Can China Have a Labor Shortage and Surplus at the Same Time?

The Washington Post's former China bureau chief thinks it can. In a review of a new book on China he notes the country's long list of problems. In the same sentence we are told that China suffers from both a "rapidly aging population" and "mounting unemployment in an economy that needs to grow 7 percent annually just to provide jobs for 25 million new people entering the workforce." Let's see, the problem of a rapidly aging population is usually a story about the rising ratio of retirees to workers. It's a bit hard to see how this can be a problem in a country that has a huge problem of unemployment. (Don't the unemployed workers fill the jobs vacated by retirees?) Of course a country growing as fast as China does not have to worry at all about the growing ratio of retirees to workers. Even in an extreme scenario the growth in the strain on the working population due to an increase in the number of retirees would be half a percentage point annually. China's productivity growth has been averaging close to 8 percent a year, swamping any potential adverse effects from a rising ratio of retirees to workers.

--Dean Baker