The Peninsula

An underappreciated part of South Korea’s successful 2025 Asia-Pacific Economic Cooperation (APEC) summit at the end of October was its focus on demographic decline. While APEC summits traditionally address a broad range of economic issues, this year’s summit elevated the impact of declining birth rates, shrinking workforces, and aging populations to the top of the regional policy agenda. “We’ve striven to narrow differences among APEC members … and ultimately succeeded in reaching agreement on the Gyeongju Declaration and two other key documents,” South Korea’s presidential Blue House said.

South Korea is confronting one of the fastest demographic transitions in the world, so the Lee Jae Myung administration should be congratulated for using the APEC meeting to advance a regional conversation about what economic competitiveness entails when labor pools contract and societies age rapidly.

Building a Sustainable Workforce for Tomorrow

Demographic shifts are a particular concern for South Korea, with the total population declining for the first time in 2021. As of last year, South Korea had a fertility rate of 0.7—one of the lowest in the world. Should current trends continue, the working-age population will shrink from 72 percent to 56 percent in 2040. Concurrently, the entire country will have become super-aged by 2029, with 20 percent of the population over the age of sixty-five.

The declining birthrate in South Korea will have significant public policy effects. The country is already examining how it will affect military readiness through its impact on military recruitment. In terms of fiscal policies, the demographic change will also affect the public pension system. Over the last three years, the number of pension subscribers has consistently fallen at an increasing rate, while the number of recipients has increased. If current birthrate trends continue, the national pension fund is projected to be depleted by 2056.

South Korea has tried to address the issue of demographic challenges for some time. Research has shown, however, that previous pronatalist policies, such as cash incentives for women, only change the timing at which women have children and not the total number. The Lee administration should look to alternative investments to address the impact of declining birthrates on economic productivity, rather than relying on monetary incentives to encourage women to have children.

Although a declining birth rate is an acute challenge, it is also one faced by other major economies. As such, it is noteworthy that the APEC participants developed the Collaborative Framework for Demographic Changes, which seeks to address the challenges associated with slowing population growth across the Indo-Pacific.

The framework includes five general recommendations for member states to implement. First, member economies are told to take initiative in building systems that can adapt to an aging and smaller workforce. This includes removing barriers to economic participation by increasing investments in workforce training and retraining across all ages. Members are also encouraged to invest in the silver economy, which will grow over the next several decades and could become a potential successor to sectors that have become less profitable. Second, the framework encourages member economies to modernize their workforces. In addition to investing in education to develop capable workers who can start and participate in new industries, members are called to enhance recognition of professional qualifications and licensing assessments that will aid the workforce in expanding possible areas of employment.

Third, technological innovation in the health services industry should be prioritized not only as a necessary tool for older populations but also as an engine of growth for an industry that will only grow in demand. Fourth, member states are encouraged to expand female workforce participation through training and education, as well as by supporting caregiving and other domestic duties predominantly performed by women. Finally, the framework highlights the need for member states to share information through government, academic, and civil society partners.

Adoption of the abovementioned principles would enable South Korea to maintain its status as a technological power and strengthen its already educated workforce. Given that South Korea’s labor force is contracting and getting older, the country should turn to higher-growth industries such as healthcare, IT, semiconductor manufacturing, and environmental technology. These industries have not only grown at a faster rate than transportation, shipbuilding, and automobiles, but also are resistant to robotization and less physically demanding.

To promote growth and protect welfare schemes, South Korea must evaluate its economy’s strengths and weaknesses and recalibrate investment to areas with greater potential that align with the country’s changing workforce. South Korea’s younger and shrinking workforce presents two primary challenges. First, a smaller workforce that does not produce at a rate significantly greater than its larger predecessors will stall in growth and be unable to maintain a pension system whose dependents outnumber its contributors. Second, should the workforce remain bereft of tools that would allow them to be more productive, incomes will also remain stagnant, leading to lower consumption and thereby impacting growth.

There are several areas of the economy that are suitable for the new makeup of the South Korean populace. In 2025, healthcare was a particular area of the economy that boomed. South Korea reported net job growth of 220,000 jobs in November, with the healthcare sector comprising the majority of the job growth. Growth in the healthcare industry was driven by a marked uptick in eldercare needs, which coincided with population trends. The growing number of retirees also created an increase in IT employment, with companies moving investment toward healthcare tech. However, these employment increases were not only concentrated in these select areas but also in certain age groups. The majority of new jobs were filled by workers over the age of sixty, while youth unemployment has increased. These trends, which may be emblematic of trends other APEC countries will soon face, emphasize the importance of adopting the Collaborative Framework.

This economic pivot first necessitates public investment in technological literacy to equip the older workforce with essential skills and increase the capital-labor ratio of the smaller workforce. The increase in employment in the Korean IT industry has been driven by government investment and subsidies for domestic companies. In keeping with the framework’s first recommendation, South Korea has also begun public-private partnerships to integrate AI into the workplace. These practices will streamline production and allow workers to become more productive. Youth unemployment, though, must be taken more seriously by the new administration. Reports show that increasing youth unemployment is primarily caused by a mismatch of graduate credentials and the preferences of employers. With the average Korean graduate having no work experience, employers are increasingly hesitant to bring on young workers. Skills programs in the country are mostly private, meaning the administration must step in to empower the next generation.

A Strong Finish

South Korea’s successful hosting of the APEC summit deserves credit, but the real significance lies in the Lee administration’s decision to make demographics a major part of its policy agenda. With population decline accelerating faster in Korea than almost anywhere else in the world, the Collaborative Framework for Demographic Changes gives Seoul a platform to shape how Indo-Pacific economies confront a shared structural challenge. The Korean government now faces the far harder task of implementing reforms that raise productivity, expand workforce participation, and prepare older workers for new technology.

If Gyeongju is remembered not only as a diplomatic success but as the moment Korea began treating demographics as an economic strategy, APEC 2025 will be remembered most for reframing the country’s path toward future competitiveness.