The myth of the US labor shortage is about to come crashing down courtesy of the Philadelphia Fed (just as we have been warning for months), but it is about to be replaced with the stark reality of China’s all too real lack of workers.
Consider the following story from the SCMP: two years after Zhao Yanfang’s mandatory retirement from her blue-collar job in the canteen of a state-owned enterprise, the 52-year-old is back to work – this time at a noodle restaurant in Beijing. On a recent slow day, she taps buttons on a mobile device, inputting orders for patrons who present various coupons acquired through different channels – including the company’s own app, and food-delivery platforms – while reading off the day’s specials for dine-in customers.
“It’s all for the sake of my son,” she says, explaining how the father of her twin grandchildren lost his job during the pandemic. “Were it not for supporting his family, I would never have bothered working after retirement, trying to learn this complicated ordering system.
“I thought my three decades of work experience would be enough for waitressing. I didn’t expect it would be so challenging.”
Zhao is among the millions of China’s retirees who have re-entered the job market or are looking to do so as the financial burden on Chinese families mounts from the government’s disruptive zero-Covid strategy that has crippled business and hammered the economy. Beijing has also been encouraging retirees to return to work as the rapidly aging country faces a long-term decline in its workforce.
China’s working-age population, aged 16-64, is forecast to drop by 35 million over the next five years and to plunge by more than 60% over the next eight decades, according to a report released by the United Nations in July. At the end of 2020, there were 264 million people over the age of 60 in mainland China, and that total is projected to surge to 400 million and account for more than 30% of China’s population by 2035, according to the National Health Commission.
With fewer workers contributing to the public pension system, and with a growing number of seniors to be supported, China’s urban state pension fund – similar to the US social security fund – could be out of money by 2035, according to a 2019 projection by the Chinese Academy of Sciences (also similar to the social security).
One problem that looks to finally be addressed is China’s decades-long adherence to mandatory retirement ages: 60 for men, 55 for female office workers and 50 for female blue-collar workers. The ages date back to a time when life expectancy at birth in China was nearly half of what it is today, and demographic and labor experts have long argued that they need to be raised, especially for women.
In February, China’s State Council confirmed that it would gradually start pushing back its long-mandated retirement ages in the coming years, in line with Beijing’s plans to better accommodate the needs of the elderly and adjust to new realities stemming from the nation’s rapidly ageing population.
President Xi Jinping reiterated that sentiment in his report delivered during the 20th party congress in October, when he said China would “gradually push back the legal retirement age”. Though few details of the plan have been released, the State Council said changes would “gradually” be made during the country’s current 14th five-year plan (2021-25).
Meanwhile, China’s state media campaign has been promoting the value of working longer to achieve one’s career ambitions. And the government launched a special website in August to match elderly jobseekers with potential employers, with McDonald’s being among the first to recruit retirement-aged waitstaff in Beijing, with a posted salary of up to 3,500 yuan (US$488) per month for a full-time job with 40 hours a week.
“Longer life expectancies, as well as fewer workers per older person, are increasing the financial burden of pension payments,” said Joseph Chamie, an international demographer and former director of the UN’s Population Division. “To offset those rising costs, as well as the declining labor forces, governments worldwide are considering raising their official age of retirement.”
It’s not just China that is stealthily seeking to devalue retirement age: last year, Japan approved bills requiring companies to retain their workers until they are 70 years old, effectively raising the retirement age from 65 to 70. Germany plans to increase its state pension age from 65 to 67, but not until 2031. And in France, the official age of retirement is 62 – low among the 38 member countries in the Organisation for Economic Co-operation and Development. This year, the government attempted to incentivise people to continue working until 65, but the proposal naturally set off strikes.
“China’s retirement ages for men and women are relatively low compared with many other countries,” Chamie said. “Delaying retirement encourages workers to remain in the labor force. I expect that more of China’s older population will be working in the next one or two decades. Due to age-related differences in education and skills across the Chinese population, I suspect that the majority of China’s elderly in the labor force will be working in low-level manufacturing and services sectors.”
What a prospect: a generation of geriatric McDonalds line cooks and waiters.
Remarkably, more than two-thirds of Chinese at retirement age are keen to re-enter the workforce, according to a report last month by Chinese recruitment platform 51jobs.com. It did not provide the survey size perhaps because it is as “real” as any “data” out of China.
A total of 68% of older people said they had a strong desire to be employed after reaching retirement age, whether out of financial necessity or a desire to stay busy. The service and labor-intensive manufacturing sectors were the most popular areas for them to seek employment, especially among those lacking qualifications, the survey showed.
Meanwhile, China’s reputation as the “factory of the world” was built largely on the backs of young migrant workers who left their rural hometowns for opportunities in bustling export hubs. However, over the last decade, the average age of migrant workers in China has increased steadily, as fewer young people enter the workforce and older workers with no pension protection are forced to continue working.
China had 292 million migrant workers as of last year, according to the National Bureau of Statistics. The average age was 41.7 years, compared with 34 years in 2008. More than a quarter of all migrant workers are now over the age of 50. And more than half are over 40, compared with just over a third in 2010.
Kent Huang, a second-generation businessman in Guangdong province who produces hardware and furniture for export, said there are many workers aged over 40 in factories in southern China’s Pearl River Delta.
“There are about 200 workers in my factory, and 80 per cent of them are in their mid-forties or early fifties, and it’s rare to see young manufacturing workers in their twenties,” Huang said.
The older workers get paid about the same as their younger peers. All are hired for piecework, not on a monthly wage, he said. When the pandemic and China’s stringent curbs have crippled global demand, they have borne the brunt.
“Due to the epidemic and globally sluggish demand, workers’ income is actually much lower than last year. Many factories nearby have had to lay off workers,” Huang said. “Order volume has plummeted to less than 40 per cent of last year. Those female workers in their late 40s will be among the first required to take compulsory leave with minimum wage, which is far from enough to cover their living cost in urban areas, let alone support their families in their hometowns.”
Lu Zhou, an operations director at an original equipment manufacturer in Taicang in the eastern province of Jiangsu, said that for traditional manufacturing, such as shoes and garments, there can be an advantage in hiring older workers who are more likely to “cherish the job, unlike young people who jump ship very easily”.
“But, of course, in those industries that are accelerating technological upgrades, older workers struggle to find a place. They generally flow into the service industry that does not require new skills, or into the low-end traditional manufacturing industry,” he said.
Helen Wu, a founding partner of the Sunshine Immensity headhunting service in Beijing, said that it is rare to see people older than 50 selected for high-end positions: “In my 14-year career as a headhunter, chances of high-end positions have been few and far between for the elderly, unless they are well-connected or former senior executives,” Wu said.
“While China is emphasizing ‘high-quality’ development and has reduced the importance attached to GDP growth, the job prospects for most elderly will not be very rosy in the next decade, given that competition in China’s job market is already so intense,” she said.
Huang Wenzheng, a demographer who has written extensively on China’s birth rate and labour issues, said it was a harsh reality that many retirees must continue working to support their families.
“However, the elderly shouldn’t be pushed to work just to increase the labour force. People live to enjoy their life, not to work for the sake of work,” Huang said and stressed the importance of boosting China’s falling fertility rate, which fell to just 1.15 last year from 2.6 in the late 1980s and remains well below the replacement level of 2.1 needed for a stable population.
By comparison, the fertility rate in the United States is 1.6 births per woman, while in ageing Japan it is 1.3.
“The government should increase welfare for workers and couples with children,” Huang said of Beijing. “The ageing problem can only be eased by improving couples’ willingness to give birth.”
Of course, such willingness will only come if future parents are optimistic about the economic prospects both for them and their children. And that, unlike everything else in China, can not be faked which is why China is about to slip into the demographic spiral of doom.
