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2013-01-29 10:29:06
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.