Low Birth Rate

Low Birth Rate
The Korea Times has recently written that the birth rate in Korea is exceptionally low. The government has now passed a bill allowing all fathers three months leave from work if their wives gave birth.
The economic problems associated with the low birth rate is the same for Koreans as it has and will be for U.S. baby boomers. With a sudden drop in population, millions of people will have to be supported in 60 or 70 years by a tiny fraction of the population.
Also "current job insecurity will further deteriorate because a large number of schools will inevitably close. Women might be conscripted to make up for shortages of military manpower. Various pension funds will be depleted, threatening the welfare system in its infant stage. The nation will suddenly become an aged society. Retired people will be compelled to return to work sites."
"The Third World: Staying Poor and Growing Old" by Randy McDonald


Dr. Tufte said...

This is a problem that ought to take care of itself - it doesn't though.

Think about this: if people live longer, then they spend more years working.

How is it a problem providing for the care of the old, if they spent more time working (and potentially saving) than they have ever done in the past?

The answer is that this is a problem of collective irresponsibility towards our own welfare.

And ... you guessed it ... it is similar to a prisoners' dilemna. That game being played here is sequential. The middle-aged get to choose first. If they choose not to save enough, then the young get stuck with the bill - no matter what choice the young make.

It is very important to have mechanisms put in place by the government to correct for this sort of issue in advance. For example, requiring people to have pensions would mitigate this.

Isaac said...

Dr. Tufte wrote that “It is very important to have mechanisms put in place by the government to correct for this sort of issue in advance.” I completely agree with the statement. It seems that the issue in Korea is the same issue we are facing today in the United States. The government in Korea needs to put a plan into place that will fix the problem if it eventually happens. Let’s hope the U.S. plan of putting our retirement into the stock market will succeed.

Dr. Tufte said...

I wasn't suggesting that the "mechanism" would be the government putting our social security into the private market.

Rather, there needs to be a mechanism that binds people into decisions that they can't renege on and pass the costs on to others. This is the problem with social security currently.