Is China Short of Labor?

Most people believe the last thing China is lacking is labor. However, while extensive human resources remain untapped, many working-age employees are being laid-off and a large number of college graduates are having difficulty finding jobs. Some experts claim that China's demographic dividend will soon be exhausted. So, what is the real situation in China? People's Daily Overseas Edition spoke to Cai Fang, Director of the Institute of Population and Labor Economics under the Chinese Academy of Social Sciences, on this issue. Excerpts follow:

People's Daily Overseas Edition: What is a demographic dividend? What does it do for economic growth?

Cai Fang: A demographic dividend is a rise in the rate of economic growth as a result of a growing percentage of working-age people in the wider population. When this phenomenon occurs, output per capita rises. Currently, China's demographic dividend contributes 26.8 percent of the growth of its gross domestic product (GDP). Between 1978 and 1998, material capital contributed 28 percent of the country's economic growth, labor (excluding human capital) contributed 24 percent, human capital attributable to rising levels of education contributed 24 percent and labor transfers contributed 21 percent.

The size of the workforce undoubtedly relates to the total population. As a result, the composition, instead of the growth rate and amount of population, will have a direct impact on economic growth. With a sound demographic structure, there is sufficient employment for all. Using the total dependency ratio as an index for research, the fall in China's total dependency ratio contributed 26.8 percent to per-capita GDP growth between 1983 and 2000. When the ratio grew 1 percentage point, China's per-capita GDP grew 0.116 percentage point; and vice versa.

Similar findings have been made overseas. Between 1970 and 1995, a significant working-age population was responsible for between one third and one half of the extraordinarily high growth rates of East Asian economies.

East Asia's favorable demographic structure has enabled technologically poor regional economies to record continuous growth in their initial stage of development and later on achieve innovation-driven growth. The Soviet economy, however, slowed down due to a lack of this advantage.

Some experts believe China has the largest and fastest-growing working-age population, and that this growth will continue into the 2030s. What is your opinion based on the current situation?

Judging from current population curves, China's population will peak at 1.406 billion in 2030, while the working-age population will reach an all-time high of 923 million around 2020. The growth rate of the working-age population has begun to slide rapidly, a trend that is expected to continue until 2013.