Chinas population: Peak toil | The Economist

28/1/13 8:41 AM

Peak toil
Chinas population

In the first of two articles about the impact of Chinas 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 Chinas 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 15to 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
http://www.economist.com/news/china/21570750-first-two-articles-about-impact-chinas-one-child-policy-we-look-shrinking

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Chinas population: Peak toil | The Economist

28/1/13 8:41 AM

the same time.

The new statistics will amplify calls for reform of Chinas onechild 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.
Chinas 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 Chinas 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, Chinas 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 Chinas 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 Chinas
population still resides in the countryside, Chinas urban workforce still has room to
grow at rural Chinas 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.
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Chinas population: Peak toil | The Economist

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How much surplus labour remains in Chinas 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 Chinas 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 Chinas assembly lines.
Since 1995 Chinas 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 Kuijss 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 itraising its productivity within industry. The secret of Chinas success
lies not in the workers it adds, but in what new capital, technology and know-how
adds to its workers.
From the print edition: China

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