South Korea's Aging Population May Hinder AI Boom Benefits

South Korea is experiencing a significant boom driven by the artificial intelligence sector, largely due to its prominent role in memory chip manufacturing. Companies like Samsung Electronics and SK Hynix, the world's largest memory chip producers, are at the forefront of this surge, with chip workers reportedly receiving bonuses of approximately $400,000. The positive impact is reflected in the KOSPI, South Korea's benchmark stock index, which has seen an increase of nearly 60% year-to-date. However, a report from Goldman Sachs suggests that the economic benefits of this AI-driven growth may not be widely distributed among ordinary households, a phenomenon the firm describes as a "K-shaped cycle." While exports and factory investment have escalated due to high demand for chips, retail sales have remained stagnant, showing little growth since 2019. Goldman Sachs economists attribute this disparity to South Korea's rapidly aging population and one of the world's lowest fertility rates, which stood at 0.8 births per woman last year, significantly below the 2.1 rate required for population stability. For comparison, the United States reported 1.6 births per woman. Currently, 20% of South Korea's population is over the age of 65. The country faces a demographic shift as the postwar baby boomer generation retires, coinciding with a persistently low birth rate, leading to a shrinking working-age population tasked with supporting an increasing elderly demographic. Projections from the United Nations indicate that South Korea's dependency ratio—the proportion of children and elderly individuals relative to the working-age population—is expected to rise by 1.5 percentage points annually over the next decade. This rate of increase is the fastest among the 70 large and mid-sized economies analyzed by Goldman Sachs, even surpassing Japan's demographic aging pace between 2000 and 2015. Adding to this challenge is the unusual retirement behavior of older Koreans, who tend not to spend their savings. Unlike in countries such as Japan, Taiwan, and the United States, where retirees typically draw down their accumulated wealth, Koreans in their sixties continue to save, retaining an average of 37% of their income. Even individuals in their seventies maintain savings rates comparable to those in their forties. This reluctance to spend among the elderly population, coupled with a declining birth rate, poses a significant obstacle to the broad-based economic prosperity that the AI boom could otherwise foster, potentially limiting the trickle-down effect of corporate wealth to household consumption and overall economic vitality.