Many developed nations have seen fertility rates fall below replacement levels in recent decades, posing significant issues for the long-term health and viability of economies as younger generations decide against starting families.

Falling birth rates have coincided with the increasing ‘dualisation’ of labour markets in major economies, which has caused high levels of fear among newer entrants to the market about long-term job insecurity and the cost both financially and to opportunity in having children.

In a new study, researchers Dr Soohyun Lee, from King’s College London, Dr Timo Fleckenstein (London School of Economics), and Dr Samuel Mohun Himmelweit (London School of Economics), suggest improving social security support and addressing the fear caused by long-term job insecurity could be central to improving fertility rates.

Focussing on South Korea, the researchers found a shrinking core of people who were in well-paid, long-term employment, characterised as insiders, while a growing number found themselves in insecure employment on the edges of the labour market, known as outsiders.

Fear about long-term prospects and poor social security for ‘outsiders’ meant decisions on starting a family were typically being delayed, with many opting against having children at all. The effect was especially pronounced among young women. Meanwhile, those characterised as ‘insiders’ were also delaying their decisions around marriage and family because of a fear of the long-term security of their relatively privileged positions. Much of their time and energy was being expended protecting their positions.

Increasing competition for ‘insider’ position in South Korea had also caused families to invest large portions of their income in private tutoring for their offspring, adding to feelings of financial insecurity and affecting decisions to have further children.

As a result, South Korea has seen an especially stark collapse in its fertility rate, which fell to 0.84 in 2020, the lowest among Organisation for Economic Co-operation and Development (OECD) nations and far below the replacement fertility rate of 2.1. While not quite as profound, many OECD nations have also struggled with declining rates of fertility and have fallen below replacement levels in recent decades. In the UK, it stood at 1.56 in 2020.

The researchers said: “In highly dualised labour markets, young people cannot be confident that insecurity is confined to the education-employment transition, but it might become a feature of their entire working life.

“Further, fear of insecurity affects more than just those most likely to become labour market outsiders; in a context in which outsider employment has severe consequences, fear of insecurity is evident among insiders as well. Thus, the particular nature of dualization associated with insecurity affects fertility decisions across a broad swathe of the population.

“Policy ideas are needed which address how young people, and young women in particular, experience a range of institutions including formal and informal education, the transition from education to employment and, fundamentally, the labour market itself.”

The researchers added that while South Korea was “an extreme case”, the trends highlighted in the Korean labour market associated with dualisation were present across the OECD and that Korea served act as a warning for other OECD countries which are seeing some of these features develop in their own societies.