As China’s population is shrinking, Beijing is re-assessing the labour policies as shrunk labour is expansive labour, reported The HK Post.
China is currently re-assessing the labour policies given that a simultaneously reducing working population will have major implications for the Chinese economy as well as the global economy. The biggest concern for the Chinese government will be the loss of global influence that a declining population inflicts on the country, reported The HK Post.
China became an economic giant in the world thanks to its gigantic workforce manufacturing record capacities over the years, the report said, adding that would no longer be the case in the future.
The weight a country with a record population carries in the international community will also reduce, and so will the country’s influence, reported The HK Post.
The number of Chinese fell by 850,000 from the previous year to 1.4118 billion, official statistics showed. Its birth rate had been slowing for years, prompting a range of policies to try to slow this trend, including scrapping the country’s infamous one-child policy seven years ago.
Conservative estimates suggest that by 2035, around 400 million Chinese will be over 60. That is nearly a third of the total population. How the country manages to improvise the use of the labour force will determine how bad the impact of labour shortage will be, reported The HK Post.
Notably, the Chinese labour market is allegedly overworked and underpaid, which is what helped the country become an economic giant all these years.
The competition in the labour market is extremely severe. So, people are willing to work long hours just to keep a job, reported The HK Post.
Moreover, China’s social safety net is not fully developed compared to the US. Retired Chinese still depend on government aid, especially the state pension, the report said.
So, the Xi Jinping government is faced with a Hobson’s choice — either reduce the fiscal benefits to the old and infirm or burden the younger Chinese with more taxes, or both, reported The HK Post.
The second problem is, in order to maintain full employment, Chinese society must maintain high spending percentages to sustain the economy’s productive capacity. When the population falls, the first victim is spending, especially investment spending, the report said.
The logic is that if the number of workers is declining, why build new factories, office buildings, and so on? if the number of families is declining, there is not much need to build new housing, according to the report.
If the labour force reduces over the next few years, the government will need to give a new direction to its shrinking labour market.
A labour shortage will automatically strengthen the labouring Chinese demand for decent work hours and pay. But once labour becomes costly, it will reduce the benefits of manufacturing accruing to the government and impact exports, reported The HK Post.