Image Courtesy – South China Morning Post

For the purposes of this particular question, we look at 3 countries in particular within the Asian region: South Korea, Japan and China. However this is not a phenomenon observed just in these countries but in most Asian countries.

South Korea

Globally, birth rates are declining in developed countries, with South Korea experiencing an unprecedented decline. Projections paint a bleak picture, anticipating a 50% reduction in working-age individuals, a 58% decrease in those eligible for mandatory military service, and nearly half the population aged 65 or older in 50 years.

This alarming scenario poses severe threats to the country’s economy, pension system, and security, prompting politicians to declare it a “national emergency.” Despite investing 379.8 trillion $286 billion over nearly two decades to address the issue, traditional financial incentives for couples to have children have proven ineffective.

In a shift towards more “creative” solutions, policymakers are exploring unconventional measures such as hiring nannies from South East Asia at below minimum wage and exempting men from military service if they father three children before 30. Critics argue that these approaches overlook the voices of young people, particularly women, and fail to address the root causes behind the decision to forgo parenthood. In our year-long journey across the country, we have engaged with women to better understand the factors influencing their choice not to have children.

Japan
Government officials stress the urgency of reversing Japan’s declining birth trend as the number of babies born in 2023 reached a historic low for the eighth consecutive year. According to the Health and Welfare Ministry, the 758,631 births recorded marked a 5.1% decrease from the previous year, representing the lowest figure since statistical records began in 1899.

Simultaneously, the number of marriages saw a 5.9% decline to 489,281 couples, dipping below half a million for the first time in 90 years—a significant factor contributing to the plummeting birth rates. Japan’s cultural emphasis on paternalistic traditions has traditionally discouraged out-of-wedlock births.

Surveys reveal that a growing number of younger Japanese individuals are hesitant to marry or start families due to discouraging job prospects, a cost of living outpacing salary growth, and corporate environments that do not support dual-working parents. Additionally, societal attitudes towards children playing outside and crying babies are evolving, with many young parents expressing feelings of isolation.

The current population of over 125 million is projected to decrease by approximately 30% to 87 million by 2070, with a concerning four in ten individuals expected to be aged 65 or older. This demographic shift poses significant implications for the economy and national security, particularly as Japan looks to bolster its military capabilities in response to China’s escalating territorial ambitions.

China

For the consecutive second year, China’s population has witnessed a decline. According to data from the National Bureau of Statistics, the country experienced a reduction of 2 million people in 2023, coupled with a record-low birth rate dropping from 6.77 births to 6.39 births per 1,000 people.

China has been actively addressing this demographic challenge, reversing its one-child policy in 2015 and providing financial incentives to parents while promoting the values of marriage and childbearing. Notably, the Chinese Communist Party and local governments have shifted their focus to laws and programs aimed at encouraging young women to embrace motherhood and marriage.

Cities like Hangzhou and Wenzhou have introduced financial incentives, offering 20,000 Chinese yuan (approximately $2,800) for having a third child and up to 3,000 yuan per child, respectively. Despite the introduction of a “three-child policy” in 2021 by China’s ruling party, aimed at encouraging families to have more than two children, there has been limited uptake, particularly among the younger demographic.

This trend is not unique to China, as even democratic societies have grappled with birth-rate declines despite experimenting with financial incentives and pro-family policies in recent years.

What are the economic impacts due to a faltering birth rate?

Economic implications loom large in the face of declining birth rates, with an aging population straining social security and healthcare systems. The decrease in working-age individuals poses a risk of labor force shortages and reduced economic productivity, underscoring the urgency of strategic measures to address this trend for sustained economic growth.

On a social scale, a diminishing birth rate reshapes societal dynamics, affecting community structures and intergenerational relationships. The repercussions extend to essential sectors like healthcare, education, and innovation, creating challenges that demand thoughtful solutions to maintain equilibrium and support societal needs.

The global perspective amplifies the significance of declining birth rates. Developed countries face the risk of stagnation, while for poorer nations, a decrease in birth rates might mean missing out on opportunities for economic development akin to Ireland or Singapore. Economist Tyler Cowen highlights the urgency for less developed nations, asserting that their last chance may come in this generation. These countries not only grapple with migration challenges to wealthier nations but also face similar demographic issues such as an aging population. In the short term, the rapid advancements in artificial intelligence pose a challenge, making it difficult for poorer countries to compete in services like call centers and customer service.

This multifaceted scenario calls for comprehensive solutions that consider economic, social, and global perspectives, ensuring a balanced approach to address the challenges posed by declining birth rates.

Nonetheless, the phenomenon of declining birth rates and shrinking populations is not exclusive to the aforementioned countries; projections by the UN indicate that numerous high-income nations will confront population decline in the foreseeable future. Globally, two-thirds of the population resides in countries where the fertility rate falls below the critical 2.1 threshold essential for population stability. Japan’s population decline is predominantly attributed to urbanization, a trend observed in many parts of Europe and America as well. Urban areas, characterized by demanding work hours, soaring living costs, and limited childcare options, often deter child-rearing. Particularly in Japan, ranked as the world’s third-most expensive nation to raise children, couples tend to prioritize their careers over building a family.

While economic growth is not solely contingent on population expansion but a combination of factors such as technological advancement, education, innovation, and resource efficiency, sustained economic growth can be achieved with substantial investments in these areas by governments and businesses. Human resource scarcity naturally incentivizes companies to innovate and automate for increased productivity and efficiency. Nations like Finland and Sweden, grappling with declining populations, have maintained robust economies by prioritizing education, research & development (R&D), and innovation. Notably, China’s economy is projected to grow by 5.2% in 2023 and 4.5% in 2024 despite a population decline in 2022, and Japan’s economy is anticipated to experience slight growth in the coming years despite demographic challenges.

While economic growth may be more modest with a decreasing population, it is regarded as more stable and sustainable compared to growth spurred by rapid population increases. This shift necessitates a redefinition of the concept of economic growth, incorporating considerations of happiness, health, and sustainability alongside traditional measures of prosperity expressed in monetary terms.

Consequently, a contracting population need not signify economic doom. The emphasis should not solely be on population size but on the quality of contributions, driving sustained economic progress. Investments in education, R&D, innovation, and inclusive workforce policies, encompassing the elderly, women, migrants, and automation, present viable and sustainable solutions to mitigate the adverse effects commonly associated with an imbalanced old-age dependency ratio.