Wrinkles of Graying The Economy is Aging as Well

On November 19, at an aging population associate research symposium sponsored by the Korea Development Institute (KDI), such opinions were proposed.

Kim Dong-seok, a researcher at KDI, observed through the “Aging population and economic growth” report published on this day that if the current speed of technology growth and declining birth rate are maintained, the potential growth rate for 2040 will decrease to 1.38 percent.

The average potential growth rate of the 2000s will be 5.10 percent, dropping to 4.82 percent by the 2010s, 3.56 percent by the 2020s, and to 2.25 percent by the 2030s at an accelerated pace.

The aggregate birth rate, which is the average number of children a woman will be able to have throughout her life, dropped to an all-time worldwide low last year to 1.19 from 6.0 in the 1960s.

Researcher Kim said, “Besides preventing a decrease in the birth rate we need to increase the labor force participation rate and the productivity of the general economy.” The financial burden caused by aging was indicated as a factor that is acting as an obstacle for the Korean economy.

Choi Joon-ook, a researcher at the Korean Institute of Public Finance, foresaw through the “Aging population and finance” report that the rate of public expenditures, including health insurance, compared to gross domestic product (GDP), will rapidly increase from the current 35.5 percent to 51.6 percent in 2050 and 57.9 percent in 2070.

Researcher Choi feared that due to the rapidly aging population, at around 2020, the public expenditures burden will start to increase abruptly and rise to 42.4 percent by 2030 and 47.2 percent by 2040.

It was analyzed that the old-age dependency ratio, which is the ratio of the aged the younger generation must support and is currently at 12 percent, will skyrocket to 65.7 percent by 2050, adding to the burden of the younger generation.

Researcher Choi also said, “The increase in the financial burden of an aging population will follow to an increase in the burden of the taxation rate and produce negative such as a decline in the motivation to work.”

Consequently, to prevent the decrease in labor productivity as a result of the aging population, it was indicated that the preparation of countermeasures such as utilization of female labor and increasing the labor productivity of the aged are urgent.

Bang Nam-ha, a researcher at the Korea Labor Institute, forsees, “Due to the aging population, the growth rate of the labor force will rapidly convert to negative after 2020,“ and added, “Around 2020, the percentage of workers 50 years and older among the total labor force will be 40 percent, and by 2050, approximately 50 percent.”

Researcher Bang also added, “Such policies promoting the participation of females in the labor market, securing employment security and increasing the quality of employment for the aged are necessary.”

Yong Park parky@donga.com