China’s Population: Peak Toil

Published on Author weprinsky
workers in a Chinese factory

In the past year the Economist reports that the number of working age Chinese has decreased by a staggering 3.45 million people.  This statistic will likely help to evoke a push towards reforming the “one child rule” that China has in place.  While the “one child rule” sounds very black and white, there are a number of exceptions to this rule as the average number of children per woman in China is about 1.47.  It is predicted that without the one child rule the fertility rate would be about 1.62.  Regardless, even if the one child rule was eliminated, China’s economy would not see an increase in the labor force for about 15 years, so the question is; what should China do right now?

Many think that the solution lies with the migration of rural workers to the city where they can produce goods more efficiently.  Others argue that the decline in working age population is not a significant problem for the economy at all.  I believe that while the growth in population has certainly helped China’s economy to flourish (and adding workers could improve their current situation), the main reason for China’s expansion has been their unprecedented growth in the areas of capital and technology.  If China wants to keep growing economically at the pace it has been, they should keep their primary focus on technology and capital growth, not fertility.

4 Responses to China’s Population: Peak Toil

  1. Having deliberately limited population growth via the one child policy (and thus correspondingly raising China’s per-capita GDP), China has essentially accelerated the pace at which fertility rates shape demographics in developed nations. Following in the footsteps of advanced economies such as Japan and Korea, China will soon encounter the fiscal and social challenges faced by countries with an aging population. Although I believe that the gender disparity will prove to be a larger contributor to social instability within the decade, the economic slowdown since 08 is likely to have derailed internal plans, possibly resulting in the demographic issue arising before other matters of economic stability (such as the transition into a developed economy) have been resolved.

  2. I believe that the aging population in China will have a much larger impact on their near-future economy then people seem to be indicating. Certainly, social instability will be a direct result of the gender disparity, but the aging population in China seems to be a direct threat to its status as a manufacturing powerhouse. Cheap and young labor are what has turned China into the world’s capital of manufacturing recently, and with an aging workforce, coupled with a group of youths that are quickly becoming disillusioned with working in low-paying manufacturing jobs, trouble seems to be ahead. With higher expectations, the young workforce is not ready to accept the types of jobs that their grandfathers and fathers have.

  3. I agree with you Harrison, much like our dwindling farm population, the minutia of daily farm life is less and less appealing in a more globalized world.

  4. First, fertility needs to be above 2.1 children per woman for a population to stabilize; at 1.68 each generation will be only 1.68/2.0 = 84% the size of its parent’s generation. Now if women don’t have their first child until age 23 (my guess for China), then even if fertility rates were to jump tomorrow to 2.1 we’d still see smaller and smaller cohorts entering the labor force through 2035 (and only then stabilizing at a lower level). This “demographic momentum” (and the fact that fertility rates seem to change only slowly) means that with 99.9% certainty China will see its population decline, and with 100% certainty will see an unfavorable shift in the labor force to population ratio, driven by a fall in the share of youth and a rise in the share of elderly.

    In the medium run labor can shift from low-productivity agriculture to higher-productivity manufacturing and services (at present, basically anything off-farm). At present a combination of hukou 户口 and the peculiar structure of land rights locks people in place while keeping farm productivity low. That will change at some point, but the experience of other countries is that you certainly don’t need even 10% of the labor force working the land. Later on this term we’ll look at the concept of “demographic dividend” and the Lewis (-Fei-Ranis) “turning point” which will help us put bounds on the likely time frame for such adjustments.