[ccebook.cn]The World in 2010

Asia
Peak labour
Nov 13th 2009
Chinese workers will become scarcer
Demographers in China will celebrate 2010 as a golden year: the moment when the “demographic dividend” of
the past couple of decades will reach its peak. Since the 1970s China’s birth rate, and therefore the number
of dependent children, has been plummeting, whereas the number of elderly people has been rising only
gradually. The result has been a low “dependency ratio”—the proportion of dependants to people at work. Now
at around 0.4, that ratio has helped to fuel China’s prodigious growth.
From 2010 it will start to change. The number of dependent children will remain low because China’s one-child
policy of the late 1970s is still broadly in place. However, as life expectancy goes up (at 74, it is already half
as long again as it was 50 years ago), the number of older people will grow, and the dependency ratio will
rise with it, to above 0.6 by 2050.
Dependency ratios are beginning to rise all over the rich world, especially in Asia’s “tiger” countries—Hong
Kong, South Korea, Singapore and Taiwan. By contrast, dependency ratios in most developing countries will
fall until at least 2030. China is unique in getting old before it has got rich. That matters, because a higher
dependency ratio means a lower growth potential. Nor is the government in a position to provide the pension,
health-care and other benefits that a vastly increased number of older people will need.
When most of China’s industry was state-owned, the “iron rice bowl” provided cradle-to-grave social security
for its workers. But that system was dismantled 20 years ago, and now pension and health-care provision is
patchy at best.
China is running out of children to look after the elderly, a state of affairs often summed up by the formula
“4-2-1”: four grandparents, two parents, one child. The country has about 20 years to get its act together.
Although its workforce will start shrinking from 2010 relative to the population, in absolute terms both its
number of workers and its population as a whole will grow until about 2030, when the population will peak at
around 1.46 billion. After that it will begin to decline gently.
The government is well aware of the problem, and has drawn up detailed plans to beef up the pension and
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