Trend Rapid population ageing weighs on both labour input and productivity

Summary

Rapid ageing is set to act as a negative force on both of the supply-side engines of Korean growth. With participation far lower among older people, a rising elderly share will slow growth in the number of employed. Earlier research reports that ageing depresses total factor productivity, and a shrinking share of young people, who adopt and develop new technology more easily, weakens economy-wide productivity gains. The authors attribute the projected fall in potential growth primarily to this demographic change. They expect labour input's contribution to growth to turn negative around 2030 as the working-age population declines.