KOREA: Can Korea Handle a Low Birthrate and Ageing Society

. SEOUL, Korea (The Chosunilbo), September 5, 2008: Viewpoints / Editorial This year, the number of elementary schoolchildren stood at 3.67 million, down 150,000 from last year. This figure was 64 percent of 5.74 million in 1970. The number of new elementary school students fell from 669,600 in 2000 to 540,800 in 2008. Experts predict that the number will further drop below 500,000 in two years' time -- due to the low birthrate. In 1980, some 870,000 babies were born, but the number dropped to 440,000 in 2005. A low birthrate inevitably leads to an ageing society. The ratio of people 65 years old and older will increase from 9.1 percent in 2005 to 15.6 percent in 2020 and to 24.3 percent in 2030. In 2005, a productive population (age between 15 and 64) of 34.53 million supported 4.38 million old people. But in 2030, 31.30 million productive population will have to support 11.81 million elderly people. Can the economy overcome that challenge? Spending for the elderly population, including payouts of national pension, basic old-age pension, and long-term care insurance, will increase from 3.7 percent of GDP in 2007 to 13.4 percent in 2018. All in all, the productive population will dwindle; spending on the elderly will increase; the government's financial status will worsen; savings will be depleted; investment will remain sluggish; and productivity will inevitably drop. The country's potential growth rate, which currently stands in the 5 percent range, will fall to 3 percent in 2020 and to 2 percent in 2030. It looks as if the Korean economy, which barely exceeded the mark of US$20,000 per capita GDP in 2007, has already entered a tunnel called "low birthrate and ageing." Korea's economic engine has been overloaded. Bill Emmott, a British economic journalist, published a book entitled "The Sun Also Sets" in 1989. In the book, he predicted that the Japanese economy will lose its growth engine and slide into a slump due to the fiscal burden of ageing. He made that inauspicious prediction at the very time when the Japanese economy was at its peak. Japanese economists objected to his prediction by presenting various kinds of statistical data. But the Japanese economy did slide into a long-term recession in the 1990s just as he had predicted. In the late 1980s, the Japanese economy ran at full speed as if determined to overtake the U.S. economy. Currently, the Korean economy is so weak that it falters even in the wake of rumors about an impending financial crisis. We should also take costs of unification, which will arrive sometime in the future, into consideration. Experts estimate it at somewhere between hundreds of trillions of won and W2,000 trillion (US$1=W1,129). If we fail to make our economy as big as possible while we can, it will languish under the fiscal burden of ageing and get mired in overruns of unification costs. The only way for a society to overcome the burden of a dwindling productive population and the rapidly increasing number of the elderly people it supports will be to train each and every one of its people to compete with any foreign rival. The 2008 World Competitiveness Report by the International Institute for Management Development ranks Korea 35th among 55 nations surveyed in terms of educational competitiveness. Korea ranks fourth in the world in the number of college graduates, but its educational system has failed to produce the skilled personnel society needs. Under this educational system, Korea and its people won't be able to work their way through difficulties. The only way for Korea and its economy to survive while neither bending to the increasing pressure of ageing nor shrinking under the heavy burden of unification costs is to conduct massive reform for the country's educational system as soon as possible. Copyright (c) 2007 The Chosun Ilbo