Rising life expectancy in South Korea is contributing to a notable decline in consumer spending, as more individuals prioritize saving for retirement. (Image created by AI/ChatGPT)
SEOUL, April 24, (Korea Bizwire) — Rising life expectancy in South Korea is contributing to a notable decline in consumer spending, as more individuals prioritize saving for retirement over immediate consumption, according to a new report released on April 23, 2025, by the Korea Development Institute (KDI).
The report, titled “The Impact of Demographic Factors on Propensity to Consume and Policy Implications,” highlights a strong inverse relationship between life expectancy and consumption behavior. From 2004 to 2024, South Korea’s average life expectancy increased by 6.5 years—from 77.8 to 84.3 years—while the average propensity to consume fell from 52.1% to 48.5%, a decline of 3.6 percentage points.
KDI attributes most of this decline—about 3.1 percentage points—to increased longevity, estimating that each additional year of life expectancy correlates with a 0.48 percentage point drop in consumption propensity.
The trend reflects heightened savings behavior as people prepare for a longer post-retirement period, particularly in the absence of a corresponding increase in official retirement ages. With many older adults anticipating unstable or low-income employment after leaving the primary workforce, they are choosing to save more during their working years.
The decline in consumption propensity, the report notes, has become a structural factor in South Korea’s sluggish private consumption growth—one that has persistently trailed the broader pace of economic expansion.
However, the KDI forecasts a potential rebound in consumption starting in the mid-2030s. This projected shift would be driven by a slowdown in life expectancy gains and a growing share of elderly individuals aged 75 and older who have already accumulated assets, potentially loosening their savings constraints.
To address the broader economic implications, the report calls for structural reforms in the labor market. Specifically, it urges a transition from South Korea’s entrenched seniority-based wage system to one that rewards job roles and performance.
It also recommends expanding post-retirement employment opportunities through re-employment schemes to better utilize the aging workforce and stimulate consumption among older adults.
“Structural improvements in the labor market and targeted policy measures can help mitigate the negative impact of demographic trends on private consumption,” the report concludes.
Lina Jang (linajang@koreabizwire.com)
