South Korean Government To Address Nation’s Issue of Low Birth Rate and Aging Population

D-Bo , July 21, 2015, 10:16 a.m.

South Korea will announce a new package of measures late this year to cope with the country's chronically low birthrate and aging population that threaten to sap long-term growth, a senior official said Tuesday. In a speech at an economic development seminar in Seoul, Vice Finance Minister Joo Hyung-hwan warned that Asia's fourth-largest economy is facing serious demographic challenges due to the problems.

"There is a need to make fundamental changes in the economic system to tackle the problems at hand," the official said. "The country has one of the lowest birthrates in the world, and is the fastest-aging society among the Organization for Economic Cooperation and Development member states." Such changes can have an enormous impact on the economy by reducing the country's workforce down the road, he said.

"The government plans to unveil the new plan around the end of this year to tackle the problems of the low birthrate and aging population," Joo said. The country announced two sets of measures in the past, including giving cash support to families that have many children, helping to provide more comprehensive child care services and expanding welfare for senior citizens.

South Korea's total fertility rate, or the average number of children that would be born to a woman over her lifetime, stood at 1.21 last year, down from 1.47 in 2000. The country is already an "aging society" with 7 percent of the population over 65 and will become an "aged society" with 14 percent of all people over 65 in 2018. It is expected to become a "super-aged society" in 2026, when one-fifth of the population will be over 65.

"A drop in labor quality and consumption is all going to influence the country and its industries," Joo said. The official, in particular, said that with the country's population aging at a much faster rate than others, there is a need to carefully check what fallout such developments can have. The vice minister said that the government will also announce a mid- to long-term economic development plan late this year that can compensate for demographic changes down the line.

In a meeting with reporters after the seminar, the official said the government wants as many people as possible to take advantage of the individual savings account (ISA) system that Seoul wants to adopt in 2016. Savings and funds that are placed in the ISA and used to generate interest and dividend earnings will be exempt from income taxes and be given other benefits that can help ordinary people accumulate wealth. "The system aims to help people make money and improve the way taxes are collected," the official said.

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