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It is necessary to step up to respond to the era of the low birth rate and ageing population in the aspect of industrial policy

Author Kim Wonkyu, Hwang Wonsik Date 2017.04.24 Issue No 15
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The low birth rate and ageing population are global trends. However, the ratio of Korea’s working age population will begin declining dramatically faster than its major competitors, allowing the lower ratio of working age population than that of Japan by 2060. Besides, the ratio of elderly population will begin to increase rapidly faster than its major competitors, allowing the higher ratio of working age population than that of Japan by 2050. 

*Along with ageing population, recently increasing ratio of aged manpower among employees may serve as a factor to weaken the growth potential and overseas competitiveness of Korea.

According to the analysis results, the decrease in the ratio of working age population will have negative impacts on investment, labor, and total factor productivity, thereby hampering the economic growth of Korea.

*A decrease in the ratio of working age population by 0.1% point leads to a year-on-year decrease of investment, labor, total factor productivity and GDP by 0.96%, 0.22%, 0.07%, 0.30%, respectively. Besides, an increase of the ratio of aged manpower among employees also has a negative impact on total factor productivity.

The low birth rate and ageing population have a high possibility to negatively influence the industry. It means that it is necessary to step up the efforts in the field of industry policy to respond to the low birth rate and aging population.

*In order to cope with the low productivity resulted from ageing population, it is necessary to expand R&D support by the government and enhance its efficiency. In addition, government-wide systematic reforms are important in various areas to fundamentally react to the low birth rate and aging population.