Korea's annual economic growth rate to drop 0.38% by 2035 as '2nd baby boomers' retire
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Korea's annual economic growth rate could drop by 0.38 percentage points over the next decade as the 9.54 million born in the "second baby boom" between 1964 and 1974 reach retirement age, a Bank of Korea (BOK) report warned.
According to the report released by the central bank, Monday, which assesses the potential economic impact from the retirement of the age cohort, Korea's annual economic growth rate is expected to fall by 0.38 percentage points over the next 11 years, with a significant portion of labor exiting the domestic labor market.
The decline is 0.05 percentage points higher than the estimated 0.33 percentage point decrease in the economic growth rate from the retirement of the first baby boomers — those born between 1955 and 1963, according to the report. It is because the number born in the second baby boom was about 2.5 million greater than the 7 million of the first baby boom.
Second baby boomers account for about 18.6 percent of the total population in South Korea.
Despite the concerns over Korea's growth constraint, the paper suggests that the negative impacts from the second baby boomers' retirement can be mitigated through the enactment of appropriate policies, such as employment extension and pension system improvements.
The report went on to point out that the second baby boomers in general have high human capital, favorable income and asset conditions, as well as strong willingness to continue working, and these characteristics are expected to enhance the effectiveness of policy supports.
The second baby boomers indeed are surveyed to have a high willingness to continue working. In a poll on those aged 55-79 conducted in May last year as part of the government-led economic activity survey, the proportion of respondents who expressed a desire to continue working was 68.5 percent, which is up by almost 10 percentage points from the 59.2 percent surveyed in 2012.
The second baby boomers also had 24.6 percent more net assets on average compared to the first baby boomers, showing their consumption activities could be maintained if effective policies are taken to reduce their income uncertainty through continued employment.