🚨 Population Crisis Reality: Employment Drop Starting 2030, Economic Growth Crisis Accelerating

Today Korean Economic News | 2025.06.18

📌 Bank of Korea Warns: "Workers Decrease from 2030, 10% Drop by 2050"

💬 The Bank of Korea announced that due to population decline and aging, the number of workers will start to decrease from 2030 and drop by about 10% compared to last year by 2050. This will create downward pressure on the economy, leading to slower GDP growth and increased spending on pensions and medical costs. The shortage of workers will get worse as the working-age population (15-64 years old) decreases and the baby boom generation retires in large numbers. The Bank of Korea emphasized that urgent policy responses are needed to prepare for these structural changes.

1️⃣ Easy Explanation

A shocking prediction shows that the number of people who can work in Korea will drop rapidly. Starting in 5 years, the number of workers will begin to fall, and in 25 years, one-tenth of today's workers will be gone.

This prediction from the Bank of Korea is not just a simple forecast. It shows the specific timing when the "population cliff" that is already happening will become serious. 2030 is only 5 years away - a near future we can actually feel.

Why is this happening? The biggest reason is that babies are not being born. Korea's birth rate is 0.72 children per woman, the lowest in the world. This means 100 women will only have 72 babies in their lifetime, which is far below the 2.1 needed to maintain the population.

Second is aging. The baby boom generation born between 1955 and 1963 is starting to retire in large numbers, so the number of people who can work is dropping fast. At the same time, the number of people over 65 is growing, creating a situation where "working people decrease while people who need support increase."

Why is this problem serious? First, economic growth becomes difficult. When fewer people work, fewer goods and services are produced. Second, fewer people pay taxes while more people receive pensions and medical care, putting a big burden on government finances.

What specific changes will happen? Companies will find it even harder to hire people. Worker shortages will get worse, especially in manufacturing, construction, and service industries. Also, young people will have to pay more taxes. Currently, 3 workers support 1 elderly person, but in the future, 2 workers may have to support 1 elderly person.

But there are some solutions. We can increase participation of women and elderly people in economic activities, actively use foreign workers, and improve productivity through technology. Most importantly, we need fundamental measures to increase the birth rate.

The population structure changes happening right now will directly affect our jobs, pensions, and taxes. Individuals also need to prepare for these changes.

2️⃣ Economic Terms

📕 Working-Age Population

Working-age population means people aged 15 to 64 who can participate in economic activities.

• This is a key indicator that determines a country's economic activity scale and growth potential.
• Korea's working-age population peaked at 37.57 million in 2017 and has already started decreasing.
• By 2070, it is expected to drop to 60% of current levels.

📕 Aging Rate

Aging rate means the percentage of people aged 65 and over in the total population.

• 7% or more is an aging society, 14% or more is an aged society, 20% or more is a super-aged society.
• Korea entered an aging society in 2000 and became an aged society in 2018.
• It is expected to become a super-aged society by exceeding 20% in 2025.

📕 Dependency Ratio

Dependency ratio shows the number of young and elderly people that 100 working-age people must support.

• Total dependency ratio = (Young population + Elderly population) ÷ Working-age population × 100
• Korea's total dependency ratio is expected to surge from 38.1 in 2020 to 120.2 in 2070.
• The higher the dependency ratio, the greater the burden on the economically active population.

📕 Total Fertility Rate

Total fertility rate is the average number of children a woman is expected to have in her lifetime.

• The population replacement level is 2.1 children. Below this, population naturally decreases.
• Korea's 2023 total fertility rate is 0.72, the lowest among OECD countries.
• Continued low birth rates are the root cause of future labor shortages.

3️⃣ Analysis and Economic Outlook

✅ How Population Structure Changes Affect the Labor Market

• Let's analyze the specific mechanisms and ripple effects of decreasing workers.

  • First, the decrease in working-age population is the direct cause of fewer workers. Korea's working-age population turned downward after peaking at 37.57 million in 2017. According to Statistics Korea projections, it will drop rapidly to 33.95 million in 2030 and 27.93 million in 2050. This means about 7 million people will decrease over 25 years, equivalent to an average decrease of 280,000 people per year. The core working-age group of 25-54 years will see the biggest decline. Since this age group currently makes up about 65% of all workers, their decrease will directly affect the total number of workers.

  • Second, mass retirement of the baby boom generation is acting as an accelerating factor. The baby boom generation born from 1955-1963 numbers about 7 million and is currently 62-70 years old. As they enter full retirement, 600,000-700,000 people are leaving the labor market each year. Meanwhile, people in their 20s entering the labor market number only about 400,000 annually, making a net decrease inevitable. More seriously, the baby boom generation consists of experienced and skilled core workers. Their retirement could lead not just to workforce reduction but also productivity decline.

  • Third, labor shortages will appear at different speeds and patterns by industry. Manufacturing is expected to face serious labor shortages from the 2030s. Traditional manufacturing industries like automobiles, shipbuilding, and steel are seeing aging workforces as young worker inflow decreases. Construction will also face difficulties due to shortages of field workers. Knowledge-based service industries like IT, biotech, and finance will be relatively better off, but competition will intensify as the overall labor pool shrinks. This could lead to wage pressure and accelerated overseas relocation by companies.

• The decrease in workers is not just a numbers problem but a structural change that affects the overall production capacity and innovation capability of the economy. Without proactive responses, the sustainability of the Korean economy itself could be threatened.

✅ GDP Growth Slowdown and Economic Ripple Effects

• Let's examine the specific impact of workforce reduction on economic growth.

  • First, a continuous decline in potential growth rate is inevitable. Economic growth is achieved through the combination of labor, capital, and technological progress. When labor input decreases significantly, growth potential must shrink. The Bank of Korea projects that the current potential growth rate of about 2% will fall to the 1% range in the 2030s. This is a big difference from the 7-8% growth of the past high-growth era and even the 4-5% growth of the 2000s. The problem is that this trend is structural, not temporary. Unless the population structure changes, growth rate recovery will be difficult.

  • Second, the domestic economy will be hit by consumer market contraction. Fewer workers leads to reduced household income, which causes consumption contraction. Especially, the decrease in young population directly affects consumption of durable goods like housing, cars, and home appliances. Consumption patterns are also changing due to aging. Elderly people have lower consumption tendencies than young people and consume mainly medical expenses, so the overall consumer market must shrink. This will likely lead to decreased sales in retail and service industries dependent on domestic demand, creating a vicious cycle.

  • Third, innovation capability decline could make productivity improvement difficult. Young workers play a key role in introducing new technologies and innovation. But youth decrease and organizational aging could reduce companies' innovation capabilities. Actually, Japan showed declining R&D investment and productivity growth rates from the 1990s along with population aging. Korea is likely to show similar patterns. However, if productivity can be increased using new technologies like AI and robots, labor shortages could be somewhat offset. The problem is that introducing and utilizing such technologies ultimately requires skilled workers too.

• GDP growth slowdown will lead to job losses, income stagnation, and reduced tax revenue, lowering the vitality of society overall. To overcome this, a paradigm shift from quantitative to qualitative growth is needed.

✅ Impact on Social Security Systems and Response Measures

• Let's analyze how population structure changes affect pension and medical systems.

  • First, the sustainability of the National Pension is under serious threat. Currently, the National Pension has a structure where 22 million contributors support 6.5 million recipients. But by 2050, 17 million contributors will have to support 12 million recipients. The support ratio will worsen rapidly from the current 3.4:1 to 1.4:1. The National Pension Service projects that the current 800 trillion won fund will be depleted around 2057. To solve this, premium increases or benefit cuts are inevitable, but both methods increase the burden on citizens. The government is pushing pension reform, but faces difficulties in finding fundamental solutions due to intergenerational conflicts and political burdens.

  • Second, health insurance and medical cost burdens will surge. Annual medical costs for one elderly person are 3-4 times those of young people. As the population over 65 increases from 10 million in 2025 to 18 million in 2050, total medical costs are expected to surge. The National Health Insurance Service projects that health insurance spending will exceed 300 trillion won by 2050, three times the current amount. The problem is that the economically active population who must bear medical costs is decreasing while the elderly population needing medical services is increasing. This could make health insurance premium increases or increased copayments inevitable.

  • Third, new social security models and policy responses are urgent. As the limitations of traditional pay-as-you-go pension systems become clear, various alternatives like funded pensions and individual account systems are being discussed. Extending retirement age and expanding elderly re-employment to lengthen economic activity periods are also being considered. Extending the current retirement age of 60 to 65 or 70 could significantly reduce pension finances and medical cost burdens. Expanding utilization of women and foreign workers is also an important alternative. We need to raise women's employment rate to developed country levels and attract excellent foreign talent to supplement labor shortages. Most importantly, fundamental measures to increase birth rates are needed. We must create an environment where young people can have and raise children through housing cost relief, expanded childcare support, and establishing work-life balance culture.

• Population structure change is an irreversible megatrend. However, through appropriate policy responses and social consensus, we can minimize the shock and create new growth models.

4️⃣ Conclusion

The Bank of Korea's projection of decreasing workers is a warning that shows the reality of the 'population cliff' we face in concrete numbers. The projection starting from 2030 and showing a 10% decrease by 2050 is not just a simple prediction but an inevitable result of population structure changes already underway.

The seriousness of this problem is that its ripple effects reach the entire economy. Decreasing workers leads to reduced production capacity, slower GDP growth, and domestic market contraction. At the same time, pension and medical cost burdens surge, adding to the burden on the working generation. This is not just an economic problem but a structural crisis threatening the sustainability of society as a whole.

But it's not all hopeless. Developed countries like Japan and Germany are also experiencing similar problems and seeking their own solutions. Alternatives include expanding economic participation of women and elderly people, utilizing foreign workers, and improving productivity through technological innovation.

Especially, Korea has sufficient potential to turn crisis into opportunity with its high education level, technology, and strong adaptability. By actively introducing AI, robots, and automation technology, we can achieve high productivity even with fewer workers. We can also increase labor utilization through elderly-friendly job creation and resolving women's career interruptions.

Most importantly, fundamental measures to recover birth rates are needed. We must create an environment where young people can have and raise children through solving housing problems, reducing childcare burdens, and establishing work-life balance culture. This won't be solved in the short term, but it's an essential task for long-term social sustainability.

We now face the huge challenge of population structure change. But we shouldn't see this only as a crisis - we should make it an opportunity to develop into a more efficient and sustainable society. Government, businesses, and individuals must all work together to overcome this challenge.