Experts say demographic shift won’t be detrimental to China’s labor force

By Xie Jun Source:Global Times Published: 2015-11-2 19:38:01

An aging population is one of the major problems China's government faces as it crafts the country's 13th Five-Year Plan (2016-20) for economic and social development. On Thursday, the government announced it would relax the country's family planning policy, a measure widely regarded as a way to counter China's aging population. An aging population usually leads to a decline in the labor force, which in turn impedes economic growth. But does that mean China's economy will also suffer a similar fate? Experts say not necessarily.

Elderly people chat on the street in Nanchong, Southwest China's Sichuan Province on January 16. Photo: CFP

China stunned the world with the announcement of a new family structure policy on Thursday, which will entitle couples to have a second child.

This should be a big leap for China, which holds family planning for a long period of time. But experts said it is one of the few weapons the government could take to combat a serious social problem in China, the aging population, as well as the potential shortage of labor force caused by it, although they are not sure about the effectiveness of such policies.

According to a report sent by the Shanghai Academy of Social Sciences (SASS), a government think tank, to the Global Times on Thursday, if China's birthrate remains unchanged over the next 15 years, people over the age of 60 will account for 38.2 percent of the country's population by 2055, up from 13.3 percent in 2010.

"It's inevitable that China's population will get older," Zhou Haiwang, an SASS scholar, told the Global Times on Thursday.

The SASS report projected that the labor force aged between 15 and 59 would fall from about 950 million in 2010 to about 424 million by 2100.

The facts pose a question: How would China's economy cope with such drastic decline in its labor force? Experts said that severity of the problem would be different in different areas, but the country's policy needs to address the demographic change with the right economic reforms.

City versus countryside

Despite the aging population, China's urban labor force, which consists of university graduates, rural migrants and other groups, is ample at present, and will continue to be so for a while, said Gao Xiangdong, a professor with the Population Research Institute at East China Normal University.

"The aging population won't have a great impact on China's labor supply, at least not in cities," Gao told the Global Times on Thursday.

Gao's view was echoed by several other experts. Chen Yanbin, an economics professor at Renmin University of China, wrote in an article published by the Guangming Daily in March 2013 that the demand and supply ratio for highly educated workers dropped from 1.05 in 2006 to 0.9 in 2013, indicating that the country actually has a labor surplus in this category. He also pointed out that the surplus would last for a relatively long period, even with the aging population.

When contacted by the Global Times on Thursday, Chen affirmed the views laid out in the Guangming Daily article.

Zhou from the SASS also noted that demand for labor might also shrink in the future.

"Many factories in South China's Guangdong Province have started using robots to replace workers," he said. "This might become a dominant trend in Chinese cities."

Fudan University professor Peng Xizhe said that the structure of China's labor market would change as the domestic population ages.

"As China's economy turns from relying heavily on manufacturing to focusing on services and IT, it would match this demographic shift, because it will be easier for older people to find jobs in these areas," he told the Global Times on Thursday.

Rural challenges

Unlike cities, where young workers are constantly being trained, rural areas will likely feel the burnt of a shrinking labor force.

Liu Hongxia was born in a village called Muzigang in Fuyang, East China's Anhui Province. She has been a migrant worker in Shanghai for about 20 years. During her years in the city, she got married and had five children. Now, her whole family lives in Shanghai, and she only returns to her hometown for a few occasions each year, such as the Spring Festival.

Almost all of the young people in her village have moved to the big cities to work.

"The older people are left home doing farm work," Liu told the Global Times on Saturday. "If they can, they do the farm work by themselves. If they are too old to handle it, they hire the services of professional farming companies."

In her village, sometimes 80-year-olds need to farm because they have no one to help them.

"But when the old farmers die, who will be the next generation of farmers? I don't know. Maybe the young people will go back to the villages then," she said.

Villages like Muzigang are becoming commonplace in China. In Rudong, a county in East China's Jiangsu Province, people above the age of 60 account for about one quarter of the overall population, according to a report in Southern Weekly in December 2014.

The article describes Rudong as a county with the typical characteristics of an aging population. There is almost no nightlife. Stores have few customers. And like Muzigang, the farmers in the fields are mostly over 60 years old.

Gao, however, remains optimistic.

"China's gap between rural and urban areas would also narrow in the future. As farming income increases in the domestic rural villages, the workforce will flow back into the villages," he said.

Having been to the rural areas in the Netherlands, Gao found that farmers' income and living conditions there were not so different from those of city residents.

Facing reality

The Chinese government has launched a series of measures to counter the potential pitfalls of an aging population. Besides the planned loosening of the old family planning policies, the Ministry of Human Resources and Social Security also plans to unveil reforms that would increase the retirement age in China, the People's Daily reported on October 15. Currently, the retirement age at government agencies and State-owned enterprises is 50 for women and 60 for men.

For some people, however, the government's measures are too little, too late. The two-child policy, for example, "cannot avert the pressures on China's demographic position over the next 20 years," Andrew Colquhoun, head of Asia-Pacific Sovereigns at financial information service provider Fitch Ratings, wrote in an e-mail to the Global Times on Sunday.

"Public opinion about the aging population has been too outdated in China," Peng said. "Many people think an aging population is a bad thing, but I would say it's more important to face the reality, and make domestic economy adapt to the changes of population structure."
Newspaper headline: Aging gracefully

Posted in: Insight

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