August 17, 2022

The Increasing Costs of Reunification for Aging South Korea

Under nearly any possible reunification scenario between South and North Korea the southern half will have to fork out a lot of money. The costs are easy to imagine. North Korea lacks adequate infrastructure, health care, food resources or social services to match the South. Understanding this, South Korea’s Unification Minister, Yu Woo-ik, has taken the initiative in his first year of office by lobbying for a reunification fund of 55 trillion won (KRW). This amount will be earned by donation, as opposed to a tax or other funding mechanism.

Starting now with such a fund is wise from the South Korean government’s standpoint. South Korea has an ageing population poised to lose numbers over the long term. The country’s total fertility rate is 1.23, or the sixth lowest in the world, with 2.1 the number necessary to maintain a population’s current level. While the country may be walking toward a demographic cliff, it is also uniquely positioned right now to maximize aggregate earnings across its economy. The middle-aged core of the country are at the prime point in their careers to maximize their earning potential, and the country’s earning potential, in a way that has previously not been possible. This also means that the population is uniquely situated to make contributions toward reunification.