Caixin
Sep 18, 2018 12:25 PM
OPINION

Editorial: China Should Increase Labor Productivity as Workforce Shrinks

China has had its two-child policy in place for nearly three years, and calls for further adjustment of its family planning policy and even the full liberalization of birth restrictions have continued to grow. The country’s National Health Commission recently scrapped three offices that were previously in charge of family planning, further fueling speculation.

The offices are being replaced with a new “population monitoring and family development office.” But even if China loosens restrictions on the number of children its citizens can have, the country may still struggle to quickly resolve the fundamental demographic problems it faces.

People are the most important factor of production. The quantity, quality and composition of a country’s population have a major impact on economic and social development. China is gradually exhausting its “demographic dividend,” with an unprecedented low birth rate, an aging society and a continually shrinking workforce. The effects of past controls on population growth will continue to linger in the foreseeable future. Under these circumstances, improving the quality of China’s workers is as urgent and is even more important than releasing birth restrictions. Improving the quality of the workforce and raising the efficiency of economic growth can, to a certain extent, compensate for the loss caused by the disappearance of the “demographic dividend.”

China has used policies to direct family planning since the early 1970s. China became an aging society at the start of this century, with the country’s birth rate continuing to decline and a growing proportion of its population entering old age. Some demographers have called for the complete lifting of birth restrictions and even measures to encourage births. At the end of 2013, China began allowing parents who were only children themselves to have a second child. In 2016, it launched the two-child policy, which extended that permission to the entire population. However, the number of children born each year continues to fall below authorities’ expectations.

The recent institutional adjustments by China’s health authorities have caused some people to predict that the country’s family-size restrictions could soon become history. Actually, the latest official plan for the National Health Commission still makes the commission responsible for “family planning management and service work” and “improving family planning policy,” among other duties. Additionally, the country’s laws and regulations on family planning have not yet been revised. The central government should clarify what exactly “responsible for family planning management and service work” and “improving family planning policy” mean, in order to guide public expectations.

Relaxing birth restrictions is the right choice, but even lifting all current restrictions will probably not result in a significant increase of births. It should also be noted that China is in the midst of a shift in development patterns and industrial restructuring, and many low-skilled jobs will soon be eliminated or replaced by artificial intelligence technologies. If the population’s level of education is not raised as soon as possible, especially in rural areas, China’s workforce will struggle to meet the needs of high-quality development, and it will be difficult to achieve equality for the next generation. In addition, research has shown that China’s total factor productivity — a measure that reflects economic efficiency — has been declining since 2000. The country must pay attention to both the size of its population and the quality of its workforce, by means of deepening institutional reforms. Judging from long-term economic and social development patterns, the latter could even be more important. Some developed countries are already experiencing negative population growth, but their economies have not been seriously threatened. Instead, they have maintained high efficiency, largely because they have continuously improved the quality of their workforce and made technological advances.

Demographic changes are long-term phenomena that follow their own intrinsic laws and are shaped by complicated factors. People need to be humble when considering this important issue. Excessive confidence that population growth will seamlessly and immediately fall in line with policy is similar to the kind of thinking that led to the planned economy. Reality will teach us a lesson, sooner or later. The disappointing outcome of the two-child policy taught China such a lesson, for delaying its adjustment of the one-child policy.

Ultimately, fertility is a private and personal choice. The government should strengthen demographic monitoring and forecasting, and adapt economic and social policies to changes in China’s demographic situation. It should also strive to solve problems in areas such as employment, social security, education, and medical care, and better coordinate population change with the economic, social, resource, and environmental aspects of sustainable development. If necessary, the government can improve maternity and welfare policies through measures such as tax reduction and subsidies. Throughout this complicated process, improving the quality of the shrinking workforce should always be a prominent goal.

Improving the quality of the workforce requires the joint effort of departments at all levels of government to boost education and health. The recent revision of the tax laws has increased deductions for children’s education, a positive step. Similar policies should be implemented as soon as possible to eliminate citizens’ worries. In the future, the birth rate will continue to decrease. So to improve the quality of the workforce, relevant medical, educational and housing resources should be arranged in advance to expand the relevant fiscal budgets.

It should be pointed out that education in particular plays a major part in improving the quality of the workforce. Since the start of reform and opening-up, China has used the vigorous development of education resources to produce suitable workers for its transforming economy. However, the problem of uneven and unfair distribution of educational resources has become more and more serious. It has repeatedly triggered social unrest and threatened stability. The fundamental reason is that the reform of the education system has lagged behind reform in other areas — something the public feels strongly about. The education sector should confront the issue and resolve entrenched problems.

China must adjust its population policy in a timely manner, and, more importantly, improve the quality of its shrinking workforce. It must do everything it can to avoid having a population of working adults that is both too small and too inefficient to face economic and social challenges. In order to avoid falling into this double trap, China must now begin to adjust outdated policies and reform its old systems. The interests of individual government departments should serve the nation’s goal of sustainable development.

Translated by Teng Jing Xuan (jingxuanteng@caixin.com)

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