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Effect of a Drop in the Working-age Population on Seoul’s Economy

Heeseok ParkㆍYoonhyi Jang

In Korea, the working-age population was declining in 2016, and the decline is expected to accelerate beginning in 2020. The decrease in the working-age population is causing economic changes, closely related to the economic growth rate. Thus, a policy response is required through systematic analysis. The decrease in the working-age population is expected to have a greater impact on Seoul’s economy. For this reason, the purpose of this study was to analyze the relationship between the impact of the decrease in the working-age population and the change in productivity.

According to OECD statistics, the share of the world's working-age population peaked at 65.6% in 2015, and continued to decrease to 65.2% in 2020. The working-age population in Korea has increased by an average of 0.6% per year 2000-2020. During the same period, the working-age population in Seoul decreased by an average of 0.3% per year.  Population aging reduces the working-age population in the labor market, and consequently reduces the potential labor supply capacity. An aging population is also impacting households and business sectors. 

A decrease in the total population in the household sector leads to a chronic economic recession because of an increase in the proportion of the dependent population. A reduction in the size of the market in the firm sector reduces the Abstract69 labor supply, which in turn leads to a decrease in economic growth rate.