Why South Korea's Falling Birth Rate Is Becoming a Major Challenge for Businesses and Government

South Korea’s record-low fertility rate, driven by job insecurity, rising living costs and gender inequality, threatens economic growth, workforce availability and long-term financial stability. The OECD urges governments, development partners and businesses to strengthen employment security, affordable housing, childcare and gender equality to address demographic decline and support sustainable development.

South Korea's falling birth rate is becoming a serious threat to economic growth, employment and long-term development. A 2026 report by the Organisation for Economic Co-operation and Development (OECD), prepared by its Directorate of Employment, Labour and Social Affairs and Social Policy Division, finds that job insecurity, expensive housing, rising education costs, and gender inequality discourage young people from starting families. The findings highlight an urgent need for governments, international development partners and businesses to rethink economic and social policies as the country faces a rapidly ageing population and a shrinking workforce.

South Korea's fertility rate dropped from about six children per woman in 1960 to 0.72 in 2023, then rose slightly to 0.8 in 2025. Despite this improvement, the rate remains far below the replacement level of 2.1 children per woman. The OECD warns that the recent increase may not represent a lasting recovery.

Falling Birth Rates Threaten Economic Growth and Public Finances

South Korea's population is projected to decline from 51.9 million in 2020 to 39.9 million by 2060. More importantly, the number of people aged 65 and above for every 100 working-age residents could increase from 24 to 95 during this period.

This demographic shift could create serious economic challenges. A smaller workforce may reduce production, weaken consumer demand and increase pressure on businesses struggling to recruit skilled employees. Meanwhile, governments could face rising expenditure on pensions, healthcare and elderly care.

For policymakers, the findings demonstrate that declining fertility is not simply a family issue but a major economic challenge. Governments must prepare for slower workforce growth while investing in productivity, technology and stronger social protection systems.

International development partners can also draw lessons from South Korea's experience when helping other countries prepare for population ageing and changing labour markets.

Job Insecurity, Housing and Education Costs Discourage Families

The OECD identifies employment insecurity as a major reason young Koreans delay marriage and parenthood. Approximately 85% of employees work in small and medium-sized enterprises, while only about 12% hold high-paying regular positions in large companies.

Non-regular workers accounted for 38% of wage earners in 2025, up from 32% in 2015. Many experience lower salaries, weaker employment protection and limited career opportunities.

These conditions make it difficult for young people to plan their financial futures. Around four in five Koreans in their twenties live with their parents, while graduates take an average of 11 months to find their first job.

Housing affordability creates additional pressure, particularly in Seoul. High property prices and rental costs discourage independent living and delay marriage.

Education expenses further increase the financial burden. In 2024, education accounted for more than 5% of household consumption, over three times the OECD average. Competition for university admission encourages families to spend heavily on private tutoring.

Governments could respond through affordable housing, better employment opportunities and education reforms. Businesses could support young workers through stable contracts, skills training and improved career progression.

Gender Inequality and Workplace Barriers Limit Family Choices

Gender inequality remains another major obstacle to higher fertility. South Korea has the largest gender wage gap among OECD countries, while its maternal employment rate stands at approximately 64%, compared with the OECD average of 71%.

Women often face career interruptions after childbirth, reduced earnings and difficulties returning to stable employment. Non-regular jobs account for 47% of female employment, compared with 31% among men.

Although public spending on family benefits increased from 0.1% of GDP in 1998 to 1.8% in 2023, it remains below the OECD average of 2.3%.

South Korea has expanded parental leave and childcare support, but access remains unequal. Among parents of children born in 2024, only 46% of mothers and 71% of fathers were eligible for parental leave.

For employers, these findings highlight opportunities to improve employee retention through flexible working arrangements, affordable childcare support and equal career opportunities.

Companies that fail to introduce family-friendly workplaces could face greater recruitment difficulties as the working-age population declines.

Policy Reforms Could Protect Growth and Offer Global Lessons

The OECD argues that reversing demographic pressures requires coordinated reforms rather than relying mainly on financial incentives for childbirth.

Improving women's participation in employment could deliver substantial economic benefits. OECD estimates suggest that narrowing gender gaps in labour participation and working hours could increase annual economic growth by 0.23 percentage points and raise GDP per capita by 8.9% by 2060.

For governments, priorities include reducing labour market inequality, expanding parental leave coverage, improving housing affordability and making childcare more accessible.

International development partners could use these findings to support programmes promoting women's employment, social protection, workforce skills and sustainable ageing policies.

Private-sector stakeholders have opportunities to invest in childcare services, digital education, workplace technology, healthcare and elderly care. However, companies also face risks from labour shortages, rising employment costs and changing consumer markets.

South Korea's experience delivers a wider lesson: sustainable demographic and economic development depends on making employment secure, family life affordable and workplaces more inclusive. Without structural reforms, financial incentives alone are unlikely to produce lasting improvements in fertility or protect future economic growth.