How to navigate the national emergency

the government must rekindle the stalled labor, regulatory and pension reforms.

Cho Min-geunThe author is the business and industry news director of the JoongAng Ilbo. Even 20 years ago, having a child was not an easy thing. At that time, the total fertility rate was between 1 and 1.5. Peers around my age often said that having a child, finding a job and buying a house were the “three most difficult problems.”

Seniors and relatives who already started a family reassured us by saying “Start a family first, and you will find a way.” Based on that vague advice, we got married one after another, had children, took out a loan and bought a house. The hope that tomorrow would be better than today drove us to make decisions that may seem reckless in retrospect. After all, we expected that the economy would grow, our incomes and assets would increase and debts would slowly decrease. There were twists and turns, but the main trajectory did not deviate much from this expectation.

However, the total fertility rate, which didn’t fluctuate significantly, started to plummet after recording a rate of 1.24 in 2015. It was 1.17 in 2016 and 1.05 in 2017. And in 2018, it fell below 1. This year, it dropped to 0.6, prompting the president to declare a national emergency. What changed since 2015, and by how much?

Among the social and economic changes of that time, women’s employment and housing prices are often discussed in relation to the total fertility rate. In 2015, women’s employment rate went over 50 percent for the first time. The situation was already tense because the social system and infrastructure couldn’t keep up with the increase of women’s participation in economic activities, and it abruptly exploded beyond the threshold. Young couples were forced to make a choice between having a child and a job. And the final nail in the coffin was home prices skyrocketing since 2017.

The Presidential Committee on Aging Society and Population Policy seems to have taken note of this “2015 mystery” in its latest countermeasures. Its key measures are focused on lessening burdens from taking parental leaves, offering assistance to newlyweds and couples with newborns to take out loans and buy houses, and reducing the childcare vacuum for working parents.

It is better than previous measures that meaninglessly included almost everything, and perhaps it will help slow down the decline in birthrate a little bit. But those measures won’t be enough to reverse the situation completely as the government promised. Gen MZ in Korea refers to themselves as the first generation to be poorer than their parents. This means that the hope for a better tomorrow, which keeps us going through hardships, is already shaking.

The stock market explicitly shows this. The market is a window into the current and future prospects of a country’s economy. This year, global stock markets, including those in the United States, Europe, Japan and Taiwan, broke all-time highs and set new records, but the Korean stock market remained idle. While the S&P 500 surged 15 percent and the Nasdaq soared 18 percent, the Kospi was up just 4 percent despite the government’s “value-up program” which started at the beginning of the year.

The main reason is that domestic investors completely ignored Korean stocks. Individual investors, in particular, are engaging in “stock investment migration,” selling Korean stocks and buying U.S. stocks. While they sold 11 trillion won ($7.9 billion) worth of Korean stocks, they bought 8 trillion won worth of U.S. stocks. The same is true for exchange traded funds (ETFs). The top 10 funds are all investing in U.S. stocks. Even the National Pension Service is reducing its investments in the domestic market because the returns are not high.

In the end, we must turn despair into hope. To do this, we need to pay attention to another indicator that has undergone a significant change since 2015. Many experts believe that the potential growth rate of the Korean economy may have fallen to 2 percent that year. The low-growth structure was firmly established, and the dynamism and vitality of the economy have weakened significantly.

The government knows that expanding ministries and paying incentives will not resolve the problem. To build the grounds for hope, the government must rekindle the stalled labor, regulatory and pension reforms. This is not the time to sit back and complain that the National Assembly is not cooperating.