Addressing South Korea’s Demographic Challenges: A Multifaceted Approach

South Korea faces a looming demographic crisis characterized by a declining birth rate and an aging population. To mitigate the potential economic fallout, a recent report emphasizes the urgent need for proactive adaptation strategies. Thes strategies encompass leveraging artificial intelligence (AI), boosting elderly employment, and attracting skilled foreign workers.

Boosting Productivity Through Artificial Intelligence

The report highlights the transformative potential of AI in enhancing productivity. by actively integrating AI into various sectors and fostering collaboration between humans and AI systems, South Korea could considerably elevate its potential growth rate.

Specifically, projections indicate that embracing AI could lead to an average annual potential growth rate of 1.81% between 2024 and 2040. This represents a considerable increase of 0.66 percentage points compared to the projected growth rate of 1.15% without AI implementation. This underscores the critical role of technological innovation in sustaining economic momentum.

Unlocking the Potential of an Aging Workforce

Another key strategy involves increasing the employment rate among older adults. The report suggests that a 5 percentage point increase in the employment rate of individuals over 60 could boost the potential growth rate by 0.1 percentage points. moreover, this would generate an estimated ₩5.784 trillion in additional income tax revenue.

This approach not only addresses labor shortages but also leverages the experience and skills of older workers, contributing to a more dynamic and resilient economy. As of 2024, many developed nations are actively encouraging later retirement ages and providing incentives for continued workforce participation.

Attracting Global Talent to Enhance Competitiveness

To bolster its competitive edge, South Korea must actively attract highly skilled foreign talent. The report draws a comparison with Japan, which has successfully increased the proportion of professional manpower among its foreign residents to 15.0% in 2023.In contrast, only 4.7% of foreigners in South Korea are classified as professionals.

The report advocates for the introduction of a “K-Blue Card” system, offering visa benefits to facilitate long-term stays for foreign talents. Furthermore, it emphasizes the importance of creating more attractive settlement conditions to compete effectively with other countries seeking to attract skilled workers. This includes addressing issues such as language barriers, cultural integration, and access to quality education and healthcare.

K-Blue card, which provides visa benefits to allow foreign talents to stay in Korea for a long time, should be introduced, and better settlement conditions should be prepared than competitors.
Kim Cheon-gu, researcher at the Korea Sangsang

Reforming Labor Structures for Greater flexibility

The report also calls for labor market reforms to enhance flexibility and adaptability. This includes allowing certain industries to exceed the standard 52-hour workweek and promoting various retirement options, such as re-employment and wage peak systems after retirement age.These measures aim to optimize labor utilization and ensure a smooth transition for older workers.

These reforms are crucial for adapting to the changing demographics and ensuring that South Korea’s workforce remains competitive in the global economy.By learning from the experiences of countries like Japan,which have faced similar demographic challenges,South Korea can proactively implement strategies to mitigate the negative impacts of low birth rates and an aging population.

It should be noted that Japan, which is facing a low -growth and aging crisis before Korea, has simultaneously promoted the ‘management and adaptation’ strategy aimed at strengthening the qualitative social qualitative such as productivity and system reform, and also ‘normalization’ strategy to reduce the decline in population.