Birth rates are dropping, populations are shrinking, and concerns are growing over who will support ageing generations. This issue is hardly new. Whether due to economic pressures, rising unemployment, the impact of pandemics, or shifting gender roles, countries worldwide—both developed and developing—are grappling with the economic challenges created by fewer babies and an ageing populace. The impact may be gradual, but the consequences of a declining birth rate are becoming increasingly hard to ignore.
In China, the world’s second most populous country with a population of 1.4 billion, this demographic crisis is even more urgent. The government’s efforts to encourage population growth have once again fallen short with marriages and births continuing to decline and predicted to reach an all-time low. The question that needs to be asked now is whether it is wise to “trust the process” and stick with the current strategy or if China should show courage and try something new.
Over the past decade, the country has implemented a series of major policy shifts aimed at boosting population growth. In 2013, China eased its One-Child Policy restrictions, followed by the introduction of a Two-Child Policy in 2015, which saw modest, short-term effects. By 2021, the government expanded this to a Three-Child Policy, pairing it with supportive measures like financial aid, childcare services, and extended parental leave. China’s age distribution statistics reveal that, as of 2023, those aged 65 and older have risen to 15.4% of the population, a figure expected to rise to 25.1% by 2035 despite the current aggressive financial incentives and family support measures. Couples, and more so women, cite high living costs, economic insecurity, cultural shifts, and a lack of interest in raising children as major factors contributing to their decision. In a renewed attempt to reverse the trend, China introduced 13 new targeted policies in October 2024, offering enhanced financial support, easier access to loans, expanded maternity insurance, longer leave periods, improved medical services, and better access to paediatric care and teen health education.
Will these new policies work? Probably not. Experts have already noted that these measures will likely have limited impact on reversing the declining birth rate. If we look beyond China, have similar policies really been effective elsewhere? Spain has implemented policies that provide equal benefits for both parents in areas such as leave, but birth rates are still steadily declining. Greece has also introduced tax reliefs and offered a birth allowance, yet it is still believed to be heading towards a demographic catastrophe. Australia’s living standards are declining providing more reasons against starting a family. We can agree that China faces a daunting challenge. It not only needs a lot of financial resources to support these policies, but it also needs a major societal shift, which could take decades. Even if the government succeeds in implementing these changes, there is no certainty that it will have the desired effect. Perhaps what China really needs is to let its population stabilise naturally—though this idea is sure to disconcert the Politburo.
Who steps in to replace retirees in the workforce? One answer might be to lean heavily on automation. While this is easier said than done, there are already real-world examples where technology has played a crucial role. A study by the IMF found that increased automation and robotics in Japan’s manufacturing sector helped offset labour shortages, boosting productivity, employment, and even wages. With the right conditions and careful economic planning, automation could ease the pressure of a shrinking human workforce on a larger scale. Of course, that doesn’t address the financial side of things. Machines won’t be paying taxes, so alternative solutions are needed to support an ageing population. I believe a strong option here is 'phased-in retirement.' This approach would allow workers nearing retirement age to gradually reduce their workload over several years, transitioning smoothly from full-time employment to full retirement. Not only would this ease the strain on the pension system, as employees would remain in the workforce longer, albeit in reduced capacities, but it would also ensure that experienced workers remain available to mentor and train the younger generation. This plan could work alongside China’s upcoming increase in the retirement age—from 60 to 63 for men and from 50 to 55 (or 58 depending on the profession) for women, starting in January 2025.
This idea may not be widely accepted, and it is certainly not one that would be easily implemented in many liberal societies. This approach is also not without its risks—automation and AI, for instance, are expected to have a disproportionately negative impact on women. But China, for better or worse, has the authority to enforce such radical changes and suppress protests until the results start to show. In the end, the paradox of slowing down to move forward might be a better approach. Smart economic adjustments, fostering innovation, and leaning into technological advancements might do more to address the issue than a never-ending cycle of new rules. Sometimes, taking a step back and letting things evolve gradually can lead to more sustainable, meaningful change than rushing in with urgent fixes.
Image: Flickr/Michael Elleray
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