China's Multi-Decade Worker Shortage Starts Next Year

Due to China’s one-child policy, the country faces a demographic disaster a few decades out whereby there will be far too many depedents supported by a far smaller base of working age people. This is relatively well known.Yet interestingly, this demographic disaster starts to unfold next year.

The Economist: SINCE the 1970s China’s birth rate has plummeted while the number of elderly people has risen only gradually. As a result its “dependency ratio”—the proportion of dependents to people at work—is low. This has helped to fuel China’s prodigious growth. But this “demographic dividend” will peak in 2010.

The evolution of China’s elderly and child population is shown below in an Economist graphic.

It shows that from 1975 – 2010, China’s one child policy helped create an economically-beneficial situation whereby the proportion of dependents in the population fell over time. Thus the country had increasingly more workers (producing economic output) per dependent (consuming output).

However, 2010 and onwards is when it’s time to pay the piper. The proportion of elderly dependents will enter a multi-decade growth phase, whereby there will be increasing numbers of non-working dependents for each working-age person to support. Thus what was once a substantial tailwind reverses into a GDP-grinding headwind, starting next year.

Chart via The Economist
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