Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / South Korea's 0.72 Birth Rate and the Economy of Loneliness
Transcript
- Lucas: South Korea's total fertility rate just hit 0.72 — that's the lowest number ever recorded in a country that isn't facing a wartime famine or a pandemic. And I think that number deserves a moment. 0.72 means the average South Korean woman is expected to have fewer than three-quarters of one child in her lifetime. Luna: That's half the replacement rate of 2.1. And for comparison, Japan — the poster child for demographic decline — is still at 1.2. What's driving Korea so much lower? Lucas: Right, and Japan's 1.2 is already a crisis. Korea is on a completely different trajectory. Economists and demographers have been sounding alarms for a decade, but the rate keeps falling. It was 0.78 in 2022, 0.72 in 2023, and early data suggests 2024 might be even lower. Luna: I remember covering the 2021 census data — there were more pet dogs than children under five in Seoul at that point. That's a visceral stat. Lucas: Exactly. And that's not just a cute trivia fact — it tells you something about the lived reality. The core problem in Korea is a convergence of three brutal forces: education costs, housing prices, and corporate culture. And unlike in Japan, where there's more of a social safety net, Korean young people are facing these pressures with very little buffer. Luna: Let's start with education. I've read that Korean parents spend an average of something like 30 percent of household income on private tutoring. Is that still accurate? Lucas: It's actually higher now. A 2023 government survey found that families with school-age children spent roughly 34 percent of monthly income on private education — that includes hagwon, which are after-school academies, plus test prep and music lessons. The total private education expenditure hit 26 trillion won in 2023, about 20 billion US dollars. Luna: That's staggering. And it's not just about money — it's the time commitment. Kids are in school until 4 PM, then at hagwon until 10 PM. When does a family have space for a second child? Lucas: They don't. And that's the point. The Korean education system is a zero-sum arms race. If you don't get your child into a top university, they're effectively shut out of the best jobs at the chaebols — Samsung, Hyundai, LG. So parents pour everything into one child. The idea of having two or three is financially and logistically impossible for most. Luna: Then there's housing. I remember the '88,000 dollar apartment' controversy from a few years ago — the government announced a housing supply plan and prices actually went up. What's the current state? Lucas: Housing in Seoul is a nightmare. The median apartment price in Seoul is now about 1.2 billion won, roughly 900,000 US dollars. That's more than 15 times the median household income. And the rental market is dominated by a unique system called jeonse — where you give a massive lump-sum deposit, like 70 percent of the home's value, and get it back when you leave. That's a huge barrier for young couples who don't have that kind of cash from their parents. Luna: So you need rich parents to even rent a place. And if you're starting from zero, you're basically locked out of marriage and family formation. Lucas: Exactly. And marriage is still the gateway to childbearing in Korea — over 98 percent of births are to married couples. So the marriage rate is a leading indicator. And the marriage rate has fallen off a cliff. In 1996, there were about 435,000 marriages. By 2023, that was down to 192,000 — a 56 percent decline. Luna: And the age at first marriage has been rising. For women, it's now over 31. For men, over 33. Each year of delay reduces the window for having multiple children. Lucas: There's actually a study by the Korea Institute for Health and Social Affairs that quantifies this: each one-year delay in first marriage for women reduces their expected number of children by about 5 percent. So when you combine later marriage with the fact that nearly half of women in their early 30s have never married at all, you get a fertility rate that collapses. Luna: I want to talk about corporate culture. Korean workers put in the longest hours in the OECD, but there's also this intense hierarchy. For women, the decision to have a child often means the end of their career. Lucas: That's the third leg of the stool. South Korea has the widest gender pay gap in the OECD — women earn about 31 percent less than men. And the labour force participation rate for women in their 30s drops sharply. The M-curve is still very much present: women work until they have a child, then they leave, and many never return to full-time work. The corporate culture is unforgiving. Luna: There's a term in Korean — 'mom's grave' — used to describe the career death that follows maternity leave. That's not subtle. Lucas: It's not. And the government has tried throwing money at the problem. Since 2006, successive administrations have spent over 280 trillion won, roughly 210 billion dollars, on pro-natalist policies — cash bonuses, subsidized fertility treatments, extended parental leave. They even have a 'baby bonus' of about 2 million won per child. But none of it has worked. Luna: Because the root causes aren't just financial. It's a cultural and structural problem. You can't bribe people into having children if they can't afford to raise them or if having a child means losing your job. Lucas: Right. And some policies may have even backfired. For example, the government introduced a rule that capped weekly working hours at 52 in 2018 — meant to improve work-life balance. But enforcement is weak, and many companies circumvent it. The real issue is the expectation of presenteeism and overtime that's baked into corporate culture. Luna: Let's talk about the economic consequences. Korea's population is projected to halve by the end of this century. What does that mean for GDP growth? Lucas: The Bank of Korea has modelled this. Under current fertility rates, Korea's potential growth rate — the maximum sustainable GDP growth — could fall from about 2.5 percent in the 2010s to below 1 percent by the 2040s. And by 2050, the working-age population will have shrunk by about 35 percent. That means fewer workers to support a rapidly growing elderly population. Luna: And the pension system is already under strain. The National Pension Service is projected to run out of funds by 2055 at current contribution rates. If birth rates don't recover, that date moves closer. Lucas: There's also the military angle — South Korea still faces a conventional threat from North Korea. A shrinking pool of young men means the military is struggling to maintain its force size. They've already reduced mandatory service from 24 to 18 months, and they're considering further cuts. Luna: So every aspect of national life is affected. Hospitals in rural areas are closing because there aren't enough patients. University enrollment is falling — some universities are merging or shutting down. The social fabric itself is changing. Lucas: And this is where the 'economy of loneliness' comes in. With fewer children and more people living alone — single-person households now make up 34 percent of all households in Korea — the economy is shifting toward solo consumption. Think convenience store meal kits, small-portioned groceries, pet care, and streaming services. But there are also negative economic effects: less demand for family-sized housing, fewer consumer durables, and a shrinking tax base. Luna: Other countries are watching Korea as a cautionary tale. Singapore, Taiwan, even some European countries are seeing fertility declines, but none as extreme as Korea. Could Korea's situation be a preview of what's to come elsewhere? Lucas: I think it's a distinct possibility. The drivers — high education costs, unaffordable housing, gender inequality, demanding work culture — are common to many advanced economies. Korea is just further along. If anything, it's a stress test for what happens when a society fails to address these issues early enough. Luna: So what would actually work? Is there any policy that could turn this around? Lucas: Demographers I've spoken to say the most effective interventions would be systemic: reforming the education system to reduce the arms race, building more public housing to bring down costs, and enforcing workplace culture changes that genuinely support families. But these are generational changes. Short-term cash bonuses didn't work in Japan or Korea, and they won't work here. Luna: And some argue that trying to reverse the fertility decline might be futile — that we should instead focus on adapting to an older, smaller population. More automation, fewer schools, redesigned cities. Lucas: That's a pragmatic view, but it's politically explosive. Imagine telling voters in their 20s that the government has given up on having them start families. Still, some countries like Finland and Sweden have managed to stabilize their fertility rates around 1.5 through comprehensive family policies. So it's not impossible. It's just that Korea's situation is especially severe. Luna: It's a sobering episode. I'm left wondering: if Korea can't solve this, can any country with similar dynamics? Lucas: That's the million-dollar question — or the 280-trillion-won question. South Korea's demographic winter isn't just a Korean problem. It's a global economic experiment playing out in real time. And we're all watching to see whether policy can bend the curve, or whether we're witnessing a permanent structural shift. Luna: Thanks for the deep dive, Lucas. It's a conversation we'll need to revisit as the data keeps coming.