January 17, 2019
Seriously, this is a topic of a major article in the paper. The story is that low birth rates over the last four decades mean that fewer people will be entering the labor force and this is supposed to be really bad news.
“The declining population could create an even greater burden on China’s economy and its labor force. With fewer workers in the future, the government could struggle to pay for a population that is growing older and living longer.
“A decline in the working-age population could also slow consumer spending and thus have an impact on the economy in China and beyond.
“Many compare China’s demographic crisis to the one that stalled Japan’s economic boom in the 1990s.”
The overwhelming majority of China’s extraordinary growth over the last four decades has been due to increased productivity, not more workers in the workforce. According to data from the International Labor Organization, China’s productivity growth averaged 8.9 percent annually between 1991 and 2018. If China can sustain productivity growth at just one-third of this rate, its output per worker will be 90 percent higher in 2040 than it is today.
This means that even if the ratio of workers to retirees falls from 3 to 1 at present to 1.5 to 1 in 2040, both workers and retirees could still see a 60 percent increase in their real income. (This assumes that the average income of a retiree is 75 percent of an average worker. It also does not take account of the smaller number of dependent children.) That does not seem like a crisis.
The example of Japan as a demographic horror story also does not fit the data. According to the IMF, Japan’s per capita GDP has increased by an average rate of 0.9 percent annually between 1990 and 2018, while this is somewhat less than the 1.5 percent rate in the United States, it is hardly a disaster. In addition, average hours per worker fell 15.8 percent in Japan over this period, compared to a decline of just 2.9 percent in the United States.
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