For those in Korea, perhaps especially for those in HR-related roles in Korea, there is an obsession with demographics. And if there isn’t an obsession, there should be. That’s because as demographics go, so goes everything else. It is said that a country gets the systems—political, economic, healthcare, labor, etc.—that demographics allows it to have. When a country’s demographic situation is good, everything else gets easier. When it is bad, everything becomes difficult.
Korea’s demographic situation is well-known. According to data announced by the National Statistical Office on February 22, 2023, Korea's total fertility rate in 2022 was recorded at 0.780. This is a decrease from 0.837 in 2020 and 0.808 in 2021, which were already the lowest levels in the world. According to OECD (Organization for Economic Co-operation and Development) data, the proportion of the population aged 65 or older among the total population rose from 5.1% in 1990 to 10.20% in 2008 and 17.5% in 2022. As the birth rate declines and the aging population continues, Korea is aging rapidly.
Attempts by the Korean national government and by local governments across the country to rein in the problem of low fertility rates are also well-known. Those efforts have, so far, shown no efficacy.
According to a report by Jeju Peace Institute (JPI), published in May of this year, while defense spending has stayed steady at 2-3% of GDP, the share of total social welfare expenditure as a percentage of total government expenditure rose steeply from 2.9% in 1990 to 18.1% in 2020. The writers of the report don’t directly assert proof that there is a 1:1 correlation between the aging population and higher social welfare spending, but they infer that at least a strong correlation exists. The long-term economic repercussions of a falling birthrate and an aging population have been discussed (lamented?) ad nauseam.
What people talk less about, and what the JPI report is mainly about, is the impact on Korea’s foreign policy. We probably discuss it less because foreign policy is more amorphous and more difficult to tie directly to demographics than economics is, but we should make no mistake; foreign policy, in this age of massive geopolitical risk, is no less important. If Korea’s demographic challenges are going to impact its willingness and ability to fulfill its foreign policy goals in the future, we want to know that now.
According to JPI, the main ways aging demographics impacts a country’s foreign policy are the following:
Korea has national conscription, but Japan is already struggling to attract men to military service. Fewer men in the labor pool mean more pay and benefits to attract the ones that there are. Aging countries get less bang for their defense yen. Even with conscription in Korea and shortening windows for national service, a demographic crunch is coming for the Korean military.
The above indicates that there is a ‘window of opportunity’ for the countries in Asia to conduct military power-based foreign policy (we’re thinking China, especially here), and when that window closes, foreign policy by force will no longer be an option. In other words, a “Demographic Peace” will break out.
What would a “Demographic Peace” mean for Northeast Asia? For South Korea?
Many of the recent issues South Korea has dealt with, including the US Inflation Reduction Act, the US CHIPS Act, rapprochement with Japan, and even North Korea’s increased provocations, can be looked at as being driven by geopolitical concerns. Since the end of the pandemic, geopolitical concerns have dominated the landscape of Northeast Asia, driving changes in capital flows and supply chain designs.
Many of those geopolitical concerns are driven by an increasingly assertive China coming up against an America that is digging its heels in, in defense of its position in the world. Should these challenges lessen, countries in Northeast Asia can take up the task of addressing the many other crises we find ourselves knee-deep in climate change, technological disruption, and demographics itself.
Read more of the report for yourself. (The original report is in Korean.)
[JPI PeaceNet] The Impact of Population Aging on National Foreign Policy and Implications for Korea http://jpi.or.kr/?p=21398
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Article originally published in Steve's LinkedIn Newsletter HR Asia August 1, 2023
