Fashion Over Family. Is Immigration the Answer?
Following on from our Demographics Matter article we take a deeper dive into South Korea’s demographic crisis, characterised by an alarmingly low birth rate and a rapidly ageing population. Despite various government incentives to encourage parenthood, many young Koreans remain unconvinced that having children is a more worthwhile investment than pursuing personal fulfilment through luxury and leisure activities.
South Korea, Asia's fourth-largest economy, has continuously recorded the lowest birth rate globally, a situation that shows no sign of improvement. Efforts to reverse this trend, including proposals to establish a dedicated ministry for demographic challenges, have so far failed to yield the desired outcomes. The lifestyle choices of Generations Y and Z, prioritising experiences over long-term commitments like marriage and parenthood, further complicate these efforts. Park Yeon, a 28-year-old fashion influencer, exemplifies this trend: "I'm all about YOLO (you only live once)," she says, prioritising self-reward and immediate happiness over saving for marriage and children.
It has been suggested that the younger generation’s tendency to prioritise status and online recognition over traditional markers of success, such as home ownership and family, contributes significantly to the declining birth rate. Jung Jae-hoon, a professor at Seoul Women’s University, points out that the high spending habits of young Koreans reflect their pursuit of personal and social validation, leaving little room for savings or family planning. Data indicates that the savings rate among individuals in their 30s has declined over recent years, despite interest rate hikes aimed at curbing consumer spending. Additionally, there has been a marked increase in spending by younger Koreans on luxury goods, high-end dining, and travel.
Financial concerns remain a significant barrier to childbearing, as highlighted in a recent survey by research firm PMI Co., where nearly half of the respondents cited job insecurity and education costs as the primary reasons for not having children. This economic strain, combined with the preference for immediate gratification, helps explain why government measures such as subsidies and extended parental leave have failed to reverse the trend. South Korea’s creation of a new ministry dedicated to demographic issues reflects a strategic shift, yet the cultural and economic barriers remain.
New analysis by Michael Clemens of the Peterson Institute for International Economics provides a fresh perspective on South Korea's demographic dilemma. Clemens suggests the country could see a 10% decline in income per citizen within 18 years due to the ageing population, assuming no additional immigration post-2024. His research indicates that the shrinking labour force will diminish the productive capacity of the economy more rapidly than can be offset by increased capital accumulation or current pronatalist policies. This will result in a decline in per capita income, further exacerbated by the growing financial burden on the working-age population, who must support an increasing number of dependents, including both the elderly and children.
Clemens argues that traditional pronatalist approach might not be sufficient to counteract the demographic decline. Instead, Clemens suggests that temporary labour migration could play a crucial role in mitigating economic stagnation. Using countries like Malaysia as a model, South Korea could potentially alleviate pressure on its labour market and support economic stability. However, this economically promising approach raises important questions about migrant rights and integration.
To prevent severe economic stagnation and reduce the financial burden on the younger generation, tackling the demographic crisis in South Korea, and even globally, will require a comprehensive strategy that balances economic incentives with cultural and social shifts.
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