South Korea’s birth rate would be 30% higher without private-education competition, study says

South Korea’s fertility rate could have been about 30% higher without the status competition that drives families to spend heavily on private education, according to a study presented at a joint conference.

The paper, by Virginia Commonwealth University professor Yeom Min-cheol, argues that comparing children’s education with that of other families pushes private-education spending to socially excessive levels and discourages people from having children. The research examined countries using an education-concern indicator from the World Values Survey and also used regional and time-based changes in rules limiting late-night academy classes.

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Japan’s long-term stagnation is largely explained by the impact of early ageing on growth, and the same pressure is expected to spread to other East Asian countries.

For South Korea, the study estimated that women born between 1970 and 1975 would have had an average of 2.45 children instead of 1.92 if status competition had not affected family decisions. The analysis also found that lower-income households spent a larger share of their income on private education, 8.4% for the lowest income group compared with 5.1% for the highest.

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South Korea is the fastest country among OECD members in demographic transition, and by 2050 its total population is expected to decline by 10%, or 5 million people, while its working-age population will fall by more than 35%.

Yeom proposed funding childbirth incentives by taxing private-education spending among high-income households. Researchers at the conference also linked demographic change to broader economic pressures. Fumio Hayashi of Japan’s National Graduate Institute for Policy Studies said earlier ageing helped explain much of Japan’s prolonged stagnation and that similar pressures would spread across East Asia.

South Korea’s population is expected to fall by 10%, or 5 million people, by 2050, while its working-age population could decline by more than 35%, according to OECD economist Volker Zimmermann. He said the Seoul metropolitan area continues to attract young people, while other regions face population loss, labor shortages and weaker local economies. High wages draw young people to the capital region, but expensive housing and congestion make family formation harder.

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Population structure is a powerful force, but population is not destiny, as is often said.

Other speakers said ageing would put downward pressure on growth, prices and financial stability. Shin Kwan-ho of Korea University argued that the main constraint would be slower total-factor productivity growth rather than labor shortages alone, making technology, immigration and innovation policies important alongside longer working lives. Bank of Korea Governor Rhee Chang-yong said demographic change presents a serious challenge, but one that can be anticipated and addressed in time.

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The change in population structure is a formidable challenge, but we can see what is coming in advance and prepare before it is too late.