China’s entering the age of a shrinking workforce

Chinese workers may soon have to work just a little bit longer. Last year, the ruling Communist Party adopted a resolution that would see the country’s statutory retirement age gradually rise over the next five years.

So far, it has not been specified, but an earlier official report suggests it is likely to end up at around 65 years old. This would put the country more in line with other large economies, including the United States.

At present, China has one of the lowest retirement ages in the world, at 60 for men, and 55 for women in white-collar jobs or 50 if they are in blue-collar employment.

Party leaders have mulled reforming China’s retirement plan for several years. But the apparent urgency now reflects growing concern over the impact that a shrinking – and aging – population will have on the country’s dwindling pension pot.

Funds set aside to cover retirement costs look set to be completely used up by 2035, the Chinese Academy of Social Sciences projected just a few years ago. Raising the retirement age will no doubt stretch funds for a few extra years.

Demographic issue

But it will not be a permanent fix, and it does nothing to address the serious underlying demographic problems that the country faces.

I have studied China’s population for over 40 years and I believe the demographic issue confronting the world’s second-largest economy now represents one of the most serious problems it has faced in centuries.

With a fertility rate of 1.1 children per woman and more deaths each year than births, China’s future is one of a declining population, with an enormous increase in the number of elderly.

The rise and fall of the Chinese population

Compounding the problem, Beijing has long been hostile to the idea of supplementing its native population through immigration – just 0.1% is foreign-born. That is the smallest percentage of any major country in the world.

Since the Communist Party came to power, it has only seen population growth.

In 1950, several months after the founding of the People’s Republic of China, the population numbered 539 million. It then rose every year for nearly 70 years, reaching 1.43 billion in 2021. But at that point it peaked.

In the subsequent years, there have been more deaths than births. Furthermore, United Nations projections, suggest that if current trends continue China’s population will fall below 1 billion in 2070, below 800 million in 2086, and down to 633 million by 2100.

Population shift

That represents a loss of more than half its current population in around 75 years. Such a drastic decline would wreak havoc on its labor force, causing untold economic problems. But it isn’t simply about numbers.

Potentially more concerning is the shift in how the population is made up.

According to UN figures, just under 20% of China’s population was in the retirement bracket of 60 and over. But by 2100, this is projected to increase to an astounding high of over 52%.

The data also shows around 12% of China’s population are young workers, aged 20 to 29. Older employees aged 30 to 59 make up 46% of the workforce. But by 2100, this is projected to drop to just over 7% for young workers and around 29% for 30- to 59-year-olds.

China’s shrinking working-age population

Similarly, the number of children and young adults, those aged 19 and under, will drop from 21% in 2023 to 11% in 2100.

In short, the population projections for China do not bode well for the future of the country. There will be fewer workers to support a growing number of, mainly elderly, dependents.

Still, Beijing’s plan to increase the retirement age will have only a minor impact on alleviating the problems associated with these trends. Raising it will not help to slow the decline. There is, however, something that can mitigate this trend – immigration.

Many major nations with low fertility rates rely on international migration to provide young workers. They also have more babies than the local people.

Birth rate

Compare, for instance, China’s low rate of 0.1% foreign-born with almost 14% foreign-born in the US and 18% in Germany. Even the East Asian nations of Japan and South Korea have higher foreign-born percentages than China, at 2% and 3.7%, respectively.

Several attempts have been made by the Chinese government to implement policies to increase the birth rate, but they have failed after proving to be ineffective.

It will not be easy to implement an active immigration policy in China, a country seemingly deep-rooted in racial purity shared by many leaders in the Communist Party.

There may well be resistance to immigration from the wider Chinese population.

In the early years of any policy that encourages mass immigration, some Chinese would lose their jobs and need to find employment elsewhere. This would especially be the situation for young workers.

But in general, immigrants seek employment in jobs that the local population does not prefer – sometimes referred to as “three Ds jobs,” or those that are dirty, dangerous, and demeaning. This has been the case in most European countries and the US.

The alternative will be more painful for China in the long run.

Pension reforms

If an active immigration policy is not implemented, by the beginning of the next century, China will be half as large as it is today and will be one of the oldest countries – if not the oldest – in the world.

Beijing is already facing the strain of these trends, hence the need for pension reforms. But without the influx of a young immigrant workforce, the problems it faces will be far worse.

Dudley L Poston Jr is a Professor of Sociology at Texas A&M University.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy of China Factor.