Population Aging: Impacts and Policy Imperatives

Abstract

The Republic of Korea is aging rapidly, as the average woman in her childbearing years gives birth to only 1.17 children ─ among the world’s lowest numbers as of 2016 ─ while people are also living longer. The country is projected to enter into the status of an aged society from 2018, with a share of the elderly in its population of 14.3%, and to become a super-aged society with a share of 20% in 2025. Population aging, characterized by low fertility rates and growing life expectancy, influences the whole economy: it alters macroeconomic variables such as output growth, consumption, the current account and inflation as well as household finance, the housing and labor markets, and the industrial structure. It also causes significant changes in the fiscal and monetary policy environment. It is therefore important to assess the impact of aging from a broad, long-term perspective, so as to prepare for it in advance. The Korean government set the low fertility rate and population aging as items on its national agenda back in 2004, and since 2006 has pursued three five-year plans to tackle these issues, albeit without visible results. Given that it takes at least a generation’s time to see the effects of a population policy, failing to identify and address the current shortcomings could lead to irreversible consequences later. Against this backdrop, the Bank of Korea has been conducting broad research to analyze the situation related to population aging and devise appropriate policies in response. Under the overarching title Population Aging: Impacts and Policy Imperatives, this volume contains 15 papers, including an assessment of the macro and long-run impacts of population aging, case studies of other countries, and evaluations of and suggestions for the policies as well as the governance framework in Korea. Following this introduction in Part 1, Part 2 provides an overview of how population aging is unfolding in Korea, after which Part 3 undertakes a comprehensive evaluation of the macroeconomic implications of population aging. Part 4 then looks into the impacts of population aging on the various economic sectors, and the related policy challenges. Lastly, Part 5 provides the economic outlook for Korea as population aging progresses, and suggests policy imperatives.