China’s declining working-age population

Authors: John Knight, Oxford University, Yi Zeng, Duke University and Peking University, and Zai Liang, SUNY

EAFQ: How will the age structure of China’s population change over the coming decades?

Yi Zeng: The very large size of China’s elderly population and its rapid increase as a proportion of the total population are both unique characteristics of population ageing in China.

Migrant workers resting in their makeshift tents near a construction site in Hefei, in Anhui province, eastern China. Workers such as these have contributed enormously to the Chinese economic miracle in the past three decades as they built Chinese skyscrapers and laboured in Chinese factories. (Photo: AAP)

In 2010 there were 119 million Chinese aged 65 and over, constituting 8.9 per cent of China’s total population. Under a medium-fertility outlook, based on a two-child policy, and medium mortality assumptions, it is projected that there will be 363 million elderly Chinese by 2050 — or 25.9 per cent of the total population.

The average proportion of elderly households — with at least one person aged 65 or over — will increase dramatically in China over the next few decades. And by the years 2030 and 2050, respectively, the average proportion of elderly households living without children will be 2.5 and 3.7 times higher than in the year 2000. The percentage of Chinese aged 80 and over living in empty-nest households will be even more dramatic: 4.0 and 11.5 times higher than in the year 2000 for the years 2030 and 2050.

The challenges of an ageing population will be much more serious under a low-fertility scenario — leaving the current fertility policy unchanged—than under a medium-fertility scenario which would introduce a two-child policy. Moreover, if the majority of rural–urban migrants continue to be young Chinese citizens, as observed in the recent census, these challenges will be much more serious in rural China than in urban areas. The central region will face the biggest problems, followed by the eastern region.

EAFQ: How can China be expected to overcome the challenge of an ageing population?

Yi Zeng: While population ageing presents a serious challenge — because China will be old before it is rich—it could also present an opportunity if sound policies based on deep scientific research are implemented. China’s population ageing could produce huge new markets and greater employment in services and products for the elderly. Consumption is also expected to increase over time, which may bring new opportunities for continued economic growth if the right policies are developed.

If a two-child policy is implemented soon and the average age of retirement gradually increases from the current very low level of 60 for men and 55 for women to 65 years for both men and women by 2050, the annual pension deficit rate would be largely reduced or eliminated. With everything else being equal, the annual pension deficit rate under the medium-fertility (two-child policy) scenario would be much lower than under the low-fertility (current fertility policy unchanged) scenario after 2030. China needs a smooth and quick transition to a universal two-child policy, and a gradual increase in the retirement age.

China also needs to change its household registration policy, which restricts free family migration. And it needs to adopt new policies to encourage family migration, including older parents moving from rural to urban areas and among eastern, central and western regions, in order to avoid disproportionate ageing in China’s rural areas and in the central region.

EAFQ: How is China’s ageing population affecting its labour force?

John Knight: China’s labour force is declining, or will be very shortly. The urban-born labour force will fall by 6.4 per cent over the 15 years between 2005 and 2020, with the fall starting in about 2010 and accelerating in the following years. The rural-born labour force will rise by only 2.6 per cent over these 15 years, but the rise will be confined to the first five years and there will be a fall in the last five.

The reason for the decline is the one-child family policy that began in the late 1970s. However, the impact of the policy on the labour force was delayed by an ‘echo baby boom’: Mao’s exhortations produced a baby boom in the 1960s and early 1970s, which in turn produced a bumper crop of couples of child-bearing age two decades later. But recently there has been a violent demographic swing. If the number of urban children aged 15–19 is 100, In 2005 the number of urban children in the age groups 15–19, 10–14, 5–9 and 0–4 decreased in the proportions 100, 81, 66 and 56 respectively; the rural pattern was similar although not so dramatic, being 100, 104, 79 and 68, respectively.

EAFQ: How will China’s declining labour force affect its economic prospects?

John Knight: The implications for the Chinese economy and society will be dramatic. If China’s economy continues to grow as rapidly as it has done over the period of economic reform, the urban demand for rural workers will soar. On conservative assumptions rural–urban migrants will constitute two-thirds of the urban labour force in 2020.

There is a lively but unsettled debate about whether China has reached the ‘Lewis turning point’, that is, whether the previous abundance of unskilled labour which has fuelled China’s rapid economic growth has come to an end and whether there is now a growing scarcity of unskilled labour. The issue has drastic implications for income inequality and for industrial strategy. It would seem the Lewis turning stage (stage is more accurate than point) is very likely to take place in the second decade of the 21st century.

Zai Liang: China is capturing a lot of mass media headlines these days. Here are two news-making events since 2010. First, China’s level of urbanisation exceeded 50 per cent in 2011. Second, the data from the 2010 Chinese population census show China’s floating population (loosely defined as migrants who do not possess local household registration) reached 221 million in 2010, another new record. In fact, the two statistics are closely related: the rise of migration and China’s floating population have overwhelmingly contributed to China’s rising level of urbanisation and urban growth. These migrant workers also contributed enormously to China’s economic miracle in the past three decades as they built China’s skyscrapers and laboured in China’s factories supplying goods across the globe.

EAFQ: How can China better support its labour force and migrant workers in the future?

John Knight: At present migrants are second-class citizens in the cities, and the many impediments to urban settlement help to maintain the system of temporary migration from the villages. As migrants move up the job ladder to fill vacancies, the economic and social pressures for them to be allowed to settle permanently in the cities will grow. The migrants will become proletarians.

Zai Liang: If the past policy on migration can be characterised as ‘open the city gate for rural migrants’, the focus for any new policy should be on how to accommodate these newcomers to the city. This does not mean that migrants should be given special favours or privileges, just the right to be treated equally to other urban residents. Even this is not going to be easy, especially for a country with a long history of governance under a rigid and discriminatory hukou (household regulation) system.

Things have clearly improved for the floating population. Gone are the days when many major Chinese cities reserved certain occupations for city residents only. Gone are the days when the floating population was portrayed as blindly floating everywhere. In fact, the rhetoric is very much in favour of accepting the newcomers as deserving the same rights as other urban residents. Still lacking are concrete steps and policies that will benefit and improve the life chances of the floating population and their families: education of migrant children, health benefits and housing, to mention a few.

EAFQ: How could education in particular be improved for migrant children?

Zai Liang: One hot topic these days is this: are migrant children allowed to take national college entrance exams in their migrant destinations, such as Beijing or Shanghai? The question may seem very simple, but it challenges the fundamental principles of who deserves what among urban residents and newcomers. Take the case of Beijing, for example. The children of Beijing hukou residents right now enjoy the advantage of attending elite colleges or colleges in China simply because they have Beijing hukou and take their college entrance examination in Beijing. Now the migrant children (many of them have lived in Beijing for a long time, some were even born in Beijing) are fighting for their right to do the same. At the request of China’s Ministry of Education, all provincial governments announced policies on this issue by the end of 2012. The outcome is clearly not satisfactory for migrant children who plan to go to college in 2013. Significant barriers will exist for the next few years at least.

There has been a lot of talk about ‘the Chinese dream’ in the media lately, but a real Chinese dream must ensure China’s urban newcomers have equality of educational opportunity, including the right to take national college entrance exams in the city they call home.

John Knight is Emeritus Professor of Economics at the University of Oxford. The research on which these comments are based can be found in John Knight and Sai Ding, ‘China’s Remarkable Economic Growth’, Oxford University Press, 2012.

Yi Zeng is a professor at the Center for the Study of Aging and Human Development and Geriatrics Division, Duke University. He is also a professor at the Center for Healthy Aging and Development Studies, National School of Development, Peking University.

Zai Liang is Professor of Sociology, University at Albany, State University of New York.

This article appeared in the most recent edition of the East Asia Forum Quarterly‘Demographic Transition’.