China needs to explore the potential of its current population to address the shrinking labor force

The announcement triggered heated discussion and debates about what more the government can or should do to boost the birth rate. The consensus is that China needs to substantially increase public spending on childcare, reduce family spending on education and housing, and offer welfare and employment protection to women. 　

But one should be aware that even if China implements all these necessary measures, it can only decelerate, rather than reverse the apparent inevitability of China becoming an aging society. The experience of other aging societies shows that even in developed Western welfare states with free healthcare, subsidized childcare and generous financial incentives to have children, there is a limit to what these measures can achieve. 　

The challenge is particularly acute for China. While the demographic shift took place in about 100 years in Western society, it only took about 30 years in China, leaving very little time for the country to cope with the dramatic changes in its population makeup. 　

Other than efforts to boost birth rates, the Chinese government should also explore the potential of the current population to cope with the shrinking labor force. According to the census, which was conducted in 2020, 218 million people in China had gone through higher education, leading many to talk about the “talent dividend” of China’s population. The increased education level of China’s labor force is definitely positive, although whether it can automatically turn into a talent dividend depends on whether China can achieve its goal to upgrade its economy into an innovation-driven one. 　

At present, China faces major challenges to create enough jobs for some 10 million college graduates each year, while there are periodic labor shortages in its manufacturing sector. The country needs to continue to reform its education system to meet the needs of its ever-changing industrial development. 　

In the meantime, China needs to address the institutional barriers faced by its large migrant labor force. It is estimated there are now about 280 million migrant workers of rural origins living in urban regions. 　

Under China’s household registration policy, rural migrant workers are often denied access to public services and face institutional barriers to permanently settle in cities. As a result, many choose to return to their rural hometowns in their 40s, where jobs tend to be unstable and lowpaid. 　

This is undeniably a waste of human resources as many of them have valuable experience in different industries. If China can address the institutional barriers faced by the migrant labor force so they can settle in cities, they will be able to continue to contribute to China’s industrialization for another 20 years. 　

Finally, China should lift the retirement age. China’s current retirement age is set at 55 for women and 60 for men, lower than many other countries. The measure will reduce the ratio of the senior population relative to the working-age population. 　

While the demographic change is no doubt a major challenge, it does not have to be a crisis. To a large extent, an aging population and a declining birth rate is an inevitable result of the increase in life expectancy, economic development, improved gender equality and freedom of choices. 　

It can also be an opportunity to address various social problems. By investing in some of China’s most undervalued groups – women, migrant workers, and seniors, China can achieve a more balanced development in the long run.