China’s workforce could rise rather than fall

by on December 13, 2015 at 1:03 am in Data Source, Economics, Law | Permalink

That is the subject of a new FT article by Steve Johnson.  I’ve already covered this on MR, but here is a recap of some of Johnson’s points:

1. Official pension ages in urban areas are 50 for blue-collar women, 55 for white-collar women and 60 for men.  Those could be raised by the government thereby boosting the labor force.  For instance, in terms of actual practice, at age 60 only 55 of urban Chinese men are still in the labor force, and just one-third of urban Chinese women are still in the labor force.

2. Chinese pension policy penalizes late retirement and this easily could be changed.

As Johnson writes: “…if China adopted measures to retain older workers in the labor force, its working population would barely fall at all until at least the mid-2030s.”

With more women working, China in 2040 might have a labor force as large as it has today.  If the retirement issue and the gender issue are both solved, China’s labor force in 2040 likely will be 10 percent higher than it is today.

So the common meme of “the Chinese labor force is about to start shrinking” doesn’t really have to be true.  The Chinese economy has many problems, but I think this one is overrated.  And we haven’t even talked yet about possible productivity increases.

1 Mark Thorson December 13, 2015 at 1:35 am

Since 2013, China has been the largest purchaser of robots, so why would they need to expand the labor force? Still, it’s nice to know the Party has some knobs to turn if they need to adjust something. If you’re looking for an Asian country with a labor force problem, it’s Japan.

2 ChrisA December 13, 2015 at 4:46 am

If China ends up as bad as Japan that would be a great outcome for China.

Productivity enhancing robots can and will help China eventually I am sure, the issue is really what about the next 20 or 30 years before such general purpose robots are available. The shrinking workforce could pull more retirees back into the labor force, but we have to remember that the older cohort in China are the least educated and grew up in a largely agricultural society. So they are not likely to be high productivity individuals. Because of this trend I think we have now seen peak Chinese growth, a more normal 4 to 6% can be expected from now on slowing the convergence with fully developed nations.

Another interesting trend is if labor shortages do occur in China is if that will change their foreign policy. Right now the Chinese leadership are quite timid on foreign policy because they fear the unemployment any trade disruption would cause.

3 Eric December 13, 2015 at 1:46 am

Be warned, you just broke the dream of “demographic dividend” of your Indian fans.

4 wut December 13, 2015 at 11:01 am

Could you explain further? Curious

5 anon December 13, 2015 at 8:15 pm
6 So Much For Subtlety December 13, 2015 at 3:24 am

For instance, in terms of actual practice, at age 60 only 55 of urban Chinese men are still in the labor force, and just one-third of urban Chinese women are still in the labor force.

Only 55? Anyone know their names?

So they put their demographic collapse for a few more years. Big deal. They do not need to fiddle with the retirement age. Although it is a good idea. They need women out of the work force and making babies. The One Child policy was and is a disaster.

7 Miguel Madeira December 14, 2015 at 8:50 am

“They need women out of the work force and making babies. ”

At least until some decades, this will reduce even more the worforce, no?

8 Brad December 13, 2015 at 5:58 am

China still has a significant pool of underemployed rural workers at it’s disposal. The growth of it’s workforce is slowing, but it still has a long way to go before it stops.

9 rayward December 13, 2015 at 7:20 am

Demographers project that China’s population will peak in 2030 and then decline by over 400 million in the second half of this century ( Over 400 million! Consider the economic and political consequences of that.

10 wut December 13, 2015 at 11:03 am

Cleaner air and water is probably one. Cheaper housing as well. Less traffic. Wildlife recovery seems likely.

11 Tom Warner December 13, 2015 at 8:05 am

This is a huge stretch. Even if China makes substantial efforts to retain older workers in the workforce, and I don’t see it yet, I doubt that would have much economic impact. As a rapidly growing and urbanizing country, China has few 50+ year olds and extremely few in rural areas who are producing at the average level.

12 George December 13, 2015 at 8:58 am

In this day and age why in the world would anyone want to keep a large workforce? That makes absolutely zero sense. China is going to have to address the same issue the rest of the world will – how does the industrialized age handle the automation revolution that makes the large majority of jobs we have come to know over the last century irrelevant?

13 Miguel Madeira December 14, 2015 at 8:53 am

“the automation revolution that makes the large majority of jobs we have come to know over the last century irrelevant”

there is any real evidence of these supposed “automation revolution”? If anything, I think that growth of productivity per worker has deaccelareting in the last decades (the opposite of what should be exprected in an “automation revolution”).

14 Keith December 13, 2015 at 10:25 am

Raising the retirement age? Has that ever been met with anything other than massive protests? This sounds like technocratic wishful thinking?

15 8 December 13, 2015 at 5:39 pm

The age 18 cohort falls in size each year.

16 jorod December 13, 2015 at 9:18 pm

What is life expectancy is China? With all that pollution, it can’t be very high.

17 v December 14, 2015 at 9:45 am

We hear that the workforce has started contracting in China but that is not a real problem. Currently the issue for most companies is getting rid of people and replacing them with automation in order to cut costs. There just aren’t enough people willing to work at a wage that makes producing cheap stuff possible. That is freeing up a lot of people to work elsewhere if they were needed. Most people aren’t doing much but they’re doing a lot of it and could move to a new industry immediately if a new one emerged.

18 Vidraj December 14, 2015 at 10:54 pm

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