(Bloomberg) — It’s only twenty years ago that South Korea was so intent on population control that getting sterilized put young couples on the fast track for public housing. Even the army was in on the act, offering a free pass from annual military training to any man willing to shuffle off for a vasectomy.
In the space of a generation, everything has changed. Korea’s population is aging rapidly and its workforce is shrinking. The number of people aged 15 to 64 will peak at 37 million next year, and then steadily drop. After the rapid gains in efficiency that saw the rise of industrial powerhouses like Hyundai Motor Co. and Samsung Electronics Co., improvements in labor productivity are also getting harder to find.
Under this mounting pressure, the economy’s potential growth rate could slip by a percentage point to 2.2 percent in the 2020s. The government says the next few years may be the last real chance to escape the demographic trap, and President Park Geun Hye’s administration will release a blueprint next month for a five-year plan to tackle aging and the low birth rate.
It will have to address a workplace culture that isn’t geared to women balancing a career with child-rearing, and to find ways to help couples, who are marrying later, to have kids and raise a family.
At the other end of the spectrum, government efforts to stimulate consumer spending are being challenged by the swelling ranks of seniors. Average life expectancy is above 80 and older people are trying to save more and spend less during their ever-longer years of retirement.
“Aging is the key factor that will weigh on South Korea’s growth,” said Cho Byung Koo, a researcher at the Korea Development Institute. “People may not realize the significance of the issue now, but in a few years time, it will be too late to do anything.”
Early indications from the health ministry point to a blueprint that will include support for couples seeking fertility treatment, more efforts to promote marriage, and finding ways to turn aging into an opportunity for the medical and leisure sectors.
Park’s administration is already ushering in a new law next year to ensure large companies allow employees to work until at least 60.
While there is no official retirement age in Korea, a typical worker’s career ends around 53, as their tenure-based salary climbs and they face pressure to leave, government data show.
The administration also plans subsidies for companies that keep on elderly workers, with a slight reduction in their wages, as they bring on young workers at the same time.