Why has South Korea’s fertility rate dropped below Japan’s? An exploratory study of youth labor market challenges and family formation

Japan and South Korea experienced a rapid decline in total fertility rates (TFR) until the early 2000s; however, over the past two decades, the two countries have exhibited markedly different trends in TFR, with Korea’s rate being significantly lower than Japan’s. How can we explain the diverging patterns? This study identifies several points that may help illuminate this divergence by focusing on the youth labor market. Firstly, we demonstrate that the decline in Korea’s TFR can be largely attributed to a significant decrease in the fertility rate among the 25–29 age group, which is not the case in Japan. Furthermore, we highlight a distinctive characteristic of the Korean labor market that may exert downward pressure on the age-specific fertility rate: a large and increasing share of young men who are not engaged in paid labor, i.e. economic inactivity. Utilizing data drawn from multiple sources, we examine whether and how the increase in economically inactive young males is associated with the ongoing fertility decline in Korea.