|Population Policy in the 1970s
Overpopulation was one of the major concerns to policy makers in the 1970s. Fortunately, the annual rate of increase in population decreased over time from 3 percent in 1961 to 1.57 percent in 1980. Many factors can be cited to explain this change. This paper attempts to relate this change to the population policies employed by the Korean government in the 1970s, with the aid of various demographic researches and recommendations. The policies we discuss here concern fertility reduction, population distribution, and an integration of demographic variables into development planning. It is hoped that the joint authorship by a policy maker and a researcher will contribute to a balanced view.
Policies for Reducing Fertility
As in other countries, policies designed to decrease fertility in Korea may be divided into two broad categories: (1) those designed to encourage couples to desire smaller families; and (2) those designed to facilitate couples' realization of that desire. In the first category, altering the social and economic environment that fosters son preference was a major policy objective in the 1970s. In the second category, the most cost-effective method of increasing contraceptive efficiency was the goal of those engaged in family planning programs.
Policies to Alter Son Preference
Various studies have shown that Korean families strongly prefer a son over a daughter. A son is viewed as an investment good in that he is expected to provide old age security for his parents; a daughter is viewed as a consumption good. Son preference is considered by researchers to be a major cause of large family size in Korea.
The policy implication is clear: To reduce fertility, reduce the economic value of a son relative to that of a daughter. Recent research has shown that one way to accomplish this is to provide an alternative means of old age security through pension programs.
Policy makers in Korea are well aware of these findings. For some years now, the government has been preparing to implement a comprehensive social security and old age pension system. The 1973 National Welfare Pension Law requires all employers to provide a retirement pension for employees over 60 years of age. So far, however, only civil servants, military personnel, and public school teachers have had pension programs. Others have continued to receive severance pay only, with the amount determined by the length of employment.
Enforcement of the 1973 pension law has been postponed because researchers and policy makers fear it will have adverse effects on the economy. Financing a large-scale pension scheme would increase the unit cost of labor and, thus, accelerate the rate of inflation. The increase in labor cost would not only cut into Korea's comparative advantage in international trade but also lower the output elasticity of employment. A slower growth rate in employment is considered highly undesirable at Korea's current stage of economic and social development.
A second research recommendation for reducing son preference is to reduce the gap between males' and females' potential earnings. Higher earnings for women also may reduce fertility by raising the opportunity cost of children. More broadly, and as an objective in its own right, officials in government are studying various measures to enhance the status of women. There is an urgent need for legal reform that would enable a woman to inherit her family's assets. There is a long way to go before equal economic opportunity for women becomes a reality. This is a case in which policy makers are unable to implement recommendations of researchers not because they are unfamiliar with them but because implementation encounters powerful cultural, social, economic, and legal obstacles.
The Korean government has also attempted to reduce son preference directly through an "information-education-communications" program. The well-known slogan of the program is: "Raise well no more than two children regardless of their sex." The message has been disseminated sporadically with varying degrees of intensity. This program per se might have not significantly altered son preference among Korean families, but it helped change the traditional perception of people about family and childrens' sex under the influence of Western culture, to which the younger generations were particularly susceptible.
Incentive System to Lower Fertility
Researchers in Korea have made a variety of policy suggestions to change behavior and to increase contraceptive adoption through incentive systems. Cash payments for acceptance of a vasectomy or tubal ligation, exemption from military conscription for an only male child in a family, lower tax rates for smaller families, lower tuition for the children of families with fewer than three children, and higher priority for public housing for smaller families are among suggestions for lowering desired family size. Suggestions for negative incentives have seldom been made in Korea. Incentives for contraceptive adoption have been provided without much prodding from researchers because available foreign funds often come earmarked for that purpose-that is, for the free distribution of contraceptives and information about how to use them.
Among incentives to change behavior, lower tax rates for smaller families, higher priority for public housing for smaller families, and cash payment for acceptance of a vasectomy or tubal ligation have been adopted. For example, in December 1976, the income tax law was amended to limit the maximum allowable personal exemption for children to two. A higher priority for public housing was given to families with no more than two children, one of the parents sterilized, and the female head of household less than 40 years of age. Before 1977, acceptors of a vasectomy or tubal ligation were compensated for the day's income lost because of the operation. From 1977 to 1978, the government, mostly through the Korean Institute for Family Planning, offered 6,000 won for acceptance of a vasectomy and 15,000 won (about U.S. $30) for that of tubal ligation. These monies were paid to the acceptors, and the operation costs were paid directly by the government to the doctors who performed the operation. The success of this incentive system is reflected in the jump in the number of sterilizations from 81,000 in 1976 to 235,000 in 1977 and 232,000 in 1978.
These incentive systems were adopted because research findings, suggestions from scholars, and a priori reasoning persuaded policy makers that they were workable. Past research in other fields has also shown policy makers that incentives are effective in Korea and elsewhere, and therefore can fruitfully be used for fertility reduction. Price incentives for farmers and differential tax rates to encourage or discourage certain investments are examples. On the other hand, the free or subsidized distribution of contraceptives has become less and less effective in lowering fertility in Korea. The price elasticity of demand for contraceptives is believed to be low, and free distribution as a means of expanding knowledge and acceptability of fertility control appeared by the early 1970s to be reaching rapidly diminishing returns.
Policies to Lower Child Mortality
Research suggests that a decrease in mortality rates in general and in infant mortality rates in particular has a fertility depressing effect. It has been suggested that parents who consider a son as an investment good are inclined to safeguard that investment by diversifying their portfolio-that is, by having more than one male offspring. Such diversification safeguards the investment not only against the possible financial failure of the first son but also against his possible premature death. Therefore, although policies designed to lower child mortality are pursued in their own right, reduction of the positive effects of son preference on fertility is an acknowledged secondary objective. This is a case in which suggestions from researchers, buttressed by findings of a positive correlation between infant mortality rates and fertility rates, have demonstrated to policy makers the favorable secondary effects of a social development policy and have been an important factor influencing the health policy of the Korean government.
The health policy of Korea has utilized the following strategy: to improve the supply and quality of health services by increasing health manpower and facilities; to improve sanitary conditions, with an emphasis on improving the water supply. Among the accomplishments of this policy are the following: Between 1970 and 1978 the number of physicians increased by about 34 percent, and that of nurses by 103 percent. As a result, the population-physician ratio was reduced from 1,773 in 1970 to 1,614 in 1978, and the population-nurse ratio from 1,795 to 459 (see Table 2). A compulsory health insurance program for firms with more than 500 employees, civil servants, and school teachers has recently been implemented more rigorously. By 1981, one-fifth of the population is expected to be covered by this program.
It is impossible to isolate the impact of this health policy on the infant mortality rate; however, judging from available data, Korea's achievement in reducing her infant mortality rate is impressive. The data in infant mortality are scarce and less reliable than other demographic data published by the Korean government. Nevertheless, they indicate a remarkable decline in the infant mortality rate, from about 72 per thousand in 1966 to about 37 in 1978-1979 (see Table 2). Estimates of the elasticity of completed fertility with respect to the infant mortality rate range from 18 to 40; although this broad a range points up the measurement problems, the figures serve to suggest that the 50 percent reduction in the infant mortality rate between 1966 and 1978-1979 would have had a significant impact on fertility.
Population Distribution Policies
With the trend of a lower rate of increase in population in the 1970s, the policy makers' concern shifted from the total population increase to the pressing problems of migration of people into the three major cities-Seoul, Pusan, and Taegu. The problems of overcrowding were most acute in Seoul, where population increased from somewhat over 4 million in 1966 to 8 million in 1979. How to stem the massive flow of people into cities became a top priority. The following policies have had varying impacts on the magnitude and pace of rural-urban migration.
Farm Income Policy
Most economic models of migration single out income differentials as the main cause of rural-urban migration. The policy implications of these models are obvious: Narrowing the urban-rural income gap reduces rural-urban migration. In the 1960s and 1970s the Korean government pursued various policies designed to reduce the rural-urban income gap. Farm income policy was the cornerstone of these efforts. Although the main objective of this policy in Korea is more equitable income distribution, population dispersion is seen as a second important objective.
The most important instruments of the farm income policy have been the price support program administered through the Grain Management Fund (GMF) and the subsidy program administered through the Fertilizer Fund (FF). As evidence of the importance assigned to these programs, over 2 percent of gross national product was expended on them in 1974 and 1975. The infusion of money from the Grain Management Fund and the Fertilizer Fund into farming households improved the farmers' terms of trade from then on, raising them from the low point to which they had fallen in the late 1960s. The movement in the terms of agricultural trade through 1978 is shown in Table 3.
Concurrently with the price support and subsidy programs, the government undertook various programs to increase agricultural output: introduction of high-yielding varieties of rice; promotion of distribution channels for insecticides and fertilizers; promotion of livestock industry and farm mechanization; and land reclamation, consolidation, and irrigation. Livestock output (by weight) increased by 57 percent between 1970 and 1977. Cultivated land per farming household increased from 0.85 hectares in 1970 to 0.97 hectares in 1977. The proportion of land irrigated also increased significantly over those years.
To what extent have these policies succeeded in narrowing the urban-rural income gap and thus exerted a dampening effect on rural-to-urban migration? The record is mixed, as Table 3 illustrates. On a per capita basis, the rural-to-urban income ratio largely recovered from the dramatic plunge it took in the late 1960s. On a per household basis, rural income even slightly exceeded urban income in 1975 and 1977. Yet the policies have clearly failed to reduce the gap in earnings per worker. (In part this may reflect a greater prevalence of underemployment in rural than in urban areas.) According to economic models of migration, income differential per worker is the major cause of rural-urban migration. While Korea's farm income policy may have prevented the urban-rural gap in income per worker from widening further, it would not appear to have had the kind of impact that would alter migration patterns.
In other respects as well, the farm income policy had mixed results. One unfavorable effect of the agricultural price support program was to raise the cost of living for nonfarm workers. This led to demands for wage increases from industrial workers, which government officials found difficult to ignore. This placed the government in an acute dilemma because the low wage rate was believed to have given Korean industry a comparative advantage in international trade in the late 1960s and early 1970s. An unfavorable effect of the programs to increase agricultural output was that large farmers benefited more than small farmers; thus, income distribution within rural areas may have become more unequal.
In addition, the Grain Management Fund and Fertilizer Fund's deficit financing had an inflationary effect and a dampening effect on the overall rate of economic growth. Agricultural price increases represented about 45 percent of the wholesale price increase in 1977-1978. And, had there been no deficits in the funds, public savings would have been 5.0 and 7.3 percent of the gross national product in 1974 and 1975, respectively, instead of the actual 3.0 and 5.3. These savings could have been put into investment for economic growth.
It should be noted, however, that the government cannot simply switch from price support and subsidy programs to programs of increasing farm productivity to avoid these problems. Because demand for agricultural products is fairly inelastic, the most effective method of reducing rural-urban income disparities is to improve the farmers' terms of trade-and the most immediate way to improve the terms of trade is through a grain price support program. Furthermore, because Korea is already self-sufficient in grain, alternative policies designed to increase farm productivity might actually end up decreasing farm income owing to the inelasticity of demand for farm products.
Industrial Location Policy
After its farm income policy, the Korean government's industrial location policy is the most important policy designed to reduce urban-rural income disparities. Industrial location policy in Korea has been formulated as a part of regional planning for economic growth; however, it also has the objective of slowing down rural-urban migration by providing wage employment opportunities in rural areas.
Incentives in the form of tax exemptions have been offered to encourage firms to move their plants from Seoul and other urban centers to designated areas or to construct new plants in the designated development areas, and there are penalties for firms that choose to remain in Seoul and other congested areas. The central government, however, has leverage beyond simple legislative control to pursue its industrial location policy. For example, a firm needs government approval to obtain a foreign loan. Domestic loans are also regulated by the government through its control of the Korean Development Bank. These tools have been used to further the industrial location policy.
The Korean government has also supported the building of several major industrial sites. Three well-known "growth centers"-at Masan, Ulsan, and Pohang-have been established, each containing a school, a shopping center, recreational facilities, a hospital, and other amenities more often available only to city dwellers. Additional industrial estates are planned for the Yeocheon, Changweon, Onsan, and Banweol regions of Gyonggi Province.
These efforts-not only to build industrial production centers where labor supply conditions are favorable but also to transfer those factors identified as the "pulling" forces of migration from the major cities to less populated areas-are generally consistent with research recommendations for stemming rural-to-urban migration. In addition to promotion of industrial sites, the government has pursued a policy of relocating public institutions and government-run corporations to nonurban centers since 1972. In fact, the idea of establishing a new capital city near Daejong has been extensively discussed, with partial cost-benefit analysis carried out by the Korean Development Institute and the Ministry of Construction in the late 1970s; it has, however, never been implemented because of the staggering costs involved.
Korea's industrial location policy has also been implemented with attention to the criteria of regional investment suggested by research on strategies of economic development. For example, studies revealed that to achieve the greatest impact on economic development, a match should be made between type of regional investment and the characteristics of the region. Social overhead investment should be made in "lagging areas," while economic overhead investment directly supporting productive activities should be made in "intermediate areas."
Under the industrial location policy, this strategy has in fact been followed. Intermediate areas, such as Masan, Pohang, and Ulsan, have received economic overhead capital, while social investment-especially through the Samaul Undong (New Community Movement)-has predominated in lagging areas. At least as important as the agricultural price support programs, the Undong has enlisted local participation in infrastructural development-building and improving roads, bridges, and irrigation. Direct income supplement programs for livestock raising, silk production, cottage industry, and specialized crops have also formed part of the program.
Ironically, the fact that the central government has powerful tools to implement its industrial location policy appears in some cases to have hindered the movement of plants into rural areas. This is because these tools in the hands of a complex government bureaucracy also become red tape for firms willing to relocate. Many government branches deal with industrial location policy. National and sectoral planning are handled by the Economic Planning Board, whereas regional and urban planning are carried out by the Ministry of Construction. In addition, a potential investor in an industrial estate has to deal with both the Ministry of Commerce and Industry and the Ministry of Finance. A streamlining of administrative processes would obviously be desirable to improve policy effectiveness.
Has Korea's industrial location policy significantly reduced rural-urban migration? It is as difficult to estimate the magnitude of the impact of the policy on migration as it is to evaluate the impact of research findings on formulating policy. An indirect indication of the policy's impact on migration is the magnitude of nonfarm income and employment generated by industrial location policy. Nonagricultural income of farming households originating from "commerce, industry, and mining" increased almost 195 percent from about 18,500 won (about U.S. $38 at the current exchange rate) per household in 1974 to 54,600 won (about U.S. $109) in 1977. There are no data on how much of the increase in nonfarm income was generated by industrial location policy.
Data are also hard to obtain on the employment effect of the industrial location policy. Under the Ten-Year Land Use Plan of 1971, 6,000 plants were targeted to be dispersed to provinces, creating some 600,000 jobs in nonurban centers. The employment effect of such a program on rural-urban migration would be significant; details of actual performance, however, are lacking.
Although we cannot make a cause-and-effect judgment, we believe that-through its combined impacts on income and employment-the industrial location policy has made a significant contribution to a more even population distribution.
Educational Policies for Population Dispersion
A rural-urban gap in educational opportunities has been cited as a factor inducing internal migration in Korea and elsewhere. The quality of teachers and educational facilities in cities is far superior to that in rural areas. In terms of quantity, educational institutions-particularly high schools and institutions of higher learning-are concentrated in metropolitan areas. For example, 34.1 percent of all high school students and 67.6 percent of all college students were attending schools in either Seoul or Pusan, while the two biggest cities contained 26.9 percent of the nation's total population.
Research findings suggest that closing the educational gap would reduce rural-urban migration. Although the educational policy of the Korean government is administered by the Ministry of Education independently of population policy-making agencies, the policy has been consistent with the implications of population research findings. The ministry sought to upgrade and expand educational institutions at high school and college levels in nonurban areas. Government investment in education, however, remains steady at 3 percent of the Gross National Product and 17 percent of the government budget. In addition, until 1980 the ministry steadfastly resisted pressure to lift the enrolment ceiling in high schools, colleges, and universities in metropolitan areas. It is difficult to assess whether this policy has affected the magnitude and impact of migration into Seoul and other major cities. We know, however, that Cheju National University, on the remote island of Cheju, attracts enough students, many of them unable to enter the colleges and universities in big cities, to reach the maximum enrollment level set by the government.
In spite of these efforts by the government, the educational gap between regions remains significant. In some instances, this gap exists within a city. For instance, a report prepared by the city government of Seoul indicates that in 1976 there was more than the "optimum" number of middle and high schools north of the Han River, whereas there were only half as many high schools as needed south of the river. This resulted not from a lack of policy direction on the part of the city government. In fact, it was an announced policy of the city government to redistribute the population of Seoul to the south of Han River. Yet the city government failed to utilize existing demographic data in planning school construction.
Demographic Changes and Development Planning
Population-responsive policies address problems created or exacerbated by demographic conditions. Ideally, such policies are formulated in anticipation of population-related problems that have been identified through the analysis of demographic trends. Illustration of how estimates of such trends have been or could have been used in formulating population-responsive policies in the 1970s in Korea are given in this section.
Changes in Industrial Structure and Demographic Changes
The catchword among planners in Korea in recent years has been "structural change" in industrial output and export. Due to shifting comparative advantage and declining international demand, the rate of growth of Korean textile and clothing exports is expected to drop in the early 1980s. During the Third Five-Year Plan period, 1971-1976, Korean commodity exports maintained an annual growth rate of 11.9 percent; textiles and clothing, representing some 35 percent of total exports, kept pace with this rapid expansion. During the 1980s textile and clothing exports are expected to grow at an annual rate of less than 7 percent. Long-term planning for the Korean economy calls for a sustained growth rate of 16 percent a year in total exports during 1981-1990. To meet this target, exports of all manufactured goods other than textiles and clothing would have to increase at a rate of 17 percent per year, implying that the share of these other manufactured goods in total commodity exports would have to rise from around 65 percent during 1971-1976 to 90 percent by 1990. Korean planners are depending on a rapid increase in output in heavy industry in general, and in electronics, machinery, and shipbuilding in particular, to achieve this objective.
A structural change of this magnitude calls for incorporation of demographic parameters into at least three areas of development planning. The first consideration is the mobilization of domestic savings for the growth and structural change targeted. Projected changes in population composition are likely to have substantial impacts on savings behavior. The second is in the area of manpower planning, where the projected size of the working-age population may largely govern the feasibility of meeting the labor requirements for the planned structural change. The third is the problem of unemployment: Given a projection of the working-age population, planners need to assess the probable impact of the planned structural change on overall employment-and on structural unemployment in particular. Reliable projections or forecasts of domestic savings, manpower requirements, and structural unemployment are essential for successful economic development planning, and a consideration of demographic parameters is in turn essential for any reliable projection or forecast of these variables.
The Fourth Plan called for an increase in domestic savings from about 19.5 percent of the Gross National Product in 1975-1978 to 26.1 percent in 1981. This means that economic planners in Korea expected a marginal savings rate of 35.3 percent during 1976-1981. While this is considered unrealistically high by some foreign economists, projected demographic trends would in fact work in the direction of increasing domestic savings in the late 1970s and into the 1980s. According to Lee-Jay Cho's projection, the child dependency rate (the number of persons under 15 years of age per 100 persons of working age, 15-64) declined from about 82 in 1966 to 65 in 1975, while the old-age dependency rate (the number of persons over 64 per 100 of working age) remained at around 6. The trend is projected to continue with the (total) age dependency ratio dropping from 72.4 in 1975 to 61.7 in 1980 and 57.2 in 1985. The continuing decline in the dependency ratio is expected to increase the marginal savings rate in Korea for two reasons. First, for a given income, a decline in dependency ratio decreases family consumption requirements per worker. Second, in contrast to savings-consumption patterns in developed countries, the marginal propensity to save in Korea is probably higher among new entrants to the labor force than among married couples in their late twenties or early thirties. This is because after obtaining employment and sometimes even after getting married, young people often continue to live in their parents' house, receiving free lodging and food. It would have been desirable to formulate the planned marginal savings rate for the Fourth Plan years on the basis of estimates of the magnitude of impact of the projected declining dependency ratio and increasing proportion of younger people in the working force on the marginal savings rate. Such a population impact estimate could have been made using simulations of available demographic-economic models.
As for the manpower required to accommodate the planned structural change, no shortage of labor supply is foreseen. Lee-Jay Cho projects that the urban population will increase from 16.6 million in 1975 to 20.4 million in 1980 and 24.5 million in 1985, with a nearly constant 66-68 percent of the population in working ages over the decade. Young males of working age will increase from 6.7 million in 1975 to 8.8 million in 1980. This is the prime age group to train for the planned structural change of the 1980s-and the projected increase in this age group is favorable to such change in industrial output. On the other hand, its effects on overall employment rates will be unfavorable; the projected supply of labor exceeds the projected demand for labor that will be created by structural change and economic growth.
The unemployment that emerged in late 1979 and early 1980 is considered to have been caused mainly by the current restrictive monetary policy. However, the nature and extent of employment problems could have been anticipated and alleviated if the employment implications of a rapid increase in the labor force size during a period of significant structural change had been thoroughly researched and analyzed. For example, the extent to which the planned structural change would alter the output elasticity of employment could have been estimated and taken into account in development planning. In order to avoid structural unemployment, the changes in skill-mix required by the planned structural change could have been analyzed to identify training needs for the labor force. Finally, the impact of the planned change in industrial output-mix on urban unemployment, which is expected to be exacerbated by the concentration of the young working-age population in urban areas, should have been considered as a part of development planning.
Need for Interdisciplinary Coordination
Most economic models do not easily accommodate demographic variables, and this may be a reason for the failure of the Korean economic planners to fully incorporate demographic variables in the Fourth Plan. The usual distance between policy makers and researchers is increased by the interdisciplinary communication gap between economists and demographers. Demographers in Korea tend to shun mathematical modeling, simulations, and interlocking equations, whereas Korean economists tend to indulge in quantification for the sake of quantification more often than economists elsewhere. An interdisciplinary approach in research and policy making both in population and economic planning would obviously further the integration of demographic variables with economic planning.
The situation described above is well illustrated in the area of manpower planning. Because of the Korean War (1950-1953) and the postwar baby boom, the age-sex composition of the Korean population has not followed the pattern of change typical of developing countries. We noted earlier that the child dependency ratio declined substantially over the period 1966-1975, while the old-age dependency ratio remained stable. The proportion of the population at preschool ages (0-5 years) declined gradually as fertility began to decline in the early 1960s. On the other hand, the proportion at middle school ages (12-14) began to increase starting in 1966 and that of high school age (15-17) from 1969. The middle school age population numbered 2 million in 1966, 2.5 million in 1970, and 2.8 million in 1975.
These statistics should have prepared policy makers for a number of problems in the 1970s. Effective manpower planning would have allowed for a sufficient number of skilled personnel to provide the type and volume of public services required by the projected change in the composition of the population. Because of a lack of "anticipatory" manpower planning, a shortage of high school and middle school teachers developed in the early 1970s and worsened in the late 1970s. The Ministry of Education increased the enrollment quota for teachers colleges in the late 1960s, but the quota fell short of the number of teachers demanded in the early 1970s.
This appears to be a case of government officials failing to utilize effectively the available data. The failure appears to be attributable to the lack of communication between the different agencies of government. The National Bureau of Statistics of the Economic Planning Board undertakes population censuses, and researchers in and out of government make demographic trend estimates based on the census data. Decisions concerning teachers college enrollments are made by the ministry in such a way as to compel it to undertake all appropriate anticipatory manpower planning. Note that increasing the student enrollment at teachers colleges would have entailed a relatively minor increase in the ministry's budget: During this period all colleges, including teachers colleges, had been asking for increases in student quotas, in most cases without accompanying requests for additional funds.
There is also a problem of data utilization. In the 1970s, there has been significant improvement in the range, type, and reliability of demographic data collected in Korea. Over the decade, policy-oriented research in "relevant" areas has greatly increased in volume. However, policy makers and researchers alike recognize the need for improvement in data utilization and in the incorporation of population data into development planning. Improvement in data utilization has usually been sought through improvement in communication between data collectors and data users. Potential data users need ways to learn about the availability of the types of data they can profitably use, and researchers need to learn to present findings in a readily available and easily understandable form.
We have reviewed the population policies in Korea in the 1970s in the three major areas. In the area of reducing fertility, the government policies appear to have contributed significantly to lowering the rate of increase in total population. In the area of population distribution, the effect of measures taken by the government is less clear, but seems to have worked in the positive direction of more even distribution of population than otherwise would be the case without such measures. Demographic researchers and their policy recommendations played an important role in the policy formulation of the government. The government, however, failed to integrate demographic variables into development planning, while they are closely linked to changes in the industrial structure. More effective interministry coordination and an interdisciplinary approach in research and policy would make development planning more meaningful.