Global Trends

The Birth Rate Crash That Will Redraw the World Economy

In 2023, South Korea recorded a fertility rate of 0.72. The replacement rate, the number needed to keep a

By Malvin Simpson

August 7, 2026

The Birth Rate Crash That Will Redraw the World Economy

In 2023, South Korea recorded a fertility rate of 0.72. The replacement rate, the number needed to keep a population stable, is 2.1. South Korea was not slightly below that. It was less than a third of the way there. This is demographic winter at its most extreme.

That number is the lowest fertility rate ever recorded for any country in modern history. It dropped from 1.24 as recently as 2015. South Korea declared a national demographic emergency, created a ministry dedicated to the problem, and has spent over $200 billion on pro-natalist policies over the past two decades.

The fertility rate kept falling anyway.

South Korea is the most extreme case but not an isolated one. Japan’s population is projected to shrink from 125 million to around 96 million by 2060. Italy recorded 355,000 births in 2025 against 652,000 deaths, the fewest births since Italian unification in 1861. China’s population has been shrinking since 2022, with annual births down 50% since 2016. Demographers at the Peterson Institute for International Economics describe China’s decline as getting close to irreversible.

These four countries are not facing the same problem through different circumstances. They are facing demographic winter through the same circumstance: prosperity, urbanisation, the rising cost of children, and a shift in what young women want from their lives that no government cheque has managed to reverse.

Why the Damage Takes Thirty Years to Arrive

A fertility rate is not a birth rate. It is a projection: how many children a woman would have if current age-specific patterns held across her reproductive life. A rate of 2.1 keeps the population roughly stable. A rate of 1.5 means each generation is about 30% smaller than the one before it. A rate of 0.72 means each generation is roughly two-thirds smaller.

The consequences do not arrive immediately. A country feels a fertility collapse twenty to thirty years later, when the children not born fail to enter the workforce, pay taxes, buy houses, and fund a pension system designed for a much higher worker-to-retiree ratio.

Japan already lives in that future. Its elderly dependency ratio is the highest in the OECD and still rising. Social security spending is projected to climb from 21.5% of GDP in 2018 to around 24% by 2040. The country could be short of 11 million workers by 2040. In the worst-case scenario modelled by researchers at Tohoku University, Japan’s GDP growth turns negative in 2028 and the economy contracts to 1970s levels by 2100.

South Korea, Italy, and China are at different points along the same curve.

Japan: The Country That Got There First

Japan’s working-age population began its structural decline in the mid-1990s. This is why economists who study Japan’s lost decades of low growth often observe something that gets underreported: when GDP performance is adjusted for the shrinking working-age population, output per worker has been broadly comparable to most other large advanced economies. Japan has not been economically stagnant. It has been running faster just to stay in place.

More than one in ten people in Japan is now aged 80 or older. The country has 125 job openings for every 100 job seekers. Convenience stores and construction sites run on elderly workers because there are not enough young ones. The retirement age has been pushed upward and more women and older workers have been brought into the labour force, not because it is good policy in the abstract but because there is no alternative.

Japan’s fertility rate in 2024 was 1.2. New births fell to a record low in 2023 and the government’s own projections do not show a meaningful recovery. In January 2023, then-Prime Minister Fumio Kishida said Japan was standing on the verge of whether it could continue to function as a society. That is not rhetoric. It is arithmetic.

South Korea: The Sharpest Fall Ever Recorded

In 1960, the average South Korean woman had six children. By 1983 the fertility rate had dropped to 2.1, exactly replacement level, driven by rapid industrialisation and one of the fastest economic expansions in recorded history. What followed was a continuation of that pattern, though further and faster than anywhere else on earth.

As the country got richer, children got more expensive. Education costs in South Korea are among the highest in the OECD relative to income. Private tutoring, known as hagwon, is a multi-billion-dollar industry. Housing in Seoul costs over five times the median annual income. Young Koreans coined the term “sampo generation” for peers giving up on dating, marriage, and children. A later term, “opo generation,” added home ownership and employment to the list.

The fertility rate fell from 1.24 in 2015 to 0.72 in 2023, then rose to 0.75 in 2024 and 0.80 in 2025 on the back of a post-pandemic rebound in marriages. The government projects it will reach 1.0 by 2031. Independent demographers are less confident.

Over $200 billion in pro-natalist spending since 2006 has not moved the needle in any sustained way. The reason is not that children are unaffordable, though they are. It is that South Korea built a society around extreme working hours, intense educational competition, and career-first culture, extracted enormous economic output from that arrangement, and then discovered that the people it produced had little interest in reproducing it.

Italy: The Slow Disappearance

Italy’s demographic problem is older and slower than East Asia’s. For decades it was treated as a cultural peculiarity rather than a crisis, which is partly why it has become one.

The fertility rate has been below replacement since the 1970s. It fell to 1.14 per woman in 2025, the lowest recorded since Italian unification in 1861. Against 355,000 births that year, 652,000 people died, a natural population deficit of 297,000 in twelve months. Only net immigration of roughly the same scale has kept the total from falling further, a situation politically awkward for a government that ran partly on restricting immigration and now quietly depends on it to survive demographically.

By 2050, Italy’s working-age population is projected to shrink by 21%, a loss of 7.8 million people between 15 and 64. Italy’s productivity has been essentially flat since 2000 while the rest of Western Europe has pulled ahead. A shrinking workforce combined with stagnant productivity is a bad combination with no obvious exit.

Southern Italy is already showing what the end stage looks like. Villages with populations under a thousand are selling houses for one euro to attract new residents. Some municipalities pay families to relocate. Since the 2014-15 school year, 2,600 preschools and elementary schools have closed for lack of children. In 2023-24 alone, 127,000 fewer children enrolled than the year before.

Prime Minister Giorgia Meloni has declared demographic decline a national emergency and expanded family support through a Decreto Famiglia framework. The fertility figures for 2024 and 2025 show it has not worked.

China: The Largest Absolute Decline in History

China’s situation is different from the others in one respect: scale.

In 2022, deaths outnumbered births in China for the first time since the Great Famine of the early 1960s. In 2023 the population fell by 2.08 million, more than double the 850,000 decline the year before. Birth rates dropped 17% between 2024 and 2025 to the lowest level since 1949. The Peterson Institute projects China will experience the largest absolute population loss of any country between 2024 and 2054. The IMF estimates demographic pressure alone could cut around 0.5 percentage points from China’s annual GDP growth every year through the 2030s.

China’s fertility rate is estimated at around 1.09 per woman as of 2022. Shanghai recorded 0.6 in 2023. Annual births have fallen from 17.9 million in 2016 to around 9 million in 2024, a drop of nearly 50% in eight years.

The specific danger demographers identify is that China may grow old before it grows rich. Japan and South Korea were already high-income countries when their fertility rates collapsed. China’s GDP per capita of around $23,000 is well below where either country was at a comparable demographic point. The pension systems, healthcare infrastructure, and elderly care capacity needed to support a rapidly ageing population have not been built to the same standard. The fiscal pressure arrives before the economic capacity to handle it does.

China spent thirty-five years forcing its population not to have children under the one-child policy, implemented from 1980 to 2015. It has spent the decade since trying to persuade them to have children again. Xi Jinping has called on Chinese women to embrace a new type of marriage and childbearing culture. The government removed tax incentives on contraceptives and introduced cash subsidies for second and third children. Marriages in 2024 hit the lowest number ever recorded at 6.1 million, a fall of 20.5% from 2023.

The fertility rate has not recovered.

Why Government Money Keeps Failing

Every country in this article has spent heavily trying to reverse demographic winter. None has produced a sustained recovery.

The reason is not that the policies are poorly designed. It is that the problem is not primarily financial. Across all four countries, the decision not to have children is made because the societies built during rapid economic growth were not designed around the assumption that women would want careers, independence, and lives outside the home. They have not restructured enough to make those things compatible with raising children.

In South Korea, working hours and educational pressure make parenting feel professionally impossible. In Italy, the labour market still penalises women for having children, informal family support networks have eroded, and youth unemployment keeps many young people in financial precarity well into their thirties. In Japan, workplace culture demands total commitment from employees in ways that make the logistics of childcare genuinely unworkable. In China, collapsed property values, record youth unemployment, and high childcare costs have made the economics of a second child feel out of reach.

A government can write a cheque. It cannot write affordable housing, a shorter working week, functional public childcare, and a career track that does not end when a woman leaves early to collect her child. Countries that have maintained higher fertility rates, France, the Nordic nations, parts of Eastern Europe, have done it through structural support for working parents built over decades, not cash transfers and emergency declarations.

Three Responses, No Easy One

A shrinking population leaves governments with three options: accept a smaller economy and restructure around it, raise productivity enough that fewer workers produce the same output, or bring in people from outside.

Japan has been attempting all three at once. It has raised retirement ages, drawn more women into the workforce, invested heavily in automation and robotics, and opened immigration channels in ways politically unthinkable a decade ago. None of it has fully replaced what the demographic decline is removing. It has bought time.

Immigration is politically the hardest option in Italy and South Korea, both of which have significant cultural resistance to large-scale population change. Italy needs immigrants to maintain its population and is governed by a party that built its coalition opposing them. South Korea has begun admitting more foreign workers in specific sectors without any broader shift in policy or public attitude.

For China, immigration at scale is not a realistic option. There are not enough people elsewhere to fill a Chinese demographic gap measured in the tens of millions.

No country has reversed demographic winter once fertility has gone below roughly 1.5 per woman for a sustained period. The policies that have kept fertility higher elsewhere are not one-time interventions but decades of structural investment in making parenthood compatible with the lives educated, economically active women actually want to live.

Japan is already inside the consequence. South Korea, Italy, and China are close behind. The rest of the developed world is watching.es back. The rising price is really just the sound of a great many people reaching for the same old comfort at the same time.