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South Korea’s Demographic Trends Continue to Decline

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South Korea’s Demographic Trends Continue to Decline

South Korea’s population decline is following the U.N.’s most negative projections, with major implications for the country’s economic future.

South Korea’s Demographic Trends Continue to Decline
Credit: Depositphotos

South Korea’s total fertility rate has been below the replacement rate of 2.1 births per woman since 1983. As new data from the United Nation’s World Population Prospects shows, the decline in total fertility is deepening the downward trend in South Korea’s demographics.

South Korea used to have a relatively young population. The portion of the young, non-working age population 14 and under was roughly on average with the OECD as recently as 2005. However, in less than two decades the young have become a smaller share of South Korea’s population than in any country other than Japan, and South Korea is expected to pass Japan for the smallest youth population this year.

In contrast, the share of South Koreans over the age of 65 has grown from 10.8 percent of the population in 2010 to 17.5 percent in 2022. Based on current trends, Statistics Korea estimates that senior citizens will account for 30 percent of the population in 2036 and 40 percent by 2051.

Total fertility trends have become more extreme in recent years. In 2018, South Korea became the first country to see its total fertility rate fall below 1.0. It has declined each year since and is estimated to have fallen to 0.81 in 2021. This has implications for South Korea’s demographic trends.

The United Nations last did population estimates in 2019. Based on those estimates, South Korea was estimated to have a relatively modest population decline from a high of 51.34 million in 2025 to 49.78 million under the medium variant. The new estimates put South Korea’s population at 49.32 million in 2040.

Of course, with South Korea’s population already in decline, the U.N.’s medium variant does not reflect current trends in the country. The 2019 low variant, however, did forecast the population to begin declining before 2025. Based on that estimate, the population will decline to 47.34 million in 2040. The new low variant estimate suggests that the population will decline to 47.18 million in 2040.

With a current life expectancy of 83.7 years, it is not surprising that there are only moderate adjustments in the new U.N. data – though in a continuing downward trend. Further along the time horizon, however, the differences grow. Sticking with the low variant, which most closely reflects South Korea’s current trends, the 2019 estimate projected South Korea’s population to decline to 37.54 million by 2060 and to be only 19.2 million by 2100. The new estimate, however, projects the population to decline to 36.64 million by 2060 and just 15.63 million in 2100 – less than a third of South Korea’s population as of 2021.

Because factors could change both total fertility or mortality over time, the estimates become more speculative the farther into the future you go. However, they do reflect what the situation could look like if current trends continue unabated.

From the perspective of South Korea’s economy, the most significant factor will be the aging of the population, which will result in the continued decline in the working age population, those aged 15-64. Between now and 2050, Statistics Korea expects the working age population will decline from 37.38 million in 2020 to 24.19 million in 2050. The U.N. medium variant estimate is more pessimistic, expecting a working age population of only 20.96 million. The low variant estimate is only slightly lower.

Workers between ages of 25-49, those who are in their prime working years, however, are expected to decline from 36.8 percent of the population to 23.1 percent by 2050.

The decline in population has implications for South Korea’s economic future, which have been likely worsened by the pandemic. Over the last decade and a half South Korea’s potential growth rate has fallen from 5.0 percent to an estimated 2.2 percent by the OECD. Research by the IMF suggests it may be slightly higher at 2.5 percent, but demographic factors alone will reduce South Korea’s potential growth rate to 2.0 percent by the end of the decade. Over time, the sustained decline in the working age population will continue to weigh on economic growth.

The pandemic at a minimum has also likely set back one of South Korea’s options to mitigate the decline in the workforce. Prior to the pandemic, the IMF estimated that South Korea could add 7 percent to its GDP if it could increase its female labor force participation rate to that of males by 2035. However, the pandemic hit women in the workforce hardest and female labor force participation, while recovering, is still below about what it was prior to the pandemic.

In addition to increasing female labor force participation, South Korea could raise the retirement age to keep workers in the workforce longer. For most South Korean workers, the retirement age is 60. This pushes potentially productive workers out of the labor force sooner than in countries facing similar demographic challenges, such as Italy where the retirement age is 67 or Japan where it is set to rise to 65 by 2025. To keep workers in the workforce longer, the Yoon administration is considering options from raising the retirement age to 65 or older to letting businesses rehire retirees under a different legal status.

As South Korea’s population ages and births decline, demographics will put pressure not just on the economy and by extension the pension system. It will also place pressure on the national security, as there will be fewer young males for South Korea’s conscription-based military.

The new U.N. statistics may only show slight changes in demographic trends, but those trends continue to go in the wrong direction.