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November 8, 2011

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Home » Opinion » Chinese Views

Aging society not ailing society

THE birth of the symbolic 7 billionth citizen of the world on October 31 has rekindled the debate on the validity of China's family planning policy, which some have claimed to be out-of-date in recent years.

The original policy was relaxed a while ago to allow couples, each from a one-child family, to have two children.

Now there seems pressure for further relaxation to include, in Shanghai's case, anyone who holds a local residence permit, in hopes of addressing the challenges of a rapidly aging population.

Supporters for an amended policy believe that a growing proportion of the elderly to the total population will suck resources, trigger a crisis in China's economy, and make our pension and health care system unsustainable in the long run, because in the past, the elderly generally worked less, saved less, and consumed more.

However, it's important to remember that their belief is largely based on three assumptions - that age-specific behavior will remain unchanged as the age structure evolves; that the higher cost for individual families as well as the society at large of bringing new citizens into the world will be negligible; and that the older generation will always be provided for by the younger generation.

First of all, these supporters might have overlooked the fact that the elderly are not only growing in numbers, but also have become substantially healthier and better educated.

If people advancing into their 60s and 70s are healthier and more cultured than preceding generations, the demands for health care will be less intense, and many will be able to work longer and contribute to the economy in a more productive way.

Although raising the retirement age has run into resistance in the past, pension reforms have nevertheless been pushed forward successfully in some aging European nations. And raising the retirement age appears to be gaining widespread popularity.

For example, individuals surveyed in Australia have expressed a desire to spend a similar proportion of their lives in retirement as life expectancy increases.

And workers beyond retirement age are already seen everywhere in China, often in part-time jobs.

Furthermore, increased life expectancy has historically been strongly associated with increased per capita income and a compression of morbidity, meaning that the burden of aging may not be as heavy as many people anticipate.

Secondly, in a nation that already has a teeming 1.37 billion people, any addition to that number should not be taken lightly. According to Reiner Klingholz, director of the Berlin Institute for Population and Development, the earth is definitely over-populated even today.

Although China has witnessed phenomenal social and economic progress in recent decades, the old tradition of revering big families hasn't changed as much. In an online survey carried out by the Shanghai Population and Family Planning Commission, more than 72 percent of local women wanted to have at least two children.

Financial burden

The financial burden additional children place on their families can be significant, especially in urban areas. And this will undoubtedly accelerate resource depletion.

Parents might be better off relying on the savings from havings from having fewer children, rather than relying to a large extent on their children's dwindling sense of filial duty, or the country's social security, when they get old.

In addition, low fertility has been the driving force behind female labor-force participation and higher human capital investment in the younger generation.

The latter may help reverse the adverse effects of a seemingly unfavorable age structure by replacing large cohorts of less productive members with small cohorts of better educated, more productive ones.

And last but not the least, today's China is home to hundreds of thousands of NEETS (people not in education, employment, or training) who are living off the savings of their retired, or close-to-retirement-age parents. Some even draw on their grandparents' meagre pension to make ends meet.

These NEETS mainly come from two social groups - city dwellers who are unable, or unwilling, to meet the challenges of a fiercely competitive job market (which is a sign that labor supply exceeds demand, and just another reason why we need not worry too much about a labor shortage in the future), and rural residents who might have been too poorly equipped for work due to a shortage of everything from doctors, to teachers, to food (which is precisely why we need to keep fertility low).

The China State Council and China National Bureau of Statistics have shown that both male and female workers saw substantial drops in labor-market participation between 1990 and 2005, suggesting that increased demand for labor stemming from the retirement of large cohorts of older workers could indeed be met by drawing the large unemployed, or under-employed working-age population into the labor market.

I believe that an aging society is a normal result of economic development worldwide. The challenges are somewhat bigger for the Chinese because we are yet to pay back the huge population debt our grandparent's generation was wrongly encouraged to create.

Although the human instinct to procreate is natural, in this day and age we must keep in mind that an individual's welfare is strongly correlated with the welfare of their society.

In an over-crowded China, even an aging society is unlikely to cause enough hardship to justify a premature end to our tested Family Planning Policy.

Quite the contrary, the fruition the policy is achieving in terms of economic boom and per capita income growth should be guarded with great care.

Luckily, population aging in China will not cause major demographic upheaval for another decade or two, providing our policy makers a window of opportunity to prepare for the change by promoting education and improving productivity.

As demographer Reiner Klingholz has pointed out: as long as people grow older in good health and education, there would be no real aging problem.

The writer is a freelancer who now lives in Shanghai.




 

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