September 23, 2023
Economy International

China’s Working Population Plummets by 41 Million: Is the Country’s Economy in Crisis?

China's Working Population Plummets by 41 Million: Is the Country's Economy in Crisis?

Over the past three years, China has seen a significant decline in its working population, with over 41 million people leaving the workforce. The drop in numbers is attributed to the impact of the COVID-19 pandemic on the country’s economy, coupled with a decline in the working-age population. According to the country’s statistics bureau, 733.5 million people were employed in 2022, compared to 774.7 million in 2019. The data also reveals an increase in the number of retirees, which is likely to put pressure on Beijing to expedite plans to raise official retirement ages.

Stuart Gietel-Basten, a demographer at the Hong Kong University of Science and Technology, explains that the decline in the working population is due to factors such as higher youth unemployment caused by the pandemic and a shrinking number of people in the “classic age group of the working-age population.” The number of people aged between 16 and 59 has been gradually declining since 2012, and over the last three years, the number in that group dropped 38 million to 857.6 million. This demographic change has been the main driving factor behind the employment drop, according to Lu Feng, a labor economist at Peking University, as the number of people reaching retirement age has increased dramatically.

China’s economic growth is expected to pick up this year as coronavirus restrictions end, and the number of employed people in China could rise as people return to the workforce. However, the employment trend will remain on a structural downtrend due to the aging population, according to Larry Hu, a China economist at Macquarie Securities Ltd.

China’s retirement age has remained unchanged for over four decades, with the retirement age being 60 for men and 55 for female white-collar workers, despite an increase in life expectancy. As a result of the baby boom during the 1960s, a significant number of workers will fall out of the 16-59 age group over the course of this decade. The Chinese government has listed retirement age reform as a key economic task for the year and may provide more detail on reform plans this month when the annual government work report is presented at the National People’s Congress.

China’s workforce has become significantly more urbanized over the past decade, with around 63% of workers employed in urban areas last year, up from 50% a decade earlier. The increase in urbanization is seen as a positive trend for economic growth. Additionally, labor productivity, defined as gross domestic product produced per worker, increased by 4.2% in 2022, according to the statistics bureau, although this is slower than the rates of around 6% per year reported in the 2010s.

Vice-minister of human resources and social security, Yu Jiadong, stated that the decrease in China’s working-age population is driven by the rising number of retirees. He added that China has the largest population and labor force of any developing country. However, the decline in the working population is likely to put pressure on the government to implement retirement age reform and find new ways to maintain economic growth.

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