Korea’s birth rates have imploded and are now the lowest in the world. The main reason is that many Korean women are constrained to choose either career or family, while men have little choice but to become the family breadwinner. Inflexible working practices and gender-unequal sharing of caring responsibilities sharpen the career-family trade-off in Korea compared to most other OECD countries, despite a rapid expansion of family policies. As Korea has grown richer and women have gained more equal opportunities to men in education and labour markets, the sacrifice of career and income for each child has grown and pushed fertility to new lows. In previous decades, women responded by postponing childbearing and reducing the number of children, but almost all would eventually marry and have at least one child. Now they increasingly forego marriage and childbirth altogether. The constrained choices facing parents reduce the well-being of both men and women, making for lower GDP and tax revenue due to low female employment, and ageing creates labour market and public finance challenges. A recent uptick in marriages and births is most likely a temporary after-effect of the pandemic, but could conceivably be a trend shift following a recent working hour reduction cumulating with reforms implemented the past couple of decades to support working parents. However, a fertility revival will at best be slow and gradual until policies, gender norms and working practices taken together support a large majority of women to pursue career and family in tandem.
Korea's Unborn Future
Abstract
Executive Summary
Birth rates are falling across the world and nowhere more so than in Korea, where fertility has imploded to unprecedented lows. As a consequence, the Korean population is expected to halve over the next six decades and the elderly (aged 65 or older) will account for around 58% of the total population by 2082. During this time, the old-age dependency ratio (the ratio of individuals aged 65 and over to those aged 20 to 64) will surge from 28% today to 155%. The combination of a shrinking and ageing population poses a formidable challenge to sustaining social insurance systems and maintaining living standards. Labour shortages will intensify as retirees make up an increasing share of the population, and the fiscal cost of health, long-term care and pensions is set to more than double to 17.4% of GDP by 2060
In Korea, every woman had six children on average over her lifetime in 1960. This dropped to just below one child per woman in 2018, and fell further year by year to reach 0.72 in 2023. From the 1960s to the mid-2010s, the decline in fertility came about as Korean women postponed the age at which they get married and reduced the number of children they had once married. During this time period, the vast majority eventually married and had at least one child. The period starting in the late 2010s marks a change, as falling fertility from this time on has increasingly been driven by married women having no children and women foregoing marriage altogether. This trend seems to have continued into the 2020s, even though the numbers remain difficult to interpret due to the Covid-19 pandemic.
To an extent falling fertility reflects that young people around the world have better access to birth control and increased freedom to use it to live the lives they want with the number of children they prefer, which increases welfare for those concerned and reduces environmental pressures. However, in several countries, including Korea, young generations bring very few children to the world despite their preferences for more, and despite society needing more children to dampen the consequences of rapid ageing.
When gender-unequal norms and a large gender wage gap meet long hours and inflexible working practices, many Korean mothers are constrained to choose family over career for an extended period of time, while men have little choice but to become the family breadwinner. This reduces the well-being of both men and women as well as family income. Seniority-based wages and a dual labour market compound the loss of lifetime income for any extended labour market absence. In previous times, when strong social norms dictated women to marry and have children, and women’s career opportunities were limited, women more easily chose family over employment. As Korea has grown richer, women have gained more equal opportunities to men in education and working life, and families increasingly rely on two incomes, the sacrifice of family income for each child has grown and pushed fertility to new lows.
Beyond the family budget constraint, it also matters to fertility that mothers bear a heavier individual career burden than fathers, as decisions to have a child normally require agreement between the parents. The importance of this individual cost of parenthood may have increased as an increasing share of marriages end in divorce, and it may have been pushed up by a shift in preferences. When Korean married women were in employment in the past, this tended to be either out of necessity because their husband’s incomes were too low to feed the family, or because the financial rewards were substantial. However, since the early 2000s, the elasticity of married women's labour supply in response to their own wages and spouses' income have been decreasing considerably, which indicates that women’s preferences may have shifted in favour of career.
Direct costs add to the loss of income associated with parenthood. While expenditures for food, clothing and childcare have declined as a share of average family income, increases in housing expenditure have reduced fertility rates across the OECD, including Korea. In a reflection of Korea’s dual labour market, many parents allocate a sizeable portion of their income to private tutoring to help their children get ahead, making education expenditure another major hurdle to have children. In 2023, almost 80% of Korean schoolchildren participated in private tutoring for which their parents spent roughly 10% of their disposable income on average.
Family policies, including early childhood education and care, paid parental leave and family benefits, can make it easier to combine career and parenthood and partially compensate parents for cost from having and raising children. A major policy reform in 2013 made all preschool-aged children eligible for free childcare regardless of parental income, accompanied by the introduction of a parental home-care allowance for parents opting to care for their child at home. Parental leave has also been expanded and strengthened considerably over time in Korea, with the result that both the duration and the level of payment eligible parents are entitled to compare well with the OECD average. Even so, the effects of these policies in terms of female employment and fertility have been underwhelming. Empirical evidence points to a sizeable income effect in which cash transfers and subsidised services provided in-kind increase household disposable income, enabling mothers to stay at home. Individual situations and preferences play an important role, with for example mothers living in areas with quality childcare available being more likely to increase their labour supply as a response to the 2013 reform. The career maintenance effect of family policies will likely be weaker and the income effect stronger in countries like Korea where labour market institutions make it difficult to combine career and children at the outset.
The Covid-19 pandemic led to postponed marriages and childbirths, temporary pushing fertility below its trend. A recent uptick in marriages and births reflects a catch-up effect from the pandemic years. However, it is not possible to untangle the effects of the pandemic from other forces acting, and the possibility of a trend shift in fertility therefore cannot be ruled out. The working hour reduction reform which was phased in from 2018 to 2021 represents a major shift towards work-life balance. Cumulating with the strengthening of family policies the past couple of decades it could potentially have tipped the scales for prospective working parents. However, a fertility revival will at best be slow and gradual until policies, gender norms and working practices taken together support a large majority of women to pursue career and family in tandem.
