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December27,2017
DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Inthisreport,weexaminetherapidlychangingdemographicmakeupofSouthKorea,theimplicationsanagingpopulationhasonitseconomyandthevariouspoliciesthegovernmenthasputinplacetoaddressthisissue.
1) In2016,thenumberofseniors(thoseaged65andover)inSouthKoreahadreached6.8million,or13%ofthetotalpopulation,accordingtoUNdata.
2) Some46%ofseniorsinthecountrywerelivinginpovertyin2015,accordingtotheOECD.
3) ThelifeexpectancyrateinSouthKoreajumpedto82yearsin2015from62yearsin1970,whilethefertilityrate(i.e.,thenumberofchildrenbornperwoman)declinedto1.2childrenfrom4.5children.
4) Doublingnearlyevery15years,SouthKorea’sseniorpopulationisseeingthefastgrowthamongthemajorglobaleconomiesandemergingmarkets.
Deep Dive: The Challenges of an
Aging Population—South Korea
Deborah Weinswig
Managing Director, FGRT
[email protected] US: 917.655.6790
HK: 852.6119.1779 CN: 86.186.1420.3016
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December27,2017
DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
TableofContents
ExecutiveSummary...........................................................................................................................................3
Introduction.......................................................................................................................................................4
ThePovertyRateofSeniorsinSouthKoreaIsAmongtheHighestintheWorld.................................................4RisingLifeExpectancyRatesandDecliningBirthRatesExacerbatetheSeniorBoom............................................5
SouthKorea—theFastest-AgingNation.............................................................................................................7
SeniorConsumersUnder-IndexinNearlyEveryCategory...................................................................................8
WhatIsBeingDonetoAddresstheAgingCrisis................................................................................................10PresidentMoonJae-in’sCalltoAction...........................................................................................................10LocalActivistsandAssociationsHelpingSeniors.............................................................................................11
OurThoughts....................................................................................................................................................11
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DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
ExecutiveSummarySouthKoreaisoneofthetopeconomiesintheworld.HavingexperiencedrapidgrowthoverseveraldecadesplaceditamongtheranksofcountrieswiththehighesttotalGDP—itranked11thin2016,accordingtoWorldBankdata.Inrecentyears,however,itsglobalpositionisunderthreatasaresultofaloomingagingcrisis.
SouthKoreaisnowthefastest-agingcountryintheworld,withitsseniorpopulationdoublinginnumbernearlyeveryfifteenyears,basedonanalysisofthelatestUnitedNationsdata.Atthispace,itissettoseizeJapan’stitleofmostagedcountryby2060.
Nearlyhalfofthecountry’sseniorswerelivinginpovertyin2015,withone-quarterofthemlivingontheirown,accordingto2016datafromtheOrganisationforEconomicCo-operationandDevelopment(OECD).Sincethecurrentstatepensionisinsufficienttocovertheirexpenses,manyoftheseseniorsareforcedtoworkforaliving,allwhilebattlingthephysicalandmentalhealthconditionsthataccompanyoldage.
NewlyelectedinMaythisyear,PresidentMoonJae-inhasvowedtoaddressthesituation.Hehasproposedseveralreformssuchasincreasingpensions,providingmorejobsfortheelderlyandbuildinghealthfacilitiestohelpthecountry’sseniors.Inthemeantime,severalnot-for-profitassociationsandvolunteergroupsarealsohelpingalleviatetheproblemsfacingthisgrowingsegmentofthepopulationbyprovidingfreefoodandshelter.
SouthKoreaisnowthefastest-agingcountryintheworld.
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DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
IntroductionTheLandoftheMorningCalm,asSouthKoreaissometimescalled,hashadaprofoundimpactontheworldinmanyways.Fromthecountry’swell-knownelectronicsbrandsSamsungandLGandcarbrandsKIAandHyundaitoinfluencingbeauty(K-beauty)andculturetrends(K-Pop),peoplearoundtheworldhavecomeintocontactwithSouthKoreainsomeaspectoftheirdailylives.
In2016,SouthKorearanked11thintheworldbytotalGDP,accordingtotheWorldBank.ExperiencingrapidgrowthoverseveraldecadessincetheKoreanwarintheearly1950spositioneditamongthecountrieswiththehighesttotalGDP.Inrecentyears,however,thecountry’srapidlychangingdemographiccompositionisthreateningitsglobalstandingasapowerfulnation.SouthKoreaisnowconsideredthefastest-agingcountryintheworldandispoisedtousurpJapan’stitleofmostagednationby2060.
Inthisreport,weexaminetherapidlychangingdemographicmakeupofSouthKorea,howithasaffectedthelivesofseniorsinthecountry,theimplicationstheagingpopulationhasontheeconomyandthevariouspoliciesthegovernmenthasputinplacetoaddressthisissue.
First,tobetterunderstandthemagnitudeofthisphenomenon,welookattheseverityofthecountry’sagingcrisis,theproportionofseniors—whomwedefineasthoseaged65andover—insomeofthemajorglobaleconomiesandthepaceatwhichtheseniorpopulationisgrowing.
ThePovertyRateofSeniorsinSouthKoreaIsAmongtheHighestintheWorldSeniorsinmanydevelopedcountries,suchasGermany,SwedenandNorway,havetheluxuryoflookingforwardtoacomfortableretirement,withregularpensionreceipts,benefitsprovidedbythegovernmentandsurroundedbyfamilyorthoseclosesttothem.InSouthKorea,however,thesituationisnotsorosy.
• In2016,thenumberofseniorsinthecountryhadreached6.8million,or13%ofthetotalpopulation,accordingtoUNdata.
• Some46%ofSouthKoreansaged66andabove(dataavailablewasforthisagegroup)werelivinginpovertyin2015,accordingtotheOECD.ThisisthehighestrateamongtheOECDnationsandonlyaslightimprovementfromthe49%recordedin2014.TheOECDalsonotedthatatleastone-quarterofseniorslivealone,andthishasledtoincreasinglonelinessanddepression.SouthKoreahasoneofthehighestelderlysuicideratesamongtheOECDcountries.
ThesegloomysocioeconomicindicatorshavetakentheirtollonthelivesofSouthKoreanseniors.
SouthKoreaisthefastest-agingcountryintheworldandispoisedtousurpJapan’stitleofthemostagednationby2060.
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Earlierthisyear,ChannelNewsAsia(CNA),aSingaporeanEnglish-languagecabletelevisionnewsagencyandnewschannel,publishedaseriesofarticlesonitswebsitesummarizinginvestigationscarriedoutforitsdocumentaryonthelivesofolderpeopleinSouthKorea.CNA’sfindingsreinforcedthebleakpictureofthelivesofSouthKoreanseniors:
• Thecountry’sstatepensionsystemincludescriteriathatdisqualifiesseniorswithchildrenfromreceivingpensions.However,somefamiliesdonotsupportparentsintheirlateryearsandsomeseniorsrefusetobedependentontheirchildren.Thishasledtomanyolderpeopleworkinguntiltheirdeathtosupportthemselvesonthelimitedincomeandsavingstheymighthave.
• ThebasicstatepensioninSouthKoreaisKRW200,000permonth(about$182),whichmanyfindinsufficienttopayforeverydaynecessities,includingmedicalexpenses,whichtendtoincreasewithage.
• Asjobopportunitiesarelimitedforolderpeople,manyresorttomenialjobssuchascollectingcardboardboxestoselltojunkdepots,oreventurntoprostitution,tosupportthemselves.
SouthKorea’sagingcrisishasbeenmanyyearsinthemaking,whichhasledtoasignificantproportionofthepopulationlivingouttheirsenioryearsunderchallengingconditions.
RisingLifeExpectancyRatesandDecliningBirthRatesExacerbatetheSeniorBoomThetwinfactorsresponsibleforspawningSouthKorea’sagingcrisis—risinglifeexpectancyratesanddecliningbirthrates—begantotakeshapeintheearly20thcentury.
TheintroductionofWesternmedicalandhealthcarefacilitiesledtoadramaticriseinthelifeexpectancyrateto52yearsduringtheperiod1955–1960,from37yearsduring1925–1930,accordingtotheAsiaSociety.Lifeexpectancyratescontinuedtoimproveoverthenextseveraldecades.
WorldBankdataindicatesthatthelifeexpectancyrateinSouthKoreajumpedto82yearsin2015from62yearsin1970,thehighestincreaseamongthecountrieschosenforthisreport.
SouthKorea’slifeexpectancyratejumpedto82yearsin2015from62yearsin1970.
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Figure1.LifeExpectancyatBirth,inDescendingOrderBasedon2015Data(Years)
Source:WorldBank
Astheoverallhealthofthepopulationimproved,peoplelivinglongerandcontinuingtohavelargefamiliesputastrainontheeconomy,particularlyaftertheKoreanwar,whichtookplacebetween1950and1953.Duringthistime,thecountrywasdealingwithlimitedresourcesforitsrelativelylargeandgrowingpopulation.Tocurbfurthergrowth,thegovernmentintroducedafamilyplanningcampaignin1962,leadingtoprogressivelysmallerfamiliesoverthefollowingdecades.
SouthKoreafelltohavingoneofthelowestfertilityrates(i.e.,thenumberofchildrenbornperwoman)amongselectcountries,with1.2childrenbornperwomanin2015,fromhavingoneofthehighest,at4.5childrenin1970,accordingtoWorldBankdata.
Figure2.FertilityRatesinAscendingOrderBasedon2015Data(NumberofChildrenbornperWoman)
Source:WorldBank
Thus,thedualeffectofanincreaseinthenumberofpeoplelivinglongeralongwithareductioninfamilysizeandnewbirthshascutSouthKorea’sdemographicevolutionatbothends,leadingtodrasticgrowthintheproportionofseniorsinthetotalpopulation.
ThefertilityrateinSouthKoreasawasignificantdropto1.2childrenin2015from4.5childrenin1970.
72 7262
72 71 71
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84 83 82 82 81 79 76
0102030405060708090
Japan France SouthKorea UK Germany US China
1970 1985 2000 2015
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China SouthKorea France US UK Japan Germany
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SouthKorea—theFastest-AgingNationUntil2000,SouthKoreahadoneofthelowestproportionsofseniors(aged65andabove)amongtheselectcountriesinFigure3,at7%ofitstotalpopulation,accordingtoUNdata,afiguresimilartothatofChina.After2000,theproportionoftheSouthKoreanpopulationaged65andabovebegantoclimbdramatically,andisforecasttoexceedthatoftheUS(19%)by2025,andthatofJapan(37%)by2060.
Figure3:Seniorsasa%oftheTotalPopulation
Source:UnitedNations,DepartmentofEconomicandSocialAffairs,PopulationDivision(2017)/FGRT
UNdataalsoshowedthatfrom1985to2000,thenumberofseniorsinSouthKoreagrewby1.9timescomparedtothatofothernationsinourgroup,ofbetween1.1and1.8times.Between2000and2016,the65+populationinSouthKoreadoubledinsizeto6.8million—thefastestpaceamongthecountriesinFigure4.Risinglifeexpectancyratesanddecliningbirthrateshaveresultedinsmallerfamiliescomparedtopreviousgenerations,whichhasledtoaskewingoftheoverallageprofileofthecountry’spopulation.
Between2016and2030,theseniorpopulationinSouthKoreaisforecasttogrowby1.8times,accordingtoUNdata,slowerthanintheprevious15years,butstillthefastestpaceamongtheselectedcountries,withonlyChinaexpectedtoseesimilargrowth.
Figure4.Growthofthe65+PopulationinSelectCountries(NumberofTimes)
Country 1985–2000 2000–2016 2016–2030SouthKorea 1.9 2.0 1.8
Japan 1.8 1.6 1.1
China 1.6 1.6 1.7
France 1.4 1.3 1.3
US 1.2 1.4 1.5
Germany 1.2 1.3 1.3
UK 1.1 1.3 1.3Source: United Nations, Department of Economic and Social Affairs, Population Division(2017)/FGRT
ThenumberofseniorsinKoreadoubledto6.8millionin2016from3.4millionin2000.
TheproportionofSouthKorea’s65+populationisexpectedtoexceedthatoftheUSby2025andthatofJapanby2060.
0%
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ThenumberofseniorsinSouthKoreajumpedto6.8million,or13%ofthepopulationin2016,from1.6millionor4%ofthepopulationin1980.By2030,thisfigureisforecasttoriseto12.6million,or24%,nearlyone-quarterofthecountry’spopulation,basedonUNprojections.
Figure5.SouthKorea’sDemographicComposition(Millions)
Source:UnitedNations,DepartmentofEconomicandSocialAffairs,PopulationDivision(2017)/FGRT
Whiletheincreaseintheseniorpopulationhascertainlybeendramatic,thishasnotnecessarilybeenagoodthing,astheirqualityoflifehasdeteriorated.
SouthKorea’sagingcrisisdidnotjusthappenovernight;ithasdevelopedovermanyyearsasaresultofacombinationofmacro-andsocioeconomicfactors,andsoanyremedialactionswillneedtobeofasimilarmagnitude.
Beforewelookatreformsintroducedbythegovernmentandthestepstakenatthegrass-rootslevelbyactivistsandnon-profitorganizations,weexaminethestructureofSouthKoreanconsumerspendingtounderstandhowseniorsspendrelativetootheragegroups.
SeniorConsumersUnder-IndexinNearlyEveryCategoryIncomesandexpendituresofseniorhouseholdsinSouthKoreaaresignificantlylowerthanthatoftheaveragehousehold.Infact,theirspendingunder-indexesrelativetotheaverageineverymajorcategoryexceptforhealthcare.InourbookMiningSilver:IdentifyingOpportunitiesintheSilverBoom,weexaminedseniorconsumersacrosstheUS,theUKandJapan,andconsistentlyfoundthatseniorsover-indexintermsofhealthcarespend.
Thedatainthefollowingtablereiteratethathouseholdsheadedbyseniorconsumerstendtobepoorerthantheaveragehouseholdorthoseheadedbyotheragegroups:foreverydollartheaveragehouseholdearns,aseniorhouseholdearnsincomeofjust67cents;foreverydollaranaveragehouseholdspends,aseniorhouseholdspendsjust65cents.
IncomesandexpendituresofseniorhouseholdsinSouthKoreaaresignificantlylowerthanthatoftheaveragehousehold.
By2030,thenumberofseniorsisforecasttoreach12.6million,ornearlyone-quarterofthecountry’spopulation.
12.9 12.3 10.9 10.4 9.8 9.2 8.0 6.9 6.8 6.8 6.9
23.6 26.7 29.8 32.2 34.2 35.2 36.3 37.0 36.6 35.0 33.2
1.61.8
2.2 2.7 3.4 4.35.3 6.8 8.1 10.4 12.6
1980 1985 1990 1995 2000 2005 2010 2016 2020E 2025E 2030E
0–14 15–64 65+
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Figure6.SouthKorea:AverageAnnualPer-HouseholdIncomesandExpendituresinTotalandbyRetailCategories,2016(Won)
All
Households 0–39 40–49 50–59 60andOver* 60+RelativetoAverage(%)
Income 52,790,280 53,476,764 60,064,056 61,646,364 35,210,508 67%
ConsumptionExpenditure 30,596,772 30,926,124 36,964,164 33,582,792 19,836,924 65%
ExpenditurebyCategory:
FoodandSoftDrinks 4,193,016 3,880,104 4,589,976 4,309,068 3,836,544 91%
AlcoholicBeveragesandCigarettes 417,912 455,904 444,492 451,692 325,824 78%
HousingandUtilities 3,276,984 3,493,476 3,375,828 3,429,276 2,853,564 87%
RestaurantsandHotels 4,132,308 4,286,184 5,000,040 4,749,480 2,389,248 58%
Health 2,126,532 1,937,700 2,045,340 2,305,596 2,200,092 103%
Transportation 3,691,824 4,118,652 4,003,368 4,594,032 2,156,232 58%
ClothingandFootwear 1,895,568 2,074,068 2,292,000 2,115,816 1,075,680 57%
Communication 1,728,012 1,753,344 2,004,396 2,051,616 1,072,584 62%
EntertainmentandCulture 1,795,824 1,912,164 2,242,608 1,921,032 1,049,436 58%
HouseholdGoodsandServices 1,310,904 1,605,012 1,451,880 1,329,192 902,712 69%
Education 3,385,488 2,442,120 6,622,452 3,242,928 287,880 9%
OtherMiscellaneousGoodsandServices 2,642,412 2,967,408 2,891,772 3,083,064 1,687,128 64%
Byageofheadofhousehold.*KOSISsplitstheagegroupsofhouseholdheadsasperabove,sothedefinitionofseniorhouseholdsforthistablediffersslightlyfromours,i.e.,thoseaged65andover.Source:KoreanStatisticalInformationService(KOSIS)/FGRT
Below,wecompareseniorhouseholdspendinSouthKoreawiththatofhouseholdsheadedbyotheragegroups.Seniorsallocatealargershareoftheirspendingtobasicssuchasfood(eatenathome),housingandutilities,healthandhouseholdgoodsandservicesthantheaveragehouseholddoes.Reflectingtheirbelow-averageincomes,seniorhouseholdsallocateabelow-averageshareoftheirspendingtodiscretionarycategoriessuchasrestaurantsandhotels,andentertainmentandculture.
Reflectingtheirbelow-averageincomes,seniorhouseholdsallocateabelow-averageshareoftheirspendingtodiscretionarycategories.
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Figure7.SouthKorea:Households’ConsumptionExpenditureCategoryShares,2016
AllHouseholds 0–39 40–49 50–59 60andOver*FoodandSoftDrinks 14% 13% 12% 13% 19%
AlcoholicBeveragesandCigarettes 1% 1% 1% 1% 2%
HousingandUtilities 11% 11% 9% 10% 14%
RestaurantsandHotels 14% 14% 14% 14% 12%
Health 7% 6% 6% 7% 11%
Transportation 12% 13% 11% 14% 11%
ClothingandFootwear 6% 7% 6% 6% 5%
Communication 6% 6% 5% 6% 5%
EntertainmentandCulture 6% 6% 6% 6% 5%
HouseholdGoodsandServices 4% 5% 4% 4% 5%
Education 11% 8% 18% 10% 1%
OtherMiscellaneousGoodsandServices 9% 10% 8% 9% 9%
Total 100% 100% 100% 100% 100%Totalsmaynotsumduetorounding.Byageofheadofhousehold.*KOSISsplitstheagegroupsofhouseholdheadsasperabove,sothedefinitionofseniorhouseholdsforthistablediffersslightlyfromours,i.e.,thoseaged65andover.Source:KOSIS/FGRT
WhatIsBeingDonetoAddresstheAgingCrisisThegovernmentandnonprofitorganizationsalikehavebeenawareofthedrasticriseintheseniorpopulationandtheirdeterioratingqualityoflife,andhavetakenstepstoalleviatetheproblem.
PresidentMoonJae-in’sCalltoActionMoonJae-inwonthepresidentialelectioninMaythisyear,andaddressingSouthKorea’sworryingdemographicsituation,insufficientpensionandjobsforolderpeoplewerekeyissuesinhiscampaign.
PresidentMoonJae-in’skeypledgesfortheseniorpopulation,asreportedbySouthKoreanwebsiteYonhapNewsAgency,were:
1) Toincreasethemonthlybasicpensionforseniorsinthelow-incomegrouptoKRW300,000($275)fromKRW200,000($183).
2) Toincreasethenumberofgovernment-providedjobsforolderpeopletoabout800,000from2017’slevelof430,000,andtodoubletheirwagestoKRW400,000($367)by2020fromthecurrentKRW220,000($202).
3) Tosupportincomethroughnationalandretirementpensionsbyenouragingmorewomenandlow-incomeindividualstoapplyforpensions,bylaunchingaretirementpensionfundsystemforsmallercompaniesandbyincreasingthestate’sroleinthemanagementofretirementpensionstoincreaseprofits.
4) Tosubsidizetreatmentfordementiaandopenlocalassistancefaciltiesandtobuildhospitalstotreatdementia.
PresidentMoonJae-inhaspledgedtoincreasethemonthlybasicpensiontoKRW300,000($275)in2018.
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Thegovernmentexpectstoimplementreformsinvolvingthebasicpensionandstate-providedjobsafterthe2018budget,andtointroducethenewhealthprogramsforseniorsinstagesfrom2018onwards.
LocalActivistsandAssociationsHelpingSeniorsToaddressthisissueatthegrassrootslevel,manylocalactivistsandaltruistshavesetuporganizationstohelpseniorsunabletocareforthemselves.ManyofthesewereoutlinedbyCNAinitsinvestigationofthelivesofseniorsinSouthKorea.
• Communitysuicidewatchgroupshavebeenestablishedtohelpseniorssufferingfromdepressionorthosethathavesuicidaltendencies.
• Gyeonggi,aprovinceinSouthKorea,hassetupcommunityhousestoprovidefoodandshelterforolderpeople.
• Manyvolunteergroupsthroughoutthecountryrunsoupkitchensandprovidefreewarmmealsandcompanionshiptoseniors.
OurThoughtsFromapracticalviewpoint,PresidentMoonJae-in’spledgesappeartoaddressthecountry’simmediateissuesrelatedtoitsagingpopulation.Itremainstobeseenwhetherthesereformswillindeedbepassedaspledgedduringthecampaign,oriftheymaygetdilutedasaresultofpoliticalconflict.
WhilethesereformswilladdressthemanycausesofthedirepredicamentseniorsinSouthKoreaarein,theymaynothelpsolvewhatmanyareexperiencingcurrently.Thisiswherethemanycharitableorganizationsinthecountrycomein.Theyhavebetteraccesstosolvetheimmediateproblemsfacingseniors,andreceivingstatesupporttoaugmenttheseeffortsmayhelpeasetheburdenonboththeorganizationsaswellasthegovernment.
ThegrayingofsocietyisnotjustanAsianproblemoraKoreanproblem.OtherlargeeconomiesandemergingmarketsmayonedayexperienceasituationlikeSouthKorea’s,albeittoalesserdegreeandataslowerpace.Thesecountriesshouldactproactivelytoimplementreforms,buildawarenessandsensitizepeoplewhilethecountryisstillyoungorwhilethechallengestotheeconomyarelessacute.CountriesthatarelessdevelopedthanSouthKoreaiscurrentlymaybeill-equippedtohandleasocioeconomicshiftofsuchmagnitude.Advancereviewoftheirnationaldemographicchangeswillhelpthesecountriesimplementprecautionarymeasurestopreventasimilarcrisis.
ManyvolunteergroupsinSouthKorearunsoupkitchensandprovidefreewarmmealsandcompanionshiptoseniors.
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DeborahWeinswig,CPAManagingDirectorFGRTNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comJohnMercerSeniorAnalystSwaroopraniMuralidharResearchAssociateHongKong:2ndFloor,HongKongSpinnersIndustrialBuildingPhase1&2800CheungShaWanRoad,KowloonHongKongTel:85223004406London:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomNewYork:1359Broadway,18thFloorNewYork,NY10018Tel:6468397017FungGlobalRetailTech.com