China’s labour crunch: End to one-child policy?

Country losing demographic dividend, which may hit growth unless things change

By Sim Chi Yin
20 March 2010

As the global financial crisis hit China over a year ago, shuttering shops and slashing exports, migrant worker Huang Mao left his electronics factory job in Shanghai.

Returning to his village of Tian Ping in a remote corner of south-western Yunnan province, he bought a pick-up truck with 50,000 yuan (S$10,215) borrowed from relatives and started a new job at home: Hauling coal and construction materials such as sand.

Today, the 22-year-old is still there, making almost as much as the 1,400 yuan a month he earned at the Shanghai factory.

‘I would have to find a higher-paying job and one that is not dirty or noisy to make me leave my family again,’ Mr. Huang said on his mobile phone from his village.

With many migrant workers like him still staying away from China’s coastal and southern manufacturing belt after the massive layoffs there, factories have in recent weeks reported a ‘migrant worker famine’.

Local media say the southern economic powerhouse of the Pearl River Delta is lacking as many as two million workers, while the eastern manufacturing hub of Wenzhou is short of up to a million.

This led the authorities in Guangzhou to raise the minimum wage there from 860 yuan to 1,030 yuan, surpassing even Beijing, the Guangzhou Daily reported on Thursday.

This ‘migrant worker famine’ has been reported every year since 2004 – except during last year’s financial crunch – but it appears to be getting worse.

While the fact that younger migrant workers like Mr. Huang have higher aspirations and are pickier about their jobs contributes to the problem, scholars say the current shortage is, more fundamentally, a symptom of a deeper ill: China’s diminishing surplus labour advantage.

This is lending weight to growing calls for Beijing to relax the controversial one-child policy introduced in the 1980s to rein in the country’s surging population.

The policy helped to give China a ‘demographic dividend’ as the number of children fell faster than the number of elderly grew. That meant the proportion of the population which was of working age rose, creating faster economic growth.

And for the past three decades, China has chalked up double-digit growth largely on the back of its army of cheap labour.

The impending depletion of that ‘dividend’ and the dwindling workforce pose the largest threat to China’s economic growth, said leading Chinese demographer Cai Fang, the most prominent proponent of this much-debated thesis.

He predicted that the country’s working-age population will peak in the next few years, but dip after 2015.

The labour force might shrink by 23 per cent between 2015 and 2050 if current demographic trends continue, the Centre for Strategic and International Studies, a Washington-based think tank, said last year.

That looming reality, brought home by the ‘labour famine’ and growing concerns over China’s rapidly greying population, has given more ammunition to proponents of a two-child policy.

A delegate at the recently concluded annual parliamentary session proposed that China roll out a two-child policy in the next three to five years.

Even Communist Party mouthpiece People’s Daily carried an article last December calling for more couples to be allowed to have two children. It was written by Mr. Tian Xueyuan, head of a think-tank of the National Population and Family Planning Commission.

At a meeting with state population researchers in January, Vice-Premier Li Keqiang – the most senior official to have spoken on the issue of late – said China would ‘switch from population control to population development’, sparking murmurs that Beijing might loosen the one-child policy.

In its front-page article this week, the Southern Weekend newspaper said the one-child policy was at a ‘historic juncture’. It quoted influential economist Hu Angang as saying: ‘I think there is no need to debate anymore whether we should adjust our population policies. Now, it is a matter of how.’

As for the current ‘famine’, Professor Cai told a Shanghai newspaper that China will need to redouble efforts to move labour-intensive industries up the value chain and spur economic development in the more rural central and western regions.

‘It is signal, but there is no need to fret,’ he said.

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