Fierce competition, anxiety over schooling may have cost Korea a quarter of its births

Korea's infamously low birthrate may be partially attributable to overzealous competition among the country's parents for their children's education, where they voluntarily enter into a fierce and vicious cycle of comparing their children with others, spending too much on private tutoring, having little money or emotional room for another child and not giving birth. 

Without that pressure, Korean women born between 1970 and 1975 would have had an average of 2.45 children, 28 percent more than the 1.92 they actually had, said Virginia Commonwealth University's associate professor of economics Yum Min-chul in a presentation at the 2026 BOK-CEPR-OECD Conference on the Economics of Population Ageing and Longevity on Sept. 2. 

The Bank of Korea hosted the two-day meeting with the Centre for Economic Policy Research and the Organisation for Economic Cooperation and Development. 

The research follows up on “Status Externalities in Education and Low Birth Rates in Korea,” a paper Yum published in the American Economic Review in 2024 with Kim Seong-eun of Sejong University and Michèle Tertilt of the University of Mannheim.

Status competition, as the researchers define it, is the practice of judging a child's educational attainment against that of other people's children. The stronger that impulse, the more a family spends on each child and the fewer children it has. Countries where anxiety about educational competition runs higher have lower birthrates with steeper declines, with Korea, Singapore and Chile the clearest cases.

About 75 percent of Korean students take private classes, and spending on private classes eats up a larger share of income at the bottom than at the top — 8.4 percent for low-income households against 5.1 percent for high-income households.

The spending is contagious. Researchers analyzed changes in regional curfews on late-night classes at private academies. They found that when the top 15 percent of households cut private education spending by 10 percent, the share of income the bottom half spends on it fell by 0.4 to 0.9 percentage points.

Yum said the comparison motive drives society to overinvest in education and inefficiently dampens the birthrate. He proposed taxing private education spending and using the revenue to fund support for having children. Policy should also tax or regulate private academies and reduce the weight given to relative performance in educational assessment, he said.

The conference also took up the effects of childbirth and aging on the economy. The so-called motherhood penalty, which is the sharp fall in women's earnings after childbirth, has grown with each five-year cohort. Twelve months after giving birth, women born between 1976 and 1980 saw their earnings fall 40 percent; for those born between 1981 and 1985, the drop was 46 percent.

Aging is also changing the conditions for monetary policy. The central bank expects a shrinking work force and rising retirement savings to push the equilibrium real interest rate down. That would leave it less room to cut the base rate in a downturn.

Bank of Korea Gov. Shin Hyun-song urged the conference to look past the immediate, but cautioned against reading demographics as fate.

“Among the longer-term issues facing central banks, demographic transition is one of the most important,” Shin said in a video address. “It is key to the evolution of productivity, potential growth […] and long-term equilibrium interest rates. I think it's fair to say that what is happening in Korea today foreshadows what many other countries will face tomorrow. Demography is a powerful force, but, as they say, demography is not destiny.”

“Unlike the short-term shocks that we spend most of our time addressing, demographic change announces itself decades in advance,” he said. “It is indeed a formidable challenge, but we can see it coming. We can prepare in good time […] This is a moment to prepare, not to postpone.”

The conference ran through Sept. 3. The second day covered AI's potential to raise productivity in an aging society, gaps in AI exposure between generations and labor market mismatches caused by population decline.

BY KIM WON [[email protected]]