The Economics of a Shrinking Nation: South Korea’s Fertility Crisis
By: Madison Kim
No country in the world has modernized as rapidly, only to fear its own extinction, as South Korea. For decades, the nation has faced a demographic crisis: it now holds the lowest fertility rate in the world, measured by the number of children women expect to have in their lifetime. Statistics Korea reported a fertility rate of 0.72 in 2023, around three times lower than the fertility rate of 2.1 required to sustain a stable population. The country has been the only Organization for Economic Co-operation and Development (OECD) member since 2018 to have a fertility rate below 1. The issue remains an ongoing national emergency despite the South Korean government pouring billions of dollars into childcare incentives. But money alone cannot fix a culture that makes parenthood feel like a burden. While much of the world’s concern is solely directed at the country’s low fertility rate, the crisis is a testament to the country’s inherent problems surrounding gender inequality and an unforgiving work system. Behind the statistics lie an economic development crisis rooted in cultural and structural values.
Background and Historical Context
After the Korean War (1950-1953), South Korea was one of the poorest nations in the world, with a GNP per capita of around $80 in the 1960s and an economy in ruins. While North Korea carried out an impressive recovery within the first eight years after the war, South Korea’s economic growth remained idle and depended heavily on aid from the United States. Most of the country’s industrial facilities were destroyed during the war, leaving South Korea stripped of capital and natural resources. But amidst a period of economic stagnation, rapid modernization under the leadership of President Park Chung-hee allowed the country to push ahead with export-oriented economic development plans in the 1960s. The country shifted from a rural, agrarian, family-oriented society to an urbanized, education-focused economy, with initial exports including light industrially-manufactured products and raw materials, and later exports comprising goods produced in chemical facilities. With this development, societal values began shifting, with competition, work ethic, and work-centric culture becoming normalized and prioritized.
Graph of South Korea’s fertility rate over time. Data from World Bank
In the 1960s, the fertility rate was around 6.0 children per woman, with a population boom following the country’s industrialization. Ironically, the South Korean government initially encouraged smaller families due to the rapidly growing population, and implemented family planning programs in an attempt to reduce fertility rates. The population dropped below the replacement level of 2.1 for the first time during the early 1980s, and there has been a downward trajectory ever since. Looking at the lingering effects today, the programs may have succeeded too well – aggressive campaigns, like subsidizing birth control and contraception, and introducing the statement “If you keep having children without thinking, you'll end up like a beggar” (“덮어놓고 낳다보면 거지꼴을 못 면 한다”) caused fertility rates to plummet. Cultural values surrounding small family sizes still exist today, leading to unintended societal consequences. In the 2000s, the government reversed course, offering nationwide baby bonuses and cash rewards for new parents. The fertility rate reached 0.72 in 2023, the lowest globally.
Economic and Social Factors Behind Declining Fertility Rate
It is never easy to balance a demanding career with family life, but the situation in South Korea is exacerbated by the country’s infamously long workweek (sometimes reaching over 60 hours), gender pay gap, and concerns about career advancements.
In South Korea, overtime is normalized while flexible schedules are rare or non-existent, and reforms to lower acceptable working hours have been unsuccessful. The vast majority of OECD countries have a workweek of 40 hours per week — this is not the case for South Korea, where a competitive culture of working long hours cultivates a perpetual work cycle. The pressure for continuous productivity poses barriers to balancing parenting with employment. The country’s large gender pay gap only adds to these difficulties: in 2024, South Korean women earned on average 30% less than men. The country’s wage gaps are amongst the widest in the OECD, fueled by ingrained systemic inequalities like outdated gender roles and occupational segregation; women are often concentrated in lower-paying sectors, with barriers to them reaching leadership positions.
Traditional gender roles also continue to shape family life, leaving women to shoulder the burden of childcare and household responsibilities while husbands are considered the main providers of the family. Researchers have found that women’s participation in the workforce drops sharply after their first child is born, recovering only gradually over the next five years. Many face a harsh work-family trade-off, often expected to leave or downgrade their careers after childbirth. As a result, the decision to have children becomes an economic calculation rather than a personal choice. For countless women, having children means weighing ambition against motherhood, turning what should be a life milestone into a complicated compromise.
South Korea’s entrenched work culture and gender inequality are only part of the story. For younger generations, the financial burden of having children makes parenthood nearly impossible. Seoul’s real estate prices have reached record-breaking highs, with an average apartment costing over $1 million USD, over ten times the average annual household income for Seoul’s top 20 percent of households. Meanwhile, the pressure for academic achievement drives families to spend heavily on private education from a very young age, with total private education spending reaching an all-time high of $20.1 billion USD in 2024. Families spend a significant portion of this on tutoring alone. Many young adults face job insecurity and stagnant wages, hindering their ability to save for family planning and rendering it difficult to reach the financial stability required for marriage and children.
Economic Consequences of Low Fertility Rate
With a fertility rate below 1, South Korea is racing towards an economic cliff. The nation’s working-age population is already shrinking, expected to fall by a quarter in the next twenty years. Fewer workers mean a smaller labor force, slower productivity, and declining GDP growth, which could erode the foundational industrial growth the country worked so hard to build. The demographic extremity is not only a number, but a looming economic crisis with tangible consequences for individuals, markets, and public policy.
Japan offers a cautionary tale. The country consistently has the oldest population in the world, with a third of its population aged over 65. In January 2023, Prime Minister Fumio Kishida said that “Japan is standing on the verge of whether we can continue to function as a society,” facing labor shortages and, like South Korea, a fertility rate that hit a record low in 2022. South Korea faces a similar trajectory, though its decline has been even sharper. The nation’s death rate surpassed the birth rate in around 2020, marking the start of population decline and worsened by the COVD-19 pandemic.
Culturally, demographic changes affect everyday life, especially in how communities engage with each other. People are bombarded with advertisements encouraging marriage or having children, with constant marketing tactics like displaying happy families or including alarming statistics. From department stores to television ads, this constant social messaging is inescapable, a constant reminder of the dire situation of the country.
South Korea also has severely non-uniform development in relation to women’s rights and gender equity. Despite South Korea’s technological and market advancements, women’s rights and work-life balance have not progressed at the same pace. More than anything, South Korea’s fertility crisis exposes the disparity between the economic modernization and static societal change, with this divide threatening the sustainability of the country’s population.
Looking to the Future
In recent years, there appears to be a step in the right direction – South Korea’s fertility rate in 2024 was 0.74 after the record low of 0.72 in 2023. There is cautious optimism with the recent slight increase after years of decline, and while still amongst the lowest of the OECD countries, fertility rates are projected to increase slowly over the next couple of years. The Institute of Statistics provides three main reasons for the increase in fertility rate: an increase in marriages that have been delayed by the pandemic, an increase in the population of the fertile age group, and the beginnings of a cultural shift in young people’s beliefs regarding childbirth and marriage.
To counter low fertility rates, the government also plans on extending parental leave for men, increasing tax support for companies that promote work-life balance, and requiring companies to raise awareness of family life outside of work. While these tactics may be effective, South Korea cannot fully address its fertility crisis with policy alone. The country requires broader cultural changes to fully reverse the crisis, and this starts with redefining success beyond a career, normalizing later parenting, and reforming corporate culture to encompass equitable gender standards. Changing the fabric of the country’s values will prove to be difficult, but real change requires a societal shift.
On a practical level, South Korea’s policies should aim to provide reasonable incentives to give birth, such as reduced costs of living and improved financial accessibility of childcare services and education. Sustainable growth depends on aligning labor and welfare systems to the demographic reality – this means tackling the roots of the fertility crisis and re-evaluating the deeply-ingrained ideologies that have directed decision-making for years. A long-term commitment will be required to avoid population collapse and prevent the erosion of prosperity the country has spent decades building. The clock is running out — South Korea’s future depends on action today.
Photo by Kim Hong-ji/Reuters
Madison Kim is a freshman at New York University studying business. Originally from Vancouver, Canada, she is interested in entrepreneurship, the economics of the entertainment industry, and how media and culture can inspire social impact. Outside of academics, she is an avid film and TV enthusiast, loves to dance and choreograph, and enjoys reading and exploring new creative projects.
