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Following the end of Chinese Lunar New Year holiday on February 15， factories in southeastern areas of China have reported shortages of workers. The phenomenon has become increasingly common over the past years， but official confirmation in early January of the first absolute decrease in the workingage population in three decades has triggered widespread concern about the country’s growth potential.
Figures released by the National Bureau of Statistics （NBS） on January 18 showed the number of laborers between the ages of 15 and 59 dropped by 3.45 million to 937.27 million in 2012. The working-age population accounted for 69.2 percent of the country’s total population in the year， down 0.6 percentage points from 2011.
It is the first time the country has recorded an absolute drop in the working-age population in “a considerable period of time，” said NBS head Ma Jiantang at a press conference. Mainly due to the falling fertility rate， he expected the country’s labor pool would shrink “steadily and gradually” over a long period or “at least until 2030.”
Scholars warn that China’s demographic dividend， or “population bonus” as some economists call it， is disappearing， as the economy is reaching its Lewis turning point， the moment in development when the surplus pool of inexpensive labor enters a deficit and further capital accumulation increases wages.
Impacts
The demographic dividend refers to an increase in the rate of economic growth due to an increased proportion of working-age people. It is a window of opportunity in the development of a society or a nation that opens as fertility rates just begin to decline， with faster rates of economic growth and human development becoming possible when combined with effective policies and markets.
Cai Fang， a demographer and Director of the Institute of Population and Labor Economics of the Chinese Academy of Social Sciences， said that there are two factors to judge whether a country has the demographic dividend—the labor force volume and the dependency ratio. The latter is an age-population ratio of those not in the labor force and those in the labor force.
China enjoyed a demographic dividend until the ratio of productive population to dependent population began to reverse， Cai said. A report released by the China Development Research Foundation predicts that China’s labor force will decrease by more than 29 million from 2010 to 2020.
“Simultaneously， the dependency ratio will grow and so China’s demographic dividend will disappear，” Cai said. According to Cai， the potential growth rate， a theoretical measure， is decided by the input of the labor force， capital and improved production rates. “The disappearing demographic dividend will significantly affect these three factors，” he said.
Cai warned that China’s potential growth rate would fall to 7.2 percent between 2011 and 2015 and 6.1 percent in the next fiveyear period， compared with 10.5 percent in 2006-10.
Disappearance of the demographic dividend will not only cut the labor force but also slow the growth of capital investment.
Cai explained that in the past China had a low dependency ratio and labor burden， so the country could maintain a high savings rate and high investment， while the situation in the future will be to the contrary. “The labor shortage will make the returns on capital investment decrease progressively， which will make capital investment drop，” he said.
Tao Dong， Credit Suisse’s chief regional economist for Asia， echoed Cai. “When the demographic dividend disappears， the increase of worker’s salaries will move the factories living on cheap labor to some other countries and regions and China’s role as the world’s factory is going to change. This will impose a great impact on China’s economy，”Tao said.
In the past three decades， Tao said， China’s economic development has been mainly based on massive low-cost labor， which is going to shrink as China approaches the Lewis turning point. “The upgrading of the industrial structure is a must for the future economic growth. The quality of workers should be upgraded as well to keep up with modern requirements. The government should invest more in vocational training，” he suggested.
“Despite the decrease in the number of laborers， China still has a working-age population of 937 million， which is a great number，” Ma said， adding it is still controversial to allege that China’s competitive labor advantage is disappearing based only on the shrinking labor pool.
“We can deal with challenges by raising productivity，” he said.
According to Ma， rising productivity not only comes from technological progress， but also from the improvement in efficiency of resource allocation， including manpower. “If the labor force can be allocated from less productive sectors to higher ones， productivity can be improved，” he said.
“This is a good chance to accelerate the transformation of China’s growth pattern，” said Cheng Enfu， Director of the Academy of Marxism at the Chinese Academy of Social Sciences. “I don’t think the supply of workers really falls short of demand in China. Some migrant workers have chosen to stay in rural areas because they find farming is more profitable than before. Those companies that are short of workers should come up with new strategies to attract them back.” The age of aging
But in the eyes of many people， adjusting the current family planning policy is essential for China to avoid losing its demographic dividend amid a rapidly aging population.
The family planning policy was first introduced in the late 1970s to rein in China’s surging population by encouraging late marriages and pregnancies. It allows most urban couples to have only one child and most rural couples to have two children if the first born is a girl. Now， only-child couples have also been allowed to have a second baby.
According to the UN aging population standard， a country can be referred to as an “aging society” when the number of people aged 60 and older constitutes more than 10 percent of its citizens， or when those aged 65 or above make up more than 7 percent of the population.
A report released by the China Research Center on Aging on February 27 revealed that China had 202 million elderly people in 2012， accounting for 14.8 percent of the total population.
The report said that by the end of last year， there were 194 million Chinese people aged 60 and over， an increase of 8.91 million from 2011， making up 14.3 percent of the country’s total population. It also estimates that 45.94 percent of the total population will need to be supported by other people in 2013， compared with 44.62 percent in 2012. Elderly people with chronic diseases will exceed 100 million this year， up from 97 million a year earlier.
“More than half of the aging population live in rural areas，” said Chen Chuanshu， deputy director of the center. “With more and more young people going to live and work in cities， how to take care of rural seniors is a severe challenge as well.”
“China’s family planning policy has successfully curbed excessive population growth in the past three decades. Now China’s population reproduction picture has been turned around， so we don’t have to keep such a strict policy，” said Zhao Linzhong， a former national legislator and Chairman of the Board of Directors of the Furun Group， a textile manufacturer in east China’s Zhejiang Province. “China will face severe problems caused by an aging society， including soaring demand for healthcare， mounting pressure on pension funds and more labor shortages if we don’t adjust the family planning policy.”
Professor Wang Ming at the School of Public Policy and Management of Tsinghua University， echoed Zhao. “If the current family planning policy remains effective， the imbalanced population structure and aging population will strike a deadly blow to the country’s long-term economic growth，”Wang said. Family planning experts， however， disagree.
“It was unfair to blame the family planning policy for all problems caused by an aging society，” said Wu Haiying， Director of the Population and Family Planning Commission of Ningxia Hui Autonomous Region. “The family planning policy had prevented more than 400 million births since its implementation， and any easing would result in a rise in population， posing challenges to employment and the environment.”
The just-concluded annual session of the 12th National People’s Congress， the country’s top legislature， approved a government reshuffling program. Among other administrative mergers， the Ministry of Health and the National Population and Family Planning Commission will be merged into a new cabinet-level agency.
When answering questions about the merger’s impacts on the country’s family planning policy， Wang Feng， deputy head of the State Commission Office for Public Sector Reform， told a press conference on March 12 that China will not change its basic state policy on family planning.
“The pressure facing residents and resources still persists in our country， which has such a huge population，” Wang said. “Following the restructuring， work in the field of family planning will be beefed up， not weakened.”
Figures released by the National Bureau of Statistics （NBS） on January 18 showed the number of laborers between the ages of 15 and 59 dropped by 3.45 million to 937.27 million in 2012. The working-age population accounted for 69.2 percent of the country’s total population in the year， down 0.6 percentage points from 2011.
It is the first time the country has recorded an absolute drop in the working-age population in “a considerable period of time，” said NBS head Ma Jiantang at a press conference. Mainly due to the falling fertility rate， he expected the country’s labor pool would shrink “steadily and gradually” over a long period or “at least until 2030.”
Scholars warn that China’s demographic dividend， or “population bonus” as some economists call it， is disappearing， as the economy is reaching its Lewis turning point， the moment in development when the surplus pool of inexpensive labor enters a deficit and further capital accumulation increases wages.
Impacts
The demographic dividend refers to an increase in the rate of economic growth due to an increased proportion of working-age people. It is a window of opportunity in the development of a society or a nation that opens as fertility rates just begin to decline， with faster rates of economic growth and human development becoming possible when combined with effective policies and markets.
Cai Fang， a demographer and Director of the Institute of Population and Labor Economics of the Chinese Academy of Social Sciences， said that there are two factors to judge whether a country has the demographic dividend—the labor force volume and the dependency ratio. The latter is an age-population ratio of those not in the labor force and those in the labor force.
China enjoyed a demographic dividend until the ratio of productive population to dependent population began to reverse， Cai said. A report released by the China Development Research Foundation predicts that China’s labor force will decrease by more than 29 million from 2010 to 2020.
“Simultaneously， the dependency ratio will grow and so China’s demographic dividend will disappear，” Cai said. According to Cai， the potential growth rate， a theoretical measure， is decided by the input of the labor force， capital and improved production rates. “The disappearing demographic dividend will significantly affect these three factors，” he said.
Cai warned that China’s potential growth rate would fall to 7.2 percent between 2011 and 2015 and 6.1 percent in the next fiveyear period， compared with 10.5 percent in 2006-10.
Disappearance of the demographic dividend will not only cut the labor force but also slow the growth of capital investment.
Cai explained that in the past China had a low dependency ratio and labor burden， so the country could maintain a high savings rate and high investment， while the situation in the future will be to the contrary. “The labor shortage will make the returns on capital investment decrease progressively， which will make capital investment drop，” he said.
Tao Dong， Credit Suisse’s chief regional economist for Asia， echoed Cai. “When the demographic dividend disappears， the increase of worker’s salaries will move the factories living on cheap labor to some other countries and regions and China’s role as the world’s factory is going to change. This will impose a great impact on China’s economy，”Tao said.
In the past three decades， Tao said， China’s economic development has been mainly based on massive low-cost labor， which is going to shrink as China approaches the Lewis turning point. “The upgrading of the industrial structure is a must for the future economic growth. The quality of workers should be upgraded as well to keep up with modern requirements. The government should invest more in vocational training，” he suggested.
“Despite the decrease in the number of laborers， China still has a working-age population of 937 million， which is a great number，” Ma said， adding it is still controversial to allege that China’s competitive labor advantage is disappearing based only on the shrinking labor pool.
“We can deal with challenges by raising productivity，” he said.
According to Ma， rising productivity not only comes from technological progress， but also from the improvement in efficiency of resource allocation， including manpower. “If the labor force can be allocated from less productive sectors to higher ones， productivity can be improved，” he said.
“This is a good chance to accelerate the transformation of China’s growth pattern，” said Cheng Enfu， Director of the Academy of Marxism at the Chinese Academy of Social Sciences. “I don’t think the supply of workers really falls short of demand in China. Some migrant workers have chosen to stay in rural areas because they find farming is more profitable than before. Those companies that are short of workers should come up with new strategies to attract them back.” The age of aging
But in the eyes of many people， adjusting the current family planning policy is essential for China to avoid losing its demographic dividend amid a rapidly aging population.
The family planning policy was first introduced in the late 1970s to rein in China’s surging population by encouraging late marriages and pregnancies. It allows most urban couples to have only one child and most rural couples to have two children if the first born is a girl. Now， only-child couples have also been allowed to have a second baby.
According to the UN aging population standard， a country can be referred to as an “aging society” when the number of people aged 60 and older constitutes more than 10 percent of its citizens， or when those aged 65 or above make up more than 7 percent of the population.
A report released by the China Research Center on Aging on February 27 revealed that China had 202 million elderly people in 2012， accounting for 14.8 percent of the total population.
The report said that by the end of last year， there were 194 million Chinese people aged 60 and over， an increase of 8.91 million from 2011， making up 14.3 percent of the country’s total population. It also estimates that 45.94 percent of the total population will need to be supported by other people in 2013， compared with 44.62 percent in 2012. Elderly people with chronic diseases will exceed 100 million this year， up from 97 million a year earlier.
“More than half of the aging population live in rural areas，” said Chen Chuanshu， deputy director of the center. “With more and more young people going to live and work in cities， how to take care of rural seniors is a severe challenge as well.”
“China’s family planning policy has successfully curbed excessive population growth in the past three decades. Now China’s population reproduction picture has been turned around， so we don’t have to keep such a strict policy，” said Zhao Linzhong， a former national legislator and Chairman of the Board of Directors of the Furun Group， a textile manufacturer in east China’s Zhejiang Province. “China will face severe problems caused by an aging society， including soaring demand for healthcare， mounting pressure on pension funds and more labor shortages if we don’t adjust the family planning policy.”
Professor Wang Ming at the School of Public Policy and Management of Tsinghua University， echoed Zhao. “If the current family planning policy remains effective， the imbalanced population structure and aging population will strike a deadly blow to the country’s long-term economic growth，”Wang said. Family planning experts， however， disagree.
“It was unfair to blame the family planning policy for all problems caused by an aging society，” said Wu Haiying， Director of the Population and Family Planning Commission of Ningxia Hui Autonomous Region. “The family planning policy had prevented more than 400 million births since its implementation， and any easing would result in a rise in population， posing challenges to employment and the environment.”
The just-concluded annual session of the 12th National People’s Congress， the country’s top legislature， approved a government reshuffling program. Among other administrative mergers， the Ministry of Health and the National Population and Family Planning Commission will be merged into a new cabinet-level agency.
When answering questions about the merger’s impacts on the country’s family planning policy， Wang Feng， deputy head of the State Commission Office for Public Sector Reform， told a press conference on March 12 that China will not change its basic state policy on family planning.
“The pressure facing residents and resources still persists in our country， which has such a huge population，” Wang said. “Following the restructuring， work in the field of family planning will be beefed up， not weakened.”