Abstract
China’s labour supply will shrink in the next 20 years. A central question is whether China can deal with this unprecedented phenomenon simply by increasing productivity and delocalizing production, possibly with the support of other measures such abolishing the hukou system and the one-child policy, and raising the legal retirement age. The author’s assumption is that, no matter what measures are taken, they will be insufficient to alleviate the labour shortage, and China may have no choice but to resort to mass immigration. This chapter first presents the United Nations Population Division’s medium-term projections for China’s working-age population and compares them with a projection that adopts the same methodology, but which is based on the 2010 census data. It then provides a critical assessment of the assumptions underlying the United Nations’ projections. The factors underlying economic migration are then presented, and followed by the use of an alternative methodology to jointly build labour market and demographic scenarios, based on a demand-driven migration model. Alternative scenarios for the 2010–2030 period and some considerations for the following 30 years are then presented. The last section discusses the various options open to China for addressing the decline in its working-age population, and the resulting shortage of labour supply.
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Notes
- 1.
Members of the Institute of Population and Labour Economics of the Chinese Academy of Social Sciences, and especially its director, Cai Fang, have played a central role in signalling that China has reached the Lewis turning point and in showing some of the main consequences (Cai 2008a, b; Cai and Wang 2006).
- 2.
- 3.
The United Nations projections continue to assume long-term convergence of fertility to replacement level (UN-WPP 2012).
- 4.
After the Mediterranean countries, the reversal of the sign of the migration balance has affected many other countries, such as the Russian Federation, the Czech Republic, Hungary, Ireland, Malta, Slovenia, and Cyprus (Bruni 2013b).
- 5.
Italy, Spain, and Germany represent some of the most relevant cases.
- 6.
The projections cover the period up to 2100, but WAP data after 2060 reflect a very questionable assumption of increasing TFR.
- 7.
The demographic transition is defined as the passage from a traditional demographic regime, characterized by high birth and mortality rates, to a modern demographic regime characterized by low birth and mortality rates. Both regimes are described as equilibrium regimes. Therefore, the demographic transition theory has always maintained that the fertility decline would stop at 2.1 children per woman. This prediction has already been largely invalidated by empirical evidence, but continues to represent a reference point for theoretical and empirical analysis.
- 8.
This result is the consequence of changes in the age structure brought about by entries into WAP of new generations that are smaller than the previous ones, and by the movement of the generations present in 2030 along the ages of working life or out of it.
- 9.
For a detailed presentation of the model (derived from a stock-flow model of the labour market developed in the 1980s), see Bruni (1988). For an application to a series of countries and areas with below-replacement fertility, see Bruni (2009). For an application to China, see Bruni (2013), (2011), and Bruni and Tabacchi (2011).
- 10.
According to this perspective, the migration balance of arrival countries is determined by their total manpower needs. As a consequence, the world total migration flows are largely determined by labour demand in arrival countries.
- 11.
In this simplified approach we take this propensity as exogenous. However a more correct assumption would be to link the trend in the propensity to participate with the trend in employment rate.
- 12.
The participation rate is assumed to decline by 0.5 % points between 2010 and 2015, by 1 point between 2015 and 2020, and then by 1.5 and 2 points in the two following 5-year periods.
- 13.
In line with the World Bank report, we assume that employment will grow by 3 % between 2010 and 2015, then decline by 2 % in the following two 5-year periods and by 3 % between 2025 and 2030.
- 14.
We assume that employment will grow by 20, 15, 10 and 5 million, respectively, in the four 5-year periods considered.
- 15.
The TDR is given by the sum of the youth dependency ratio (YDR) and of the old-age dependency ratio (ODR). The YDR is given by the ratio between children in the age group 0–14 and WAP, while the ODR is given by the ratio between the elderly (65 +) and WAP.
- 16.
The percentage of old people is expected to increase substantially from around 36 % to around 55 %.
- 17.
In this chapter we will limit ourselves to measuring the economic youth dependency ratio (EYDR), the economic inactive (of working age) dependency ratio (EIDR), and the economic old-age dependency ratio (EODR). The economic total dependency ratio is the sum of these three ratios.
- 18.
From now on, labour shortages will become increasingly evident and widespread, creating growing upward wage pressure that will affect not only the coastal areas and foreign companies, but could also spread to other areas, depending on the reallocation of the manufacturing sector in the surrounding provinces. This will be accompanied by a growing awareness among workers of opportunities to fight not only for higher wages, but also for better working conditions. A phase of labour organization characterized by greater institutional independence of labour unions is therefore to be expected (Cai et al. 2009; Garnaut 2010; Park et al. 2010).
- 19.
In the last 10–15 years, the enormous drive to develop private industry, largely fuelled by foreign direct investments, has been concentrated mainly on a few coastal provinces that offer relative advantages in terms of transport, physical infrastructure and human resources.
- 20.
According to recent estimates China’s real wages could approach $ 1,000 per month within a decade (Vandana et al. 2012).
- 21.
It has also been shown that informal urban employment—that represents the most probable outcome of rural migration—implies higher working intensity and relatively lower pay, together with less social protection, while migrants have to accept the less attractive jobs that urban residents refuse (Cai et al. 2009, p. 17).
- 22.
In 2010 the participation rates of the 60–64 and 65–69 age-groups were respectively 49.5 and 36.3 %.
- 23.
Already at the beginning of 2006, this solution was proposed by Cai Fang, Director of the Institute of Population and Labour Economics of the Chinese Academy of Social Sciences, the first to state that “China’s oversupply of labour is on its way to becoming a thing of the past” (Cai 2006).
- 24.
For a detailed analysis of the Italian case see Bruni (2008).
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Bruni, M. (2014). Dwindling Labour Supply in China: Scenarios for 2010–2060. In: Attané, I., Gu, B. (eds) Analysing China's Population. INED Population Studies, vol 3. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-8987-5_12
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