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In the first of two articles about the impact of China s one-child policy, we
look at the shrinking working-age population
Jan 26th 2013 | HONG KONG |From the print edition
ON JANUARY 18th the National Bureau of Statistics (NBS) announced that the
number of working-age Chinese shrank last year by a total of 3.45m. In the
slow-moving world of demography, that is a big turning point. The mobilisation
of Chinese labour over the past 35 years has shaken the world. Never before has
the global economy benefited from such an addition of extra human exertion. Now
the additions are over and not just in China (see article).
One statistical scruple must be acknowledged. In the past the NBS has counted
anyone between 15 and 64 years old as of working age. That age range is
consistent with international convention and China s own statistical yearbook.
But in announcing the decline last week, the NBS adopted a narrower definition:
15- to 59-year-olds. By doing so, it drew early attention to a demographic
downturn that will soon apply to 15- to 64-year-olds and to the population as a
whole. Ma Jiantang, head of the NBS, said he did not want the population data
to be drowned in a sea of figures released at the same time.
The new statistics will amplify calls for reform of China s one-child policy.
Mr Ma reiterated his support for it, but also said that China should study an
appropriate, scientific population policy in light of changing circumstances.
China s one-child policy is not quite as strict as its name implies. Once all
its exceptions are taken into account, it permits about 1.47 children per
woman. If the policy were relaxed dramatically, would China s population
explode again? Clint Laurent of Global Demographics, a research firm, is often
asked this by clients, some of whom hope to profit from a baby boom. But he has
to disappoint them. He says the best contraception is affluence and education
. Many Chinese women would not have a second child even if they were allowed
to. And if all restrictions were lifted, the fertility rate would probably
settle at about 1.62, according to S. Philip Morgan of Duke University and his
co-authors.
Despite these assurances, China s policymakers will be slow to tweak the
policy. And even if it is relaxed, it will take at least 15 years for any
second children to reach working age. What will happen to China s economy in
the interim?
The demographic dividend that China has enjoyed in recent decades has kept wage
rates low and saving rates high. With fewer children per worker, China has
enjoyed a higher income per head, a large chunk of which it has been able to
save and invest. The shrinking of the working-age population will put downward
pressure on the saving rate and upward pressure on wages, as coastal factories
have already found. According to Mr Laurent, the number of 15- to 24-year-olds
will shrink particularly quickly, dropping by 38m, or 21%, over the next ten
years.
Optimists argue that urbanisation can trump demography. Because 47% of China s
population still resides in the countryside, China s urban workforce still has
room to grow at rural China s expense. Louis Kuijs of the Royal Bank of
Scotland points out that urban employment increased by 12m in 2012 even as
rural employment fell by 9m.
How much surplus labour remains in China s rural hinterland is a matter of
great debate. Some economists think Chinese agriculture can still spare tens of
millions of workers. Others, such as Cai Fang of the Chinese Academy of Social
Sciences, argue that China exhausted its surplus workers as early as 2004. That
does not mean people will stop migrating to the cities. But it does mean that
wages will have to rise to attract them because they are also needed in their
home villages.
Xin Meng of Australian National University has surveyed thousands of migrants
in 15 cities. On average, they first left their rural homes almost nine years
ago. If cities could persuade them to stay twice as long, she points out, they
would, in effect, double the supply of migrant labour. But that would require
land reform, so that they could sell their rural plots, and reform of China s
household-registration system, so that migrants could settle with their
families in cities and use public services now reserved for registered
urbanites. When asked how long they would remain if restrictions on migration
were relaxed, 62% said they would stay for ever .
As they age, migrants may no longer be suitable for factory jobs that require
dextrous fingers, or for some construction work, which requires a strong back.
But as Yao Yang of Peking University points out, these older workers could take
over service jobs in supermarkets and health spas or as security guards which
are now done by youngsters. That would free young people to man China s
assembly lines.
Since 1995 China s economy has grown at an extraordinary rate, expanding by
9.8% a year on average. But its ascent relies less on raw human effort than
many people think. By Mr Kuijs s calculations, the mere expansion of employment
has contributed only 0.7 percentage points of its annual growth. The movement
of labour from agriculture to other, more productive parts of the economy has
contributed twice as much. But China owes the bulk of its growth not to adding
labour or moving it, but to augmenting it raising its productivity within
industry. The secret of China s success lies not in the workers it adds, but in
what new capital, technology and know-how adds to its workers.