In 1960, South Korea had a total fertility rate of more than six children per woman, high enough to cause a population explosion. But as the country developed, this number dropped decade by decade.

A country needs a fertility rate of about 2.1 — a little more than one child per parent — to maintain long-term population stability. South Korea’s fertility is now about half that number. And it’s still falling. The country’s statistics office reported that in 2018 the fertility rate fell to a record low of 0.98 — much lower even than in countries such as Japan, whose rate is above 1.4.

This means that South Korea is headed for a demographic crash. Although the country’s population has been rising due to higher birthrates in earlier generations — an effect known as population momentum — this is set to reverse as early as next year. During the next half-century, unless something changes, the population of 51 million could fall by a third.

The question is whether this rapid shrinkage will hurt South Korea’s economy. Mathematically, it’s possible for countries to endure population decline while growing richer on a per capita basis. This has been the experience of Japan, whose population has been shrinking since 2008.

So if people can continue to get richer, why does total population size matter? The answer, in short, is because population aging tends to make countries less productive. Old people retire, meaning they no longer contribute much to economic production, slowing the growth of per capita output. And as the ratio of retirees to workers grows, each worker has to spend more money, time and effort supporting the growing legion of the elderly.

Falling population can also affect how much companies want to invest in a country. Companies want to produce goods and services near where their customers live, so when the absolute size of a national market begins to shrink, it reduces the incentive to build new offices and factories there. As recently as the late 1990s, Japan invested about 30 percent of its gross domestic product, but that number is now down to about 24 percent. Although some investment can be wasteful, lower investment often precedes a reduced capital stock and a lower living standard in the long run.

An aging population can also reduce productivity growth. Once workers are past their mid-40s, their productivity starts to decline — possibly because they’re slower to adapt to changing business conditions. A 2016 paper by economists at the International Monetary Fund suggested that aging could be a reason for the productivity slowdown in Europe. Another recent paper, by economists Nicole Maestas, Kathleen Mullen and David Powell, found that U.S. states with more elderly populations experience slower growth in per capita GDP. Economists at Moody’s Analytics found similar results.

So a graying world will also be one where living standards grow more slowly. Unfortunately, there are no known policies that can raise birthrates substantially. As economist Lyman Stone has documented, offering financial incentives for childbirth and providing free child care has only a modest effect.

That leaves immigration as the main option for population stability. In theory, South Korea could offset population decline by taking immigrants from neighboring China or other nations. For countries with fertility only slightly below replacement rates, such as the United States or France, this strategy is feasible. But for South Korea, the amount of immigration needed to maintain a stable population would be staggering — as much as a third of the country’s entire population would have to be either immigrants or their descendants five decades hence. It’s not at all clear that the native-born population would tolerate such a rapid increase in diversity, especially in a country that has little history of immigration.

There’s a more fundamental problem with the immigration strategy — it can’t work for the entire world. Fertility rates are falling in most countries. China, which could serve as the main source of immigration for South Korea, is seeing its working-age population fall by millions every year. India’s will follow. Even in Africa, which is expected to supply most of the world’s population growth during the next century, a transition to low fertility is underway.

In the long run, this means the supply of potential immigrants will dry up. And in the short run, population growth in poor countries and population shrinkage in rich ones will slow the decline in global poverty rates.

So unless new and effective policies to raise birthrates are discovered, population in many nations will age and dwindle, with countries such as South Korea leading the way. This means a new age of slow growth and increased dependency burdens is in the offing. Governments, economists and businesspeople need to start planning for a graying world. They need to devise ways to utilize the elderly’s talents more effectively, increase automation, provide services for old people more efficiently, reduce medical costs and redesign pension systems to make them financially sustainable. The gray wave probably can’t be stopped, but the human race will have to find ways to cope.

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

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