Super-aged Korea's GDP set to plunge

By Choi Sung-jin

Korea’s gross domestic product in 2026, when the nation is expected to enter into a super-aged society, is expected to fall 8 percent from 2014, a report said Tuesday.

If the share of elderly people aged 65 or older rises 1 percentage point, the nation’s real GDP is estimated to drop 0.97 percent, the Korea Economic Research Institute (KERI) said in the report entitled “Estimation of the level of employment rate to bolster growth momentum in an era of aging population.”

Korea is expected to enter into a super-aged society in 2026 with the aging rate exceeding 20 percent.

Accordingly, the nation’s GDP is estimated to fall 7.95 percent compared with 2014, the report said. In 2050, the GDP is expected to plunge 21.9 percent from 2014. According to the United Nations, Korea’s aging rate in 2050 is expected to reach 35.15 percent.

“As the nation ages, the reduction of GDP will be inevitable,” said Yoo Jin-seong, a fellow at KERI, a think tank affiliated with the Federation of Korean Industries, a lobby group for family-controlled conglomerates. “Korea will need to raise the employment rate to maintain its GDP at the present level.”

If Korea’s employment rate rises 1 percentage point, the nation’s GDP will likely increase 1.02 percent, Yoo said. “That means Korea should lift its employment rate to at least 73.1 percent in 2026, 7.8 percentage points higher than the 65.3 percent in 2014, to maintain the current level of GDP,” the KERI researcher added.

Pointing out that the employment rate rose only 2 percentage points from 2002 to 2014, the report called for labor reforms by, for instance, revising worker dispatching acts, easing rules on hiring and firing and allowing the use of alternative labor.

To help improve the labor productivity of people aged 65 or older, the employment structure should also be changed from labor-oriented to expertise-based.

The study estimated the effects population aging has on real GDP in the member nations of the Organization for Economic Cooperation and Development (OECD), assuming that there are no changes in other factors.