Low birthrate is double-edged sword

By Cho Jin-seo

Staff reporter

In Gwangmyeong city, having more kids means not having to pay to dump garbage. Last week, the city government announced it will provide free garbage bags to families that have more than two children, for up to 1,200 liters of waste every year.

Those garbage bags, valued at around 30,000 won including an environmental tax, are a small monetary benefit given to families, on top of the 1 million won in subsidies they already receive with the birth of their third or more child. But the garbage bags will certainly add a beneficial factor for those large families, the city officials believe.

"We want to create a birth-friendly atmosphere by offering unique benefits to large families," the city's health official said.

Gwangmyeong might be a rather unique case, but it is certainly not alone in promoting couples to have more babies. The low birth rate has become a hot social issue in South Korea this decade, and the government has announced several times that balancing the aging society and preventing the population from shrinking would be one of its long-term policy goal.

The most obvious reason for a nationwide drive to have more babies is economic. The decreasing youthful segment of the population and the greater number of aged people instead means that in the future there will be less people to pay tax and more people to receive pensions and health care. Having fewer working-age people will also weaken the growth potential of the national economic output, since the labor force and national consumption power will shrink accordingly.

"I think the aging or our society has become an unavoidable phenomenon. The pace of aging is much faster in South Korea than it was in Japan," says Hyun Oh-seok, the president of Korea Development Institute, in an interview with The Korea Times last week. "This is one of the major problems Korea has now."

For over 40 years, South Korea's population has grown more than 1.5 times from around 32 million to over 48 million. But the growth has slowed down dramatically and it is expected to turn negative from 2018. An average South Korean couple used to give birth to 2.1 babies in 1984, but last year it was only 1.15.

Along with low the birth rate, better health care has also aggravated the problem of a rapidly aging society. In France it took 154 years for the population over 65 to become 20 percent of its entire population from 7 percent. The same process took 94 years for the United States and 36 years for Japan. For Korea, it is expected to take only 26 years.

The worst of all the doomsday scenarios came from Samsung Economic Research Institute in April ― it warned of the extinction of Koreans.

"If this trend of low birth continues, it is possible that the entire Korean race will be halved to 25 million by 2100. It will be reduced to 330,000 by the year of 2500, and then the Korean race and the Korean language will become extinct," said the report, which was written by Kang Sung-won and two other researchers.

Though it was clearly a sensational claim based on naive assumptions, the report had a point in the economic sense. A shrinking population may decrease the national economic output from around 2029, and the negative growth rate may peak at 4.8 percent around 2050.

The government has introduced various policies to encourage people to have more (legitimate) babies. It is offering a 20-percent discount on the electricity bill of families with three or more kids. It exempts the first 12 months of national pension payments for all third-born kids in the nation, and 18 months for all fourth-born children.

Those large families also get a 50-percent discount on the purchase price and registration tax of vehicles. In total, such policies have cost around 30 trillion won since 2005, according to budget reports.

Having one of the lowest birth rates in the world does not necessarily mean that South Korean couples are naturally disinclined to have babies then couples elsewhere. According to a poll by Korea Institute for Health and Social Affairs in 2005, unmarried people responded that they want to have 2.1 kids after marriage, on average. But once they get married, Koreans suddenly become averse to having children.

The reason is mostly financial, the Samsung researchers say. The age of marriage is getting older year by year because women are increasingly afraid of interrupting their career. High education costs is another major factor that discourages potential parents, they say.

Is having fewer people all bad news?

While researchers and policymakers agree on the reasons for the low birth rate, they sometimes differ on the effects of it, especially in the economic sense. The correlation between population growth and economic growth has been debated over centuries.

It is generally agreed that population growth tends to help economic growth to a certain level. But opinions differ whether the population growth is positively related to per-capita income and the quality of individual life.

In his best-selling book "A Farewell to Alms," which was recently published in Korea, Gregory Clark, professor of economics at the University of California, Davis, argues that high population density and economic growth can indeed worsen the living standards of a nation. Supporting this argument, he shows that the living standards of Europeans improved greatly when the Black Death wiped out around half the population there in the 14th century.

In South Korea, the impact of high population density is apparent. It is the world's third most crowded nation after Bangladesh and Taiwan if city states and island nations are excluded. With 486 people living together in per one square kilometer of land, the country is about 50 percent more crowded than Japan, 2.5 times more than China, 4 times more than France and 186 times more than Australia.

Such intensity of population makes housing and education prohibitively expensive in the Seoul metropolitan area, which eventually leads to the low birth rate of the people living here.

In that sense, some economists say that Korea should focus more on the qualitative, not quantitative, aspect of growth to become an advanced nation.

In its latest report, the Samsung economic research institute rated each OECD member nation on "growth" and "quality of life" fields in a scale of 100.

In the assessment, Korea marked 68.3 in the first field and 62.6 in the second field, meaning the country is less advanced in terms of quality of life.

Job statistics also increasingly support claims that the shrinking population has little to do with economic growth. In its June employment data, the government announced that the youth jobless rate has risen up to 8.3 percent, while the overall unemployment rate was only 3.5 percent.