Beyond humanitarian concerns, China has dropped its one-child policy for economic reasons — and good ones. As its population ages, more individuals are retiring than entering the workforce, causing the number of laborers to slump. A smaller workforce does more than put enormous pressure on China’s social security system. Too few employed citizens endanger its very growth machine.
But don’t look to the two-child policy for any quick fixes, warned Shang-Jin Wei, chief economist at the Asian Development Bank, in a recent Chazen Institute–sponsored talk at Columbia Business School, where he is a professor. “No parents I know can produce a 15-year-old child right away,” he joked. “In the short term, for the next two decades or so, demographics will reduce China’s growth potential until today’s newborns are old enough to enter the workforce.” After that, he added, demographics will once again be on China’s side.
Indeed, Wei attributed at least a portion of China’s amazing growth over the past two decades to its population story. When the People’s Republic was established in 1949, the average Chinese woman gave birth to six children. Deng Xiaoping implemented the one-child policy in 1979 based on the premise that fewer dependents freed up parents to work for the good of the State, and fertility rates fell precipitously in the 1980s. When the next generation entered the workforce, the cost of labor stayed low and productivity rose even further as both parents and children worked. Whatever critics said about the humanitarian aspects of the population restrictions, Wei indicated, the approach buoyed China’s economy.
Why One is Not Enough
Then demographics began to turn in the 2000s. By 2011, fewer people were entering the workforce than retiring. With social security and labor costs mounting, Beijing relaxed the policy in 2013 by allowing couples with at least one parent who came from a single-child household to have a second child, if the first was a daughter. In October, even that restriction was lifted, allowing all households to have two children. “I won’t be surprised if eventually couples are allowed to have as many children as they want,” said Wei.
Even so, it’s unlikely that China’s fertility rate, which currently is the lowest in the world at 1.6 children for every two parents, will leap forward. Wei pointed out that population size almost always falls in countries in direct contrast to rising income levels. “The US population continues to grow because it has a lenient immigration policy,” he said. He estimated that only 10-15 percent of eligible couples have opted to have a second child since 2013, and eventually 40 percent of Chinese couples will choose to go beyond one child.
The Involuntary Bachelor Nudge
A more subtle demographic, which Wei dubbed “the sex ratio imbalance,” may have contributed to China’s economic growth and could depress its future if it shrinks under the more relaxed child guidelines. Unlike what occurs naturally, where sons and daughters reach marriage age in roughly equal numbers, Chinese boys today outnumber girls by a ratio of 1.15 to 1. This is due to several factors, as Wei has pointed out in previous research, including the fact that Chinese parents prefer to have a son. In addition, B-mode ultrasound machines that allowed parents to detect the gender of a fetus started to spread in China in the early 1980s, resulting in aborted female fetuses.
That lopsided ratio means one out of nine Chinese men can’t find a wife, said Wei. He postulates that the shortage of potential brides has motivated parents of boys, in particular, to become more successful in order to boost their sons’ marriage prospects. “How do parents accumulate wealth?” Wei asked. They work harder, which has boosted China’s economy as a whole, and they save more by investing in ever more expensive homes. Children do their part by studying hard so they get into the best schools.
Parents of girls have responded by also becoming more competitive in order to attract the richest men. Wei said his research has indicated a tie between regions where the sex imbalance is most pronounced and higher costs of real estate. “The imbalance is an unintended consequence of the one-child policy,” explained Wei.
Wei expects the imbalance to lessen as Chinese couples have more children. Will the return to better marriage prospects and the lower likelihood of “involuntary bachelorhood” cut into the motivation factor that has made China such a productive economy? Wei is not sure, but warns the sex imbalance affect could become apparent even before children reach marriageable age if parents are no longer as motivated to become wealthy.