Tue, Mar 19, 2024 page8

• Mismanagement of labor resources

  • By Daniel Jia
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  The number of babies born in China has been declining year-on-year since 2017.

  In response, Chinese central and local governments have launched a series of pro-natalist policies to encourage childbirth and help arrest the decline.

  Among them, the 2022 guidelines issued by the Chinese National Development and Reform Commission together with 17 ministries of central government was the loudest.

  In recent years, the theory of “China’s demographic crisis” has flooded Chinese media. The government’s official stance is that aging and low birth rates have led to a decline in the overall population and a shortage in the workforce, thus jeopardizing its economy.

  However, does China have a demographic crisis? To answer the question, we could approach it from two aspects closely intertwined with its economy: its total population and workforce.

  In 2022, China registered its first population decline since the Great Chinese Famine from about 1959 to 1961. Although the population of a country is one of the basic conditions for its economic development, it is not the most fundamental one.

  Germany’s total population began to shrink in the 1970s. Although it has slowly rebounded since then, its total population is only about 7 percent more than at the lowest point in the 1970s. Despite these demographic headwinds, Germany’s GDP ranks fifth in the world.

  China’s experience also supports this argument. Before Mao Zedong’s (毛澤東) death, China’s population more than doubled in 30 years, but its economy was on the verge of collapse.

  By contrast, during China’s 40 years of reform and opening after Mao’s era, although its population grew only slightly in this period, its GDP increased fivefold. That is, it doubled every eight years on average.

  These two examples show that neither total population nor population growth rate are an indispensable condition for a country to achieve economic success. Therefore, it is not preordained that a decline in China’s total population would hinder its economic development.

  As early as the beginning of this century, terms such as “migrant worker shortage” and “skilled worker shortage” began to appear in official state media.

  However, the real reason for China’s labor shortage in the past 20 years can hardly be the shortage of labor force.

  The population of its labor force between the ages of 15 and 59 is about 880 million, or 63.4 percent of the total population, data released by China’s Seventh Census showed.

  Although the working population has decreased by about 40 million in the past decade, the decrease is less than 5 percent, not big enough to trigger a “labor shortage.”

  On the other hand, the unemployment rate among young people in China exceeded more than 20 percent last year, to the point that the government suspended releasing data on it.

  China’s labor market is characterised by high levels of youth unemployment, alongside a large number of idle laborers and limited employment opportunities.

  In 2020, more than 25 percent of food delivery laborers have a college degree or higher, official data showed.

  In a country where educational resources are still relatively scarce, this phenomenon is a testament to the vast waste of its educational resources and inability to effectively put it in good service to its workforce.

  A country that has a youth unemployment rate of more than 20 percent does not have a labor shortage. Rather, it is failing to manage its resources effectively.

  Based on the current rate of China’s labor force decline — about 40 million every 10 years — its working population is to gradually decrease to about 700 million by 2050.

  A 700-million-strong working population would not cause a labor shortage, Nankai University Institute of Population and Development professor Yuan Xin (原新) said.

  China’s demographic change — the decline in total population and birth rates — is a phenomenon that occurs naturally in countries of advanced economic development. Therefore, it is not a real crisis.

  The essence of China’s “demographic crisis” that has been constantly highlighted by Chinese media and officials in recent years is, in fact, a manifestation of the mismanagement of its labor resources.

  The demographic change has been skillfully used by the Chinese government as a convenient scapegoat for its incompetency.

  If China improved and optimized how it allocates its labor resources, then it could avoid the trap of insufficient labor resources.

  However, if it continues to rely on a blind urbanization approach driven by wasteful infrastructure spending, then it would surely continue to face labor shortages amid high unemployment — even if the low birth rate is successfully reversed.

  Daniel Jia is founder of consulting firm DJ LLC Integral Services in Spain.
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