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Korean construction group Booyoung is offering workers a $75,000 bonus for each baby they produce, one of many eye-catching incentives on offer as politicians and companies grapple with the country’s demographic crisis.
“If Korea’s birth rate remains low, the country will face extinction,” Booyoung chair Lee Joong-keun told employees last month.
South Korea’s total fertility rate — the average number of children a woman is expected to give birth to in her lifetime — fell from 0.78 in 2022 to 0.72 in 2023, according to government figures. It is projected to fall to 0.68 this year, far below the 2.1 the OECD says is necessary to ensure a broadly stable population.
Political leaders have increased promises of financial incentives for prospective parents ahead of parliamentary elections next month, with parties from across the political spectrum announcing proposals ranging from more generous housing allowances and tax breaks to compulsory paternity leave for fathers and extended subsidies for egg-freezing programmes.
“Time is running short, I hope every government agency approaches the issues of low birth rates with extraordinary determination,” President Yoon Suk Yeol told ministers in December.
“This is a matter of the country’s survival,” said opposition leader Lee Jae-myung as he announced his party’s programme in January. “It is an imminent challenge right at our doorstep, not a concern in the distant future.”
The effects of the crisis are already being felt. In 2022, the number of South Korean military personnel fell below 500,000 for the first time, while universities and schools reported dwindling student numbers and kindergartens have been converted into nursing homes. Last year, more prams were sold in South Korea for pets than for babies.
“What people are experiencing in South Korea now is not the result of the 0.7 fertility rate, but of when the fertility rate was 1.2,” said Choi Seul-gi, a researcher at the Korea Development Institute. “It is going to get much worse.”
Economists note South Korea faces severe fiscal challenges as the government is forced to support its rapidly ageing population. According to the Korea Institute of Health and Social Affairs, the country’s gross domestic product will be 28 per cent lower in 2050 than it was in 2022, as the working age population shrinks by almost 35 per cent over the next 25 years.
The proportion of those aged 65 is set to rise to 25.5 per cent in 2030 and 46.4 per cent in 2070. According to the OECD, 40.4 per cent of South Koreans over 65 already live in relative poverty, the highest rate in the developed world, while the country’s national pension fund is forecast to run out of money in just over 30 years’ time.
“Korea is facing an unprecedented crisis,” said Oh Suk-tae, an economist at Société Générale in Seoul. “The country will soon start to experience negative growth as its population falls. There will be serious social problems relating to health insurance, public pensions, education and military manpower.”
According to government statistics, the average newly-wed couple in South Korea has combined debts of $124,000. Young people also face rising private tuition costs amid fierce competition for limited places in elite universities and major companies, as well as for housing.
In this context, some of Korea’s companies are also stepping up.
“Companies are fully aware that they need to play a role to resolve the low births problem, and they are making efforts to improve corporate culture in order to make it easier for employees to work and raise kids through a work-life balance,” said Yoo Il-ho, the team leader of employment and labour policy at the Korea Chamber of Commerce and Industry.
Some companies appear to have found success with their incentives. Retail giant Lotte has boasted a fertility rate among its employees of more than two since it introduced mandatory maternity and paternity leave programmes in 2012. Female Lotte employees are entitled to two years of maternity leave in addition to the three months’ leave guaranteed by the state.
But experts warn that financial incentives have not always worked. Between 2006 and 2023, South Korea has spent $270bn on policies ranging from cash payments to subsidised babysitting services and infertility treatments, according to the South Korean parliament’s budget office.
“Successive governments have treated this as an issue of cost, but relatively well-off Koreans are not having children either,” said Lee Sang-lim, head of the demographics monitoring centre at the Korea Institute of Health and Social Affairs.
“The issue is the intense competitive pressure that young Korean women and men are both under, whether that’s in education, in the labour market, or in the housing market,” Lee added.
“They grew up doing nothing but study, watching their mothers struggle to get them into after-school academies and their fathers struggle to make enough money. The result is they feel less attachment to the concept of family — they don’t want the same life for themselves or their children.”
Many experts also cited entrenched social attitudes that made it difficult for women to build their careers while also raising a family.
“If I have a child, it will just mean more arguments, because my life will be reduced to nannying and housework,” said Yoon So-yun, a 41-year-old middle school teacher from Seoul. “I had to choose between my career and having a child.”
As striking as Booyoung’s $75,000 incentive is, it is not even half of what Yoon says she would need. “My mother wants me to have a child, so I told her jokingly that if she gives me $200,000 then I’ll have a baby.”
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