The 2-Minute Thought: Hard Times for Korea’s Young and Old

Bloomberg

Bloomberg

South Korea’s population is aging rapidly.  In 1980, in the midst of the “Asian miracle,” the average age in Korea was 26.  Now it is 40.  Low birth rates and long average life expectancies mean that by 2040, a third of the population will be over 65.

That’s a lot of senior citizens to support.  The number of seniors supported by every 100 working citizens will go from 18 today to 57 in 2040. And Korea already has the highest rate of elderly poverty among OECD countries.  Korea is a wealthy nation with high per capita income, but its poverty rate for those over 65 is 50%.  In contrast, the OECD average is 13%.  

Source: OECD, Pensions at a Glance 2015

Source: OECD, Pensions at a Glance 2015

Here’s another problem:  While more working-aged people are needed, young people can’t find jobs.  Unemployment for Koreans aged 15 – 29 has been climbing for years and in February reached a record-high 12.5%

Source: Korea Joongang Daily

Source: Korea Joongang Daily

Needless to say, young people fighting for their livelihoods in a fiercely competitive job market aren’t in a terrible rush to get married and have children. 

It’s hard to know where to start on all this, but here’s one place:  Koreans are too well educated.   Over 70% of high school graduates go on to college, and there just aren’t enough “good” jobs for college graduates. 

Unlike their parents who grew up hungry, recent graduates grew up in comfort, and the joke is that they aren’t willing to take on the “3D’s” – “dirty, dangerous, or difficult” work.  As one frustrated business owner told me, young people want the business card with the fancy title, but they refuse to do work if they feel it’s beneath them.  That’s an attitude that would have been laughable to their parents. 

The aim of most college graduates is the prestige of a job at a big company.  But the big conglomerates that have dominated the economy for decades are hiring less in Korea and more overseas because they’re running gigantic global businesses.  At the same time, they haven’t left enough room for a diverse domestic economy of small and medium businesses to develop.  

And when young people can’t find the right job, they often opt for more schooling.  That in turn frustrates smaller business owners who want people with experience – not endless degrees.

Is your head spinning yet?  Society is aging because birth rates are low.  Birth rates are low because competition for jobs is so fierce it discourages starting a family.  Job competition is fierce because there’s limited business diversity and labor mobility.  Labor mobility is limited for a lot of reasons, but part of the blame goes to a fiercely competitive education system that determines one’s fortunes at an early age.  And competing in that tough education system requires a lot of money -- which also discourages having a big family.  So where do you begin?