Commentary on Political Economy

Monday 4 January 2021


ASIA'S IMMINENT DECLINE - as we predicted

South Korea’s population dip is a grim milestone

The population is shrinking for the first time, after years of slowing growth. The typical prescriptions are hard during a pandemic.

Daniel Moss

South Korea greeted the new year by recording its first annual population decline. Unfortunately, the go-to solutions are meeting some practical challenges in the COVID-19 era.

Headcount dwindled slightly to 51.8 million last year, the Ministry of Interior and Safety said. The retreat was the product of a 10.6 per cent slide in births, coupled with a 3.1 per cent increase in deaths. South Korea now joins neighbouring Japan in suffering an actual fall in population, as opposed to the diminishing rates of growth that characterised past years. The ministry called for "fundamental changes," national news agency Yonhap reported, without offering details.

South Korea, generally praised for its handling of COVID-19, is wrestling with a surge in cases that threatens to undercut some of the rosy economic projections for 2021.  AP

Korea's demographic challenges partly stem from family-planning measures imposed by military-backed administrations in the 1960s, which aimed to eradicate poverty. They worked only too well. By the turn of the century, a diminishing population was on the horizon. But the timing of this grim milestone is less than fortuitous.

South Korea, generally praised for its handling of COVID-19, is wrestling with a surge in cases that threatens to undercut some of the rosy economic projections for 2021. The nation, like developed peers, is flirting with deflation. It must also contend with an increasingly bitter commercial rivalry between the US, guarantor of South Korea's national security, and China, its biggest trading partner.

The fixes that many people advocated to me on a pre-COVID trip in 2019, such as encouraging couples to have more children and greater immigration, now seem unrealistic. Borders of many countries are, for practical purposes, closed. (South Korea has instituted strict controls itself.) Climbing unemployment and curbs on social contact don't exactly inspire procreation, no matter what incentives the state dangles. Seoul residents have long complained about the cost of raising existing children.

Compounding the population decline has been a gradually emptying of the countryside, thanks to Seoul's magnetic pull. Its population and that of surrounding areas actually edged up, Yonhap said, accounting for about half of the nation's residents.

To my surprise, many rural residents said they were comfortable with immigration during my visit. Despite the country's reputation for insularity, my interpreter observed that few of the servers at restaurants were local. A banner at a traffic roundabout in Uiseong, a county in the centre of the country, urged onlookers to marry North Koreans. A church hall contained a busy office that supported brides from south-east Asia who wed lonely local farmers.

Tight job market

South Korea's problems aren't unique to the peninsula. While Japan has long been the poster child for profound demographic changes, similar shifts have been afoot in elsewhere in East Asia. China, once seen as a limitless pool of cheap labour, now has a fairly tight job market. Hong Kong and Taiwan have very low fertility rates.

In Singapore, the population fell for the first time since 2003. While the drop was attributed largely to foreigners leaving amid a deep recession, the city-state has for years been trying to boost the birthrate. Stimulus measures last year contained baby bonuses.

These forces can't be turned around overnight. It's also worth asking whether they should be. Social distancing has given greater urgency to automation, a phenomenon that people were fairly relaxed about in South Korea and Japan. (Both are major exporters of work-from-home technology.)

Robots were already doing more jobs at airports in both countries. In Singapore, they can be found making cappuccinos at trendy cafes and cleaning up at hawker centres.

The World Economic Forum reported in October that more than 40 per cent of businesses surveyed are set to reduce their workforce because of technology integration, while about a third plan to expand for the same reason. By the middle of this decade, the time spent on current tasks at work by humans and machines will be equal.

That isn't an excuse to do nothing. President Moon Jae-in passed several supplementary budgets in 2020 and plans record borrowing this year. That works when interest rates are very low, and South Korea's debt is relatively contained compared with most members of the Organisation for Economic Cooperation and Development.

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