BIZCHINA / Weekly Roundup
How to deal with the future labor shortage?
By Cai Fang (China Daily)
Updated: 2007-03-09 10:46
The author Cai Fang is director of the Institute of Population and Labor
Economics of the Chinese Academy of Social Sciences
The current labor shortage spreading from the coastal areas across the
country signifies the coming of the Lewisian Turning Point in China's
economic development. China's oversupply of labor is on its way to
becoming a thing of the past.
A job fair opened on December 3, 2006 in China Institute of Metrology,
Hangzhou, provincial capital of East China's Zhejiang Province, attracted
more than 30,000 this year's graduates. [newsphoto]
Most developing countries experience a process of dualistic economic
development. The surplus rural labor force provides cheap labor for
industrialization and the wage level increases slowly. This process
continues till there emerges a shortage in the supply of labor and the
economic growth mode reaches a modern stage.
Economist Arthur Lewis was the first to define dualistic economic
development; hence, the concept of the change from an unlimited supply of
labor to a shortage is called the Lewisian Turning Point.
China's fast economic growth took place under these dualistic economic
conditions with the country's policies of reform and opening-up to the
outside world. During this period, the scale of the working-age
population was large and its percentage kept rising.
Research shows that every percentage point drop in the dependency rate
(the ratio of those under 16 and above 65 compared with the working
population) will bring a 0.115-percentage increase in the per capita
gross domestic product (GDP). About 27 percent of the per capita GDP
growth in China can be attributed to the decease of the dependency rate
in the reform period. But according to projections on population age
structure, the dependency rate will begin to increase in 2013 as the
aging of the population speeds up. Similarly, every increase in the
dependency rate will cut the per capita GDP growth by 0.115 percent.
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