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A Demographic Cliff
South Korea’s total fertility rate (TFR) in 2024 inched up slightly to 0.748, but the figure remains the lowest among OECD nations and far below the 2.1 replacement rate required to maintain a stable population. This sharp decline means that for every 100 South Koreans, only about 36 children are born, threatening to shrink the workforce for generations to come.

The Bank of Korea projects that the country’s demographic challenges could push the economy into a prolonged slowdown by the 2040s, while the Korea Development Institute warns that potential growth could approach zero by mid-century. In a neutral scenario, economic contraction may occur by 2047; under pessimistic assumptions, the decline could begin as early as 2041.

Historical Context and the “Miracle on the Han River”
South Korea’s postwar recovery and rapid industrialization earned it the nickname “Miracle on the Han River.” Yet decades of rapid development have coincided with declining birth rates, fueled by urbanization, high housing costs, and changing social norms. Despite government initiatives, the fertility rate has barely improved from the record low of 0.721 in 2023.

Authorities have rolled out extensive incentives to encourage childbirth, spending over $270 billion since 2008 on baby bonuses, cash rewards, and family support programs. In 2023, proposals even suggested exempting men from mandatory military service if they had three or more children before age 30. Still, these measures have had minimal impact.

Nicholas Eberstadt, a political economist at the American Enterprise Institute, cautions that the slight TFR increase should not inspire optimism: “Even with a marginal rise, South Korea remains far below replacement levels. Population policy alone is unlikely to reverse the trend.”

Impact on Workforce and Productivity
A shrinking population has direct implications for productivity and economic output. With fewer young workers entering the labor market, South Korea could see slower innovation, reduced consumption, and constraints on long-term growth.

Lee In-sil, Director of the Korea Peninsula Population Institute for Future, warns that without compensatory technological innovation or strategic policy adjustments, the nation could face a “sustained economic slowdown.”

Pension System and Fiscal Pressures
The demographic decline also strains South Korea’s pension system. In March, lawmakers passed the first pension reform in 18 years, extending the depletion of the state pension fund to 2071. Younger generations will pay higher premiums while receiving reduced benefits, a change likely to draw criticism for shifting burdens to future workers.

Several pension schemes, including those for military personnel and civil servants, have already been depleted. Without structural changes, the shrinking workforce could exacerbate fiscal stress in coming decades.

National Security Concerns
Population decline also affects defense readiness. Active troops have fallen nearly 20% since 2019, from 690,000 to roughly 450,000. South Korea relies on 28,500 U.S. forces under a mutual defense treaty, maintaining a balance against North Korea’s standing army of approximately 1.23 million. With fewer eligible conscripts, sustaining a robust military could become more challenging.

Potential Solutions and Optimism
Despite the grim statistics, some analysts argue that South Korea can adapt. Lee emphasizes that economies facing demographic shifts typically respond with technological advancements, productivity improvements, and targeted immigration policies.

Eberstadt points to historical parallels, noting that fears of global famine and economic collapse in the 1970s failed to materialize, as societies adapted through innovation and resource management. “Human beings are uniquely adaptable,” he said. “While South Korea’s demographic challenge is significant, history suggests it is not insurmountable.”

South Korea faces a demographic crossroads: low fertility rates threaten to stall growth, pressure public finances, and challenge national security. Yet with proactive policies, technological innovation, and societal adaptation, the country could maintain its prosperity. The lessons from its postwar “miracle” era suggest that South Korea is capable of confronting even profound demographic shifts with resilience.