25 January 2023

China’s Declining Population Can Still Prosper

EARLIER THIS WEEK, the National Bureau of Statistics in China announced that the Chinese population has decreased for the first time in 60 years. The population decrease does not come as a complete surprise. Curbing population growth was the entire point of the one-child policy in effect between 1980 and 2015, and women in China have been having fewer babies than needed to sustain the population since the early 1990s. But even before the one-child policy, fertility in China had been on a downward trend. Fertility dropped from over six to just three children per woman in just the 11 years between 1967 and 1978. And aside from a slight uptick in the years immediately after the end of the one-child policy, fertility has continued to decrease since 2017. According to various estimates, the total fertility rate in China now stands at just over one child per woman.

Many people see China’s low fertility and declining population as a threat to its economic prosperity, assuming the labor force will shrink at the same time that social security costs and the number of older dependents will explode as the population gets older. Such alarmist reactions are typical in the discourse about low fertility and population aging. But while low fertility and population aging certainly pose a number of challenges, they need not spell demise.

IT IS UNLIKELY that fertility in China will increase substantially in the years to come. Once low fertility has become the norm in one generation, it is much less likely to increase again in subsequent generations. We have done research on this topic and refer to this as the “low fertility trap.” Mathematically, fewer births in one generation mean fewer potential parents in the next. Moreover, people who grow up with fewer siblings and less exposure to bigger families internalize smaller families as “normal,” and hence tend to have smaller families themselves. Each generation also tends to have higher material aspirations than the last while also needing longer to achieve the same standard of living. In China’s case, the country’s total fertility rate reached what we postulated to be the “level of no return” of 1.5 children per woman in 2019. Many men are struggling to find a female partner due to the surplus of men compared to women—largely caused by a traditional preference for sons and sex-selective abortions during the one-child policy. China’s population decline may thus accelerate in the future, as many men will remain childless.

The factors driving low fertility in China appear to be similar to the factors driving low fertility in other countries: more time spent in education and establishing a career; high costs of housing and raising a child; changes in the values and expectations surrounding sexuality, marriage, and children; entrenched expectations that women bear the brunt of domestic responsibilities; and difficulties combining work and family, especially for women. In China, many people of childbearing age face the added pressure of being an only child expected to support their aging parents. Young people therefore tend to postpone marriage and childbearing, which in turn lowers fertility, and more people explicitly decide to have fewer children or none at all.

We know from low-fertility countries in Asia and Europe that measures designed to boost fertility—such as a one-time baby bonus, childcare subsidies, or paid leave—rarely have more than a fleeting effect on birth rates because they only superficially address the factors driving low fertility. And so far, China appears to be having a similar experience: Despite the implementation of the two- and then three-child policies, a number of new initiatives, and propaganda to promote childbearing, fertility has continued to fall. But even if fertility rates are unlikely to go back up, in China or elsewhere, it doesn’t need to mean disaster.

FEARS ABOUT POPULATION aging are often guided by the false idea that older people are homogeneously ill, dependent, and unproductive. In fact, the average health of people over 60 has improved dramatically over the past decades. And while the risk of health impairments increases with age, particularly in the second half of life, most people over 60 have a high level of functioning. In 2020, just 8 percent of people in this age bracket in China reported difficulty performing activities of daily living such as getting dressed or cooking food—down from 12 percent in 2011. Improvements in educational attainment, residential environments, and health care accessibility were among the major factors contributing to this decline. Moreover, a shrinking labor force is less likely to threaten economic growth as new technologies are able to take over more tasks.

Low fertility presents China not only with challenges, but also with opportunities. Low fertility and shrinking population size can reduce overcrowding and resource use, and make it more feasible to meet climate targets and reduce pollution. Low fertility makes it easier to reduce poverty, as more resources can be invested in each child born. Increased competition for labor could potentially drive an improvement in wages and working conditions. Low fertility also provides women the freedom to invest their time, energy, and talent in things other than childbearing, and thus help to advance the position of women in society. An older population may also contribute to less violence and crime.

There is a lot China could do to mitigate the potential negative consequences of population aging. Measures that improve education, health, and productivity will have a greater impact than measures designed to boost fertility. We recently calculated the health-adjusted dependency ratio—the proportion of adults with the same or more aging-related disease burden as the global average 65-year-old—in 188 countries. Using this measure, we could demonstrate that many of the world’s chronologically oldest countries have the same or even lower aging-related burden than many of the world’s chronologically youngest countries. Our work suggests that China can effectively stay younger by investing in the health of its aging population. Specific targets might include tackling the increase in obesity, the high prevalence of smoking among men, and high levels of pollution. China should also focus on increasing worker productivity through education and training (also in later in life), as well as developing and acquiring technologies that make human labor more efficient.

China could also respond to population aging by extending the retirement age and encouraging higher female labor participation. China has one of the earliest retirement ages in the world: Current retirement ages are 60 for men, 50 for women in blue-collar jobs, and 55 for women in white-collar jobs. About 93 percent of women are required to retire at age 50. Postponing retirement would relieve pressure on the pension system and increase the labor pool. China has a relatively high female labor participation rate (currently 62 percent, compared with 53 percent in high-income countries and 46 percent globally). Nevertheless, women—and late-middle-aged women in particular—still represent an underutilized resource of paid labor. In light of its rapidly aging population, hints that the Chinese administration is in fact discouraging female labor force participation are not only troubling from a human rights perspective but also from an economic perspective.

While the spotlight has been on China this week, the trends observed in China are not unlike those observed in many high-income countries. The populations in many eastern European countries, Italy, Singapore, Japan, and the Republic of Korea (just to name a few) are also rapidly aging and shrinking. So far, few countries have adequately adapted economic structures (including adjusting pension levels and retirement ages to ensure long-term fiscal sustainability), health care systems, social services, or infrastructure to best suit the needs and resources of an aging population. Measures that improve education, productivity, and health across the lifespan would ease the transition to a world with fewer children. It is possible for China—and the rest of the world—to decline and prosper.

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