technological Silver Bullet
Over the long term, what is South Korea to do to keep its economy humming along amid this demographic decline? Targeted spending may be one of the best ways forward. Short of a reversal of current demographic trends, the closest thing to a silver bullet for South Korea’s demographic shortfall is heavily investing in emerging technologies such as 5G and artificial intelligence (AI).
As these technologies mature and proliferate, they will open doors for new industries and allow for tremendous productivity gains, creating massive new opportunities for growth that will shape the future of the world. An influential 2018 white paper released by the consulting firm McKinsey and Company and the World Economic Forum estimated that such technologies could add up to $3.7 trillion to the global economy by 2025. The consulting firm PwC, meanwhile, claimed that 5G could add upward of $1.3 trillion to the global economy, while AI could tack on $15.7 trillion in growth by 2030.
No other industries are expected to grow as rapidly and be as transformative in the near future. The next closest sector that may have a significant impact is renewable energy, but estimates of its contributions to global growth in the coming decade are not as large. According to a study from the International Renewable Energy Agency (IRENA), if renewable energy were to jump from about 29 percent in 2020 to 36 percent of the global energy mix by 2030, it could increase global GDP by up to $1.3 trillion.
Renewable energy shows great promise for the global economy beyond 2030 as well, though some projections rely on sweeping shifts in existing trends that may prove too optimistic to be fully realized. IRENA, for example, projected in 2020 that the right investments now could add a cumulative $98 trillion to global GDP by 2050, but this would require, among other factors, that renewables reach 86 percent of the global energy mix. However, IRENA has calculated that the world’s current trajectory will only bring renewables to 55 percent of total energy production by 2050, below the 57 percent the organization states would be needed by 2030 to realize this scenario (much less the even loftier 86 percent goal for 2050). Even as high future economic returns on Fourth Industrial Revolution technologies appear more assured, renewable energy should continue to be a pillar for South Korean public-led spending.
Beyond the potential growth prospects, capitalizing on these technologies could also add value to South Korea’s unique situation by providing more cost-effective healthcare for seniors and possibly allowing for high sustainable growth with a leaner, more flexible workforce. The fields of AI, big data, and robotics are already working in tandem to improve data sharing, diagnostics, and treatment—a trend that will likely continue to improve and may help lessen the burden on future public welfare spending. Additionally, it is still not clear whether the number of new jobs from the broad adoption of emerging technologies in the Fourth Industrial Revolution will exceed the number of jobs eliminated in older industries, as occurred in each previous industrial revolution. This state of play will create its own challenges for governments, such as widening inequality, but overall it may help to alleviate the longer-term impact of population decline on the economy as technologies such as robotics and AI can help industries become less labor-intensive without sacrificing output. As one study published by the World Economic Forum posited, “The wave of technologies that inspires fear in many countries could help remedy the social and economic challenges posed by population aging in others.”
South Korea is already a global front-runner in digital technologies, and capitalizing on this lead, especially abroad, could significantly bolster the country’s future economic competitiveness. After all, in recent years, South Korea has ranked among the top five countries for patents in the fast-growing market for information and communication technology (ICT) devices. The country also has the world’s first commercial 5G network, one of the most comprehensive networks unveiled so far. And 5G is also the foundation for effectively utilizing the Internet of Things, which will power technological innovations such as autonomous vehicles, smart cities, and smart factories. South Korean President Moon Jae-in has prioritized high-tech development even further as part of his pandemic recovery plan through the Digital New Deal, which aims to directly spend 44.8 trillion won (about $40 billion) and create 900,000 jobs in tech by 2025 (see table 1).
While AI also will be critical to the economies of the future, South Korea trails the United States, China, and several other advanced countries on this front. The Digital New Deal can help shore up areas where the country is lagging behind. New funding will support the government’s 2019 National Strategy for Artificial Intelligence, which aims to make South Korea a leading country in digital competitiveness by 2030. In 2021 alone, the Moon administration expects 9.9 trillion won (about $9 billion) in government and private funds to be spent on developing AI and other data-driven technologies.
Taking a High-Tech Gamble
The success of this strategy will depend on more than big investments. A key contributing factor to South Korea’s low productivity is that the productivity gains from adopting digital technologies are concentrated in large ICT manufacturers, which constitute only a small share of total employment. Service businesses in other sectors represent a far greater share of employment, but they are far less productive. This gap is present across OECD countries, though it is more pronounced in South Korea and can be closed at least partially if small and medium-sized enterprises begin taking better advantage of these technologies. Seoul must also engage with a variety of global stakeholders in an increasingly strained geopolitical environment to ensure market access, fair competition, and intellectual property protections for its emerging technologies.
In the end, major spending on innovative technologies like 5G and AI is a bet in the face of a looming demographic crisis—a prudent one, but a bet nonetheless. If the payoff is minimal, South Korea’s future economic woes will get worse as the country’s debt situation becomes more precarious amid persistently low growth. However, if investments provide the expected returns—and there are promising signs that they already may be delivering, given how AI is strengthening the country’s pandemic response in areas such as healthcare and biomedicine—it would be a huge boon to the future South Korean economy and strengthen the country’s competitiveness, despite the coming challenges of population decline.
Kyle Ferrier is a fellow and director of academic affairs at the Korea Economic Institute of America.
Notes
1 These rankings were compiled in 2018 and 2019 before Colombia became the thirty-seventh member of the OECD in April 2020 and before Costa Rica became the thirty-eighth member in May 2021.
