Writing in a working paper for the Brussels based think tank Bruegel, Alicia Garcia-Herrero and Jianwei Xu contribute usefully to the question of what effect China’s ageing population may have on productivity?
The short answer is ‘not much’, at least until 2035. Even after that the ageing population isn’t a guaranteed productivity retardant. As a useful aside the paper points out analysis elsewhere has failed to establish a reliable relationship between a population’s age profile and its productivity.
With regard to China specifically the paper notes:
- Between now and 2035 China’s labor force will shrink only modestly.
- The shrinkage that’s sure to occur is in rural areas as urbanization is expected to continue between now and then.
- If urbanization continues, surely, the urban labor force will continue to grow. This is important because…
- As urban employment is more productive than the rural variety the combined effect of rural shrinkage and urban growth will be positive.
- After 2035, all else being equal, the fertility rate decline will kick in and the work force will shrink. From this point 1.4% annually could be shaved off GDP growth.
- But, in the real world all else is never equal. Robotization, AI, and the effects of higher wages on efficiency could all change the calculation. The paper notes though “..there is no sign yet that this [Beneficial changes taking place] is the case.”
China faces many obstacles on the road to further development but the paper suggests, contrary to a widely held belief, an ageing population isn’t one of them. For the next decade at least.
You can access the paper in full via this link Can Urbanisation Mitigate the Negative Impact of Population Ageing?
Happy Sunday