In recent years, South Korea has witnessed the rise of a new social phenomenon known as "YOLO," or "You Only Live Once." This concept reflects the younger generation, particularly those in their twenties and thirties, prioritizing consumer spending on entertainment and immediate enjoyment—such as hobbies, travel, and dining out—over long-term investments in marriage, childbirth, and family formation.
This shift has resulted in demographic consequences that are undoubtedly creating economic challenges, which are beginning to surface and are expected to worsen in the near future. As a result, the South Korean government has implemented policies to address this crisis and mitigate its effects. This analysis sheds light on the YOLO phenomenon in South Korea by examining its features, causes, and consequences.
Demographic Crisis
South Korea experienced a rapid demographic shift after the Korean War in the 1950s. This shift was driven by accelerated economic development, moving the country from a low-income to a high-income nation, along with strict family planning policies and changes in the consumption patterns of Korean society. These factors have led to the following:
1. Declining fertility rate:
South Korea is the only country in the world with a fertility rate below one child per woman. It has seen the fastest decline in fertility over the past six decades, falling into what is known as the "low fertility trap." This refers to the difficulty or impossibility of raising fertility rates once they drop to a level between 1.4 and 1.5 children per woman. The following figure shows the development of South Korea's fertility rate since 2010
South Korea's fertility rate has recorded consecutive annual declines from 2015 to 2023, reaching an all-time low of 0.72 children per woman. This level is significantly below the global average required to maintain population stability without accounting for migration, which is 2.1 children per woman. The decline was most evident in the capital, Seoul, which recorded the lowest fertility rate in the country at 0.55 children per woman. Projections suggest that this rate could drop to a new record low of 0.68 children per woman by the end of 2024.
Moreover, South Korea's fertility rate is notably lower than that of comparable economies, such as China (1.175 children per woman), Japan (1.26 children per woman), and the United States (1.665 children per woman).
2. Delayed marriage:
The number of registered marriages in South Korea decreased by 40.6% from 2010 to 2023, reaching 193,700. Most occurred in the 30-34 age group compared to younger age groups. At the same time, the number of divorces rose to 92,400 cases.
Compared to the previous decade, the average age at first marriage for both men and women in South Korea has increased by approximately 1.8 years for men and 1.9 years for women. This brings the average age of marriage to 34 years for men and 31.5 years for women. Consequently, the average age at which women have their first child has also risen to 33.5 years.
3. Aging population:
The proportion of the elderly population (those aged 65 or older) in South Korea was approximately 18.4% of the total population in 2023. This percentage is expected to rise to 30.1% by 2035 and 46.6% by 2070, making South Korea an aging society.
Simultaneously, the number of live births declined to 230,000 in 2023, reflecting an annual decrease of 7.7%. The number of deaths, however, reached approximately 352,700, surpassing the number of births. As a result, the population of South Korea stood at around 51.7 million in 2023, an increase of 0.2% year-on-year, despite the ongoing crisis of low birth rates and accelerating aging. This growth was primarily driven by a rise in the number of foreign residents, which increased by approximately 183,000, bringing the total to 1.94 million. In contrast, the number of South Korean citizens decreased by about 101,000, totaling 49.84 million.
South Korea's population shrank for the first time in 2021. At this pace, the country's population is projected to decrease by nearly half, reaching only 24 million by 2100, according to the "Institute for Health Metrics and Evaluation" in Washington.
4. Decline in savings rate:
The savings rate among South Koreans in their thirties has decreased to 28.5% in the first quarter of 2024, while savings rates for all other age groups have increased during the same period. Conversely, this age group is the largest among consumers of luxury stores and hotels, with spending on leisure travel rising to 40.1% over the past three years. Additionally, revenues from high-end restaurants surged by 30.3% in 2023, compared to a 10.5% increase in fast-food restaurants.
As a result, the South Korean economy ranked first in personal spending on luxury and high-end goods, which grew by 24% in 2022, reaching $16.8 billion, or approximately $325 per person, compared to about $55 for Chinese citizens and $280 for American citizens. Nearly half of South Korean consumers of luxury brands are in their twenties and thirties, according to data released by Morgan Stanley.
Explanatory Factors
The phenomenon of "YOLO," embraced by the younger generation in South Korea, along with the decline in birth rates and fertility rates, can be explained by the following factors:
1. Rising cost of living:
The South Korean economy is experiencing an increase in the cost of essential services such as education, housing, and food. The cost of living in the country exceeds the OECD average by approximately 55%, according to a report issued by the Bank of Korea in June 2024. The report indicated that food, clothing, and footwear prices have risen by 55% and 61%, respectively, compared to the average recorded by this international organization. On the other hand, annual incomes for the age group in their twenties and thirties increased by only 2% in 2023, compared to a 4.5% increase for older age groups. As a result, essential consumer goods have become a significant burden for South Korean citizens, leading more young people to shy away from marriage and starting families.
2. Decline in job security for Korean women:
Working women in South Korea face significant challenges regarding their return to work after maternity leave. The country has the highest proportion of women employed in temporary jobs among member countries of the Organisation for Economic Co-operation and Development (OECD). Additionally, South Korea recorded the largest gender pay gap among OECD countries, reaching 31.2% in 2022. This marked the twenty-seventh consecutive year that the fourth-largest economy in Asia has had the worst gender pay gap among its peers.
3. Rising housing prices:
The South Korean housing market is experiencing an increase in home prices, particularly in the capital, Seoul, due to high demand coupled with limited supply. In July 2024, housing prices rose by 0.15% month-on-month, compared to a 0.04% increase recorded in June of the same year, with prices in Seoul surging by 0.76%. Consequently, the South Korean government announced earlier this year measures to boost supply in the real estate market, aiming to construct over 400,000 new homes in the next six years to mitigate sharp price increases.
Economic Impacts
Demographic crises typically have economic repercussions that resonate through the labor market, economic growth rates, and immigration policies, as illustrated below:
1. Decline in the workforce:
The aging population and changes in the demographic structure are likely to impact the workforce composition in South Korea. The number of workers aged 60 and older has increased significantly, while the number of young workers aged 15 to 29 has declined.
In this regard, projections from the South Korean Statistical Office indicate that the proportion of the population in the age group of 15-24 will decrease from 10.4% in 2022 to 5.7% by 2050. Similarly, the share of the population in the age group of 25-49 is expected to fall from 36% in 2022 to 24% by 2050. Changes in the labor structure and a decline in the labor supply will generally impact economic activity, slowing down employment in industries that rely more on younger workers compared to older workers. This will lead to bottlenecks in the labor market and slow economic growth, which will also be affected by decreased consumer spending due to the shrinking number of young consumers.
2. Increasing financial burdens:
Low fertility rates and a growing elderly population are placing increasing financial burdens on the South Korean public budget, driven by rising pension costs and spending on medical and healthcare services, which accounted for 9.7% of GDP in 2022 compared to 5.8% in 2010. Additionally, there is an increase in spending on income transfers for the elderly. On the other hand, it is likely that tax revenues will decrease due to the declining number of young people. By 2022, the number of healthcare beneficiaries had concentrated in older age groups, with approximately 3.62 million individuals in the 25-29 age group compared to 4.55 million in the 50-54 age group and 4.158 million in the 60-64 age group.
3. Increasing number of foreign workers:
South Korea is welcoming more foreign workers year after year to compensate for its low fertility rate and declining population numbers. The government has eased restrictions on migrant labor, simplified the procedures for hiring foreign caregivers, and plans to welcome around 1,200 foreign child caregivers by the first half of 2025. In 2023 alone, approximately 480,000 foreigners immigrated to South Korea, representing a 16.2% year-on-year increase. The majority of these immigrants are in the 20-29 age group and have primarily migrated in search of work and permanent positions. The South Korean government is assisting companies across various sectors in attracting skilled labor from abroad to address local labor shortages.
To address these repercussions, the South Korean government plans to establish a new ministry dedicated to tackling demographic challenges. It will provide around 700,000 Korean won per month to families with a child under one-year-old and has injected over 200 billion dollars into support programs for new mothers over the past sixteen years. Additionally, a series of measures will be implemented, including the provision of affordable housing and better job opportunities for young people. The government plans to raise the cap on parental leave benefits to 2.5 million won for the first three months, which will decrease to 2 million won in the following three months, and to 1.6 million won during the subsequent six months. Furthermore, there will be an increase in paternity leave and plans to provide free education and childcare for children aged three to five years.
It can be concluded that the challenges stemming from demographic shifts in South Korean society remain significant and have the potential to worsen in the coming years. This is largely due to the reluctance of younger generations to plan for the future and start families, driven by financial difficulties, rising living costs, and harsh working conditions. Consequently, this trend is likely to lead to a slowdown in economic activity, impact the labor market, and prompt a relaxation of immigration restrictions in South Korea.
