Demographic time bomb ticking down on South Korea

Demographic decline and changing attitudes toward work are killing off an earlier generation of ‘economic warriors’

SEOUL – Regardless of how crushingly jam-packed South Korean subway carriages get at rush hour, there is almost inevitably an unoccupied seat in almost every carriage – the one reserved for pregnant women.

It is a forlorn snapshot of what is arguably South Korea’s largest – but largely unaddressed – national challenge: the reluctance to breed and have families.

For years, it was an issue that was agonized over but invisible. Now, however, manpower shortages are becoming visible – even to the most gormless tourist who ventures out into Seoul after hours.

In a city once noted for its nightlife, multiple restaurants now take last orders at 8:00 pm. And those painting the town red had better keep an eye on the clock: Taxi supply has dried up, making it nearly impossible to hail a cab – and hard work even to book one – in the city’s nightlife zones.

But this is just the tip of a vast iceberg. The falling number of productive workers presents a huge demographic challenge for one of the world’s leading and most important manufacturing economies.  

The issue is one of quality as well as quantity. Employers and experts say that the current generation lacks the “economic warrior” mindset of their parents and grandparents, who sacrificed their health and happiness on the altar of work and growth.

With the “Korean Dream” – a career in a blue-chip firm, an apartment in Seoul and a family – increasingly out of reach, today’s youth are shifting their priorities. Poverty has largely been eradicated in South Korea, meaning recent graduates are happy to live with their parents, work in the gig economy and enjoy something their predecessors didn’t: work-life balance.

Historically, “The economy was driven by an excellent pool of HR but in terms of quantity and quality, this is emerging as a bottleneck,” Minister of Employment and Labor Lee Jung-sik told foreign reporters in Seoul on November 29. 

“Hours have to decline gradually, but the overall population is declining so we have to look at the working-age population who are not working – that is, women, young people and the elderly – and induce them into the labor market.”

But it is not just the workforce itself. There are also systemic issues.

“Our systems are not up to date as they date back to the ‘compressed growth’ days,” Lee said, referring to Korea’s surging economic expansion of from the 1960s to the 1990s. He added that his goal is to make the millennial labor market “as attractive as possible.”

The ultra-hard-working Korean of yore has been replaced by a less work-centric generation. Image: A briquette carrier of the 1970s. Photo: Tom Coyner

Dire demographics

Number crunchers digging into South Korea’s demographics are producing shocking metrics.

Our World in Data’s survey, which bases its estimates on UN fertility rates, finds that South Korea’s population peaked in 2020 at 51.84 million. In 2023, that figure slumps slightly to 51.78 million, but, from 2038, it is projected to drop below 50 million.

From then on, the survey’s graph plummets. After 2062, there will be fewer than 40 million living South Koreans; after 2084, their numbers drop to under 30 million. 

Export-centric South Korea is deeply embedded in the global economy but its demographic trends are well out of whack with global population trends. According to Statistics Korea, the world’s population is projected to rise from 7.97 billion in 2022 to 10.3 billion in 2070. By contrast, the population of South Korea is set to drop from 52 million in 2022 to 38 million in 2070.

Moreover, Statistics Korea finds the share of people aged 65 or over worldwide will rise by 9.8% in 2022 to 20.1% in 2070. But the percentage of the aged in South Korea is projected to shoot up over double the global rate, from 17.5% in 2022 to 46.4% in 2070.

A Statista forecast, that breaks down South Korea’s population into children, working-age people and the elderly, makes equally sobering reading. Statisa finds that the number of people today aged 15-64 is roughly four times greater than that of those aged 65 or over, but by 2040, the latter number will be half of the former number. And by 2070, they will be dead equal.

South Korea’s workforce is already in decline. According to Ministry of Employment and Labor stats, the number of working-age Koreans in 2012 was 73.4% of the populace; in 2021 it was 71.7%.; and by 2030, will be just 65.4%.

These multiple data points have huge ramifications for workforce numbers and output. But separately, there is the issue of changing employee attitudes toward work itself.

The disappearing Korean employee

During Korea’s high-growth period, from the mid-1960s to the watershed 1997-98 Asian financial crisis, workers could expect to exit education and enter a job that would last a lifetime. The downside was a lack of lifestyle or leisure options, given the six-day workweek.

Now, mass offshoring by conglomerates and slowing growth in what is now a mature advanced economy have changed the game. The job-for-life is gone and there is intense competition for work at prestige workplaces.

Meanwhile, newly implemented flexible work practices and prioritization of quality of life means fewer and fewer Koreans are defining themselves by their work.

“There are generation gaps in terms of perception of work between old and young,” Lee said. “Things were tough in the past, people were diligent, hard-working and had high loyalty to the workplace, but the MZ generation is different from the older generation.”

In many cases, the system is weighted against youth, who are undeniably more sophisticated, cosmopolitan and creative than their more regimented forebears – and arguably more productive.

“During the growth period, as your tenure increased, your wages increased automatically, along with your seniority,” said the ministry’s Director General of Labor Management Cooperation Policy Kwang Chang-jun. “The older generation get paid more, which is a burden for the company, so they stop recruiting and this means less opportunities for young people.”

It is not just age. In a society still weighted down by conservative social mores, gender is another issue.

“One of the biggest problems is that young people and women are less active than in other countries,” said Director General of Labor Market Policy Chong Kyeong-hun. “We need to induce their participation in the labor market.”

These multiple factors – quantity and quality of labor, and related issues in the eco-system – present headaches for those seeking employees.

“Potential employees seem to be getting pickier: If you don’t have a huge brand it is tough to hire and the young are also really into working for startups,” said one employer who runs a marketing firm in Seoul who requested anonymity in order to speak freely. “Supply and demand has changed, it seems like the pool is drying up. We are not even getting interns now, though we are advertising at universities.”

“It is beyond Korea – there is a shortage of talent everywhere,” said Steve McKinney, a Seoul-based headhunter. “One of the reasons is we have new technologies – the auto industry, for example, is changing completely –  that need new skills and requirements. Where do they come from?”

Even so, he reckons that Korea has a special problem.

“It is becoming more difficult to find the right people and motivate them, so recruitment is harder – there is a talent shortage,” McKinney, who heads his own agency, McKinney Consulting, continued. “Younger people are less willing to work, or to move, or to take a risk.”

For decades, Korean workers were at the mercy of their employers. More recently, employment law has shifted in the opposite direction.

Today’s workforce has “extremely low loyalty, they are very entitled and the legal system really encourages that,” said Brendon Carr, an employment lawyer with the Seoul-based firm HHC Law.

“Korean employment law coddles employees who steal, or who are incapable, are surly or are insubordinate,” he told Asia Times. “It is next to impossible to terminate an employee except for really spectacular Marvel supervillain-level misconduct.”

One side effect of this – and the generous benefit packages that Korean labor laws requires – is the reluctance of many employers to offer new employees full-time positions. Instead, they prefer to hire part-time or contract workers.

Young Koreans take a very different attitude to work-life balance than their parents and grandparents. Photo: Tom Coyner

What is to be done?

Seoul, like similarly demographically-challenged Tokyo, has been scratching its head over how to meet these towering workforce challenges. A multi-faceted research group has been formed and will deliver preliminary findings on December 13.

Some solutions are already being put into practice, not least more automation.

“Korea’s manufacturing industry is world-class and we have the highest automation rate in the world,” Lee said, adding that research is underway on smart factories inhabited by “collaborative robots.”

These smart plants may offer the best of both worlds. “Digitization retains employment and increases productivity,” the minister said.

Easing different classes of workers into the labor market is another focus.

To encourage women to work, the ministry has enacted a one-year parental leave system, which has, over the last three years, been taken up by between 105,000 and 112,000 women annually. Employees with children under eight are also permitted to work shorter hours.

Stronger guidance and inspections are being enforced to ensure that workplaces are not discriminatory, while businesses will, as of next year, be required to disclose the gender ratios of their employees.

In terms of granting Korea’s escalating population of elderly access to work, Seoul is increasing financial support for companies that promote continuous employment past the retirement age of 65. Employment and social welfare centers are also creating employment counseling sections for the elderly.

For the young, the government will inaugurate a pilot scheme, opening 10 university job centers next year. An AI-based occupation exploration program will also go online, seeking to marry students with appropriate careers based on their skillsets and individual preferences.  And a public-private partnership to offer students work-experience opportunities will be expanded.

Then there are labor imports. “More foreign workers will be given opportunities to work in Korea with labor market opening,” Lee said.

Korea – like Japan, customarily antagonistic toward immigration – has had some success with related policies.

For over two decades, this middle-class nation’s “Three Ds” (“dangerous, dirty, demeaning”) industrial base – largely comprising small, low-tech manufacturing operations – has been manned by hundreds of thousands of third-world workers imported from nations like Mongolia, Pakistan, the Philippines and Vietnam who toil on five-year visas.

Workers on a factory line in South Korea. Image: Twitter

Moreover, South Korea offers special visa status to “Joseon-jeokk” – i.e. China’s ethnic Korean minority – who have been key players in the service sector.

Now, there is an understanding that the numbers need to rise. In 2023, the government will open the gates to a record 110,000 foreign workers, up significantly from 69,000 this year. Their workplaces will be split between 75,000 in manufacturing,

14,000 in agriculture and 7,000 in fisheries.

Even so, Lee admits that this is not enough.

“Our systems have been focused on unskilled foreign manpower but we need more inflow of skilled labor,” he said. “These problems have to be addressed. We need continued investment into the labor market.”

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