Demographic Transition and an Aging Society:

Transcription

1 Demographic Transition and an Aging Society: East Asian Miracle, One-Child Policy, and Future Issues 16 th May, 2018 Asei ITO Institute of Social Science, University of Tokyo 1

2 Response to previous lecture Why trade volume during 1986 to 2000 seems to being a flat? (by Xu Fan) What is the future of the SEZs? (by Louisa Sjoqvist) How long will US-China trade war last and how will it affect the economies?(by Liao Manqi) Is the Beijing Consensus becoming a dominant idea? (by Guido Tubaldi) 2

3 Contents 1. East Asian Miracle and demographic transition 2. Demographic Transition in the Chinese Contexts 3. Issues for an aging society 3

4 1. East Asian Miracle and demographic transition 4

5 Trends of total population in Asia and Europe (Million) 3,000 2,500 20th East Asian Population ( ) 21th (Million) th EU15 Population ( ) 21th 2037(400) 2, , , ASEAN China Korea, Taiwan and Hongkong Japan Others Italy German UK France (Y) Source:UN, World Population Prospects: The 2017 Revision (Y) Source: UN, World Population Prospects: The 2017 Revision 5

6 Definition of key concepts working-age population ( 生産年齢人口 ) those aged 15 to 64 (related concept: employment rate means the proportion of the working age population aged who are employed) dependent population ( 従属人口 ) people younger than 15 or older than 64 birth rate ( 出生率 ) number of birth per 1,000 people (death rate or mortality rate mean number of death per 1000 people) Total Fertility Rate (TFR, 合計特殊出生率 ) to control age structure, average number of children that would be born to a woman over her lifetime In conventional international statistical usage, "child-bearing years is ages or (usually assumes current age-specific birthrate for each women and average lifetime based on current data) 6

7 Death rate and birth rate WORLD CHINA Death rate, crude (per 1,000 people) Birth rate, crude (per 1,000 people) Death rate, crude (per 1,000 people) Birth rate, crude (per 1,000 people) Source: The World Bank, The World Development Indicator. 7

8 Demographic transition First Phase high BR and DR, low population growth agrarian and pre-modern period 2 nd Phase high BR, lower DR, high population growth better nutrition and sanitation 3 rd Phase declining BR, low DR, low population growth industrialization and decline of target family size increase of opportunity cost of mother s time increase of target level of education 4 th Phase low BR, low DR, low or negative population growth (even death rate start to increase) Source: Oizumi(2013) 8

9 East Asian Miracle and demographic transition Basic Solow model deals with total population growth Bloom and Williamson (1997) focuses on population structure, dividing working population and total population let Y=GDP, N=total population, L=working population, GDP per capita y = Y/N y=y/n= Y/L * L/N* Δy=Δ (Y/L)+ ΔL-ΔN GEAP6590: growth rate of economically active population GPOP6590: growth rate of total population Bloom and Williamson (1997) 9

10 Another example Results of cross-country estimation on GDP growth rate in addition to education and openness, growth of working age population played a positive Source: Radelet, et al (1997) 10

11 demographic transition and dividend Demographic Dividend (%) Demographic Demographic Tax Working -age Population Ratio Increase of Labor Input Rise of Saving Rate Decrease of Labor Input Decline of Saving Rate Young Dependent Population Ratio (A) Child Support Cost Dependent Ratio Elderly Population Ratio (B) Pension and Health Source: Author (Year) Source: Oizumi (2013). 11

12 Effect on saving Source: Oizumi (2013). 12

13 Working population and saving rate Using data from 2016, a simple estimation suggests one percent increase in working population rate raise 0.85% increase in saving rate X-axis: working population rate (%) Y-axis: saving rate (%) Gambia, The Philippines Japan France Sudan Nepal China India Brazil Greece Singapore Thailand Macao SAR, China Korea, Rep. Hong Kong SAR, China United Mozambique Kingdom Angola Source: The World Development Indicator. 13

14 2. Demographic Transition in the Chinese contexts 2-1) Death rate and TFR in China Death rate: Great Leap Forward caused a remarkably high death rate in the 1960 TFR: wide gap between rural and urban ratio, and the national average is largely determined by rural ratio due to large population in rural region Source: Wang et al. (2017) 14

15 Demographic Dividends in China, and its projection until 2050 In 1965, ratio of working age records lowest rate of 55.5%, remain low level until the mid- 1970s as 56.1% in 1975 Reached 65.6% in 1990 and 68.5% in 2000 Peaked 73.8% in 2010 Projected to be 70.4% in 2020, 67.6% in 2030, 62.2% in 2040 Elderly ratio is 9.7% in 2015, will be 12.2% in 2020, 17.1% in 2030, surpassing child ratio that of 15.4% % 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Source: United Nations Department of Economic and Social Affairs, 15 Population Division, medium variant estimation.

16 2-2) One Child Policy In 1971, later marriage, longer spacing between children, and fewer children in total ( 晚 稀 少 ) 人类在生育上完全无政府主义是不行的, 也要有计划生育 ( It is impossible for humans to have complete anarchy in childbearing, so to have family planning ) Since September 1980, One Child Policy began sanctions and penalties for who had two or more children with some exceptions, with preferential policy toward ethic minorities, and regional variations Since January 1 st 2016, all Chinese families were allowed to have two children 16

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19 Notable exceptions of One-Child Policy Ethnic minorities Regional variation of enforcement For single-single couple 19

20 Implications from international comparisons (a) Source: Zhang(2017). 20

21 Implications from international comparisons (b) Source: Zhang(2017). 21

22 Debate on causal effect of One Child Policy on TFR Debate (see Zhang, 2017; Wang et al, 2017) policy effect socioeconomic factors Empirical approaches 1) using individual data covering both before 1979 and after 2) using regional variations 3) comparing Han and minorities women in DID approach 22

23 Using natural experimental setting Zhejiang province adopted 1.5-child policy which Jiangsu did not Estimating county-level TFR what can we learn from these results by comparing model 1 and model 3? How do you explain role of FDI? Baseline result of Cai(2010) 23

24 2-3) Other (not minor) outcomes of the one-child policy Unbalanced sex ratio Due to the Chinese preference for sons, in traditional rural society in China, girls marry out from the village while sons remain in the village. Boys are culturally and materially more valuable for peasants households. even in urban region, sex-selective abortion can be take place Due to the underreporting of girls registration Causing excess males problem (Naughton, 2018; Cai, 2013) 24

25 Effect on saving rate To demonstrate own value and attract female, do male (or his parents) have to saving money, accumulate capital and finally purchase real estate and/or car? According to Wei and Zhang(2009), rural households save money due to a higher sex imbalance ratio at the living region (county), implies competition between male Self-reported reasons for saving in rural households in China Source: Wei and Zhang(2009) 25

26 Additional effects by the one-child policy The lonely men of China's 'bachelor village' Effects on divorce, labor supply, and rural migration Marriage market competition Causing surplus male and bachelor village 26

27 3. Coming an Aging Society According to estimations by UN, aging ratio in Asia will reach 15% in 2030s from aging societies (7-14%) to aged societies (14%-) (%) Aging Ratio in Asia and EU Asia EU Sopurce: World Population Prospects : the 2017 revision 27

28 Getting older before getting rich? Prof. Fang Cai s argument more compressed pace of aging in China as well as in other Asian economy as a middle-level income economy has less advantage of labor cost, often growth rate decline. In other words, well known middle income trap Can average Chinese reach the high income level? 28

29 Social Pension system and the rural/urban segmentation During the planning economy State owned enterprises (and its unit) provided social protections for urban residents, while social safety nets for rural residents were negligible Under market reform rural/urban segmentation and government-agency segmentation remains, also large regional disparities due to different local budget constraint three systems: pension system ( 养老 ), medical care system ( 医保 ), and social assistance system (the minimum living security, 低保 ) 29

30 Complex system 1: a case of Urban Worker Basic Pension ( 城镇职工基本养老保险 ) Based on pension for SOEs worker, established in 1997, currently one of the largest pension systems in China Currently the employer contributes 20% and individual contributes 8% of the total payroll bill to the pension fund (but even this ratio varies across regions) Employer s contribution is put in to social pooling of the province Workers contribution is put into an individual pension account After reaching the retire age of the unit, and completed at least 15 years of paying, the retirees will receive from the social pooling account is 20% of the average wages of previous year 30

31 Complex system 2: a case of Urban Resident Pension Program ( 城镇居民社会养老保险 ) Design to cover those have no membership in UWBP Pilot program started in 2011, extended to nationwide in 2012 Each individual can set own annual contribution at 12 levels (100, 200,, 1000, 1500, 2000RMB) The elderly aged 60 or older, can withdraw pension The funding is subsidized by the national government, 100% for the central and western regions, 50% for eastern region (similar system applies to the National Rural Pension Program) 31

32 Segmentation and reform of administrations ( 人力资源和社会保障部, 健康和计划生育委员会, 民政部 ) According to the first session of the 13 th National People's Congress, held in March 2018, these agencies will merge into the National Medical Protection Bureau Source: Cai and Du. (2015) 32

33 Government expenditure on pension and medical care in 2013 Source: Cai and Du. (2015) 33

34 Limited contribution by social security in rural region According to Cai et al (2013), until mid-2000s, Chinese officials assumed that rural family support the elder generation needs for elderly people (especially in rural region) Source: Cai et al (2013, page 46) 34

35 Debate in Japan Disappearing local regions ( 地方消滅 ) Impact of the Masuda report in 2014 (depopulation and aging in local regions) Encouraging migration from city to country? How? Compact city? How to encourage people who live isolated area to move? Accept immigration? 35 Source: 増田寛也 地方消滅 - 東京一極集中が招く人口急減

36 Recent interesting tax system in Japan: Hometown tax (Furusato Tax, ふるさと納税 ) A new tax which allows taxpayers who live in urban areas to contribute to rural/local areas causing gift competition among regions, resulting less net contribution to local fiscal income? 36

37 Aging in country side Source: Wang et al (2017) 37

38 Does digital solution work? 38

39 Coming age of India? (or Africa?) Over the next decade, India s working age population will rise by 115 million people and account for more than half of the 225 million expected across Asia as a whole. Across that same decade, Japan s working age population will shrink by more than 5 million people, and China s by 21 million. The next 50 years will therefore be an Indian summer that redraws the face of global economic power. Source: Deloitte (2017) 39

40 Questions please select one or more How do you evaluate the outcome of the One-Child Policy? Do you think there are enough social safety nets in China? Do you think an aging society can be innovative? Do you agree with Deloitte s statement? Do you think China will actively accept immigrants from other countries? 40

41 Reference Bloom, David, and Jeffrey Williamson (1997) Demographic Transitions and Economic Miracles in Emerging Asia, NBER Working Paper No ( Cai, Yong (2010) China's Below Replacement Fertility: Government Policy or Socioeconomic Development?, Population and Development Review, Volume 36, Issue 3. Cai, Fang, John Giles, Philip O Keefe, and Dewen Wang. (2013) The Elderly and Old Age Support in Rural China: Challenges and Prospects. The World Bank. Cai, Fang and Yang Du. (2015) The Social Protection System in Ageing China, Asian Economic Policy Review (2015) 10, Deloitte (2017) Ageing Tigers, hidden dragons, Deloitte Insight, September 2017 ( Mason, Andrew. (1997) Population and the Asian Economic Miracle. Asia Pacific Population & Policy, Number 43, October. Naughton, Barry. (2017) Population: Demographic Transition, the Demographic Dividend, and the One-Child Policy in The Chinese Economy: Adaptation and Growth, MIT Press. Oizumi, Keiichiro. (2013) Aging in Asia: When the Structure of Prosperity Changes, Oriental Life Insurance Cultural Development Center ( Radelet, S., J. Sachs, and J.-W. Lee (1997). Economic growth in Asia. In Emerging Asia: Changes and Challenges. Manila: Asian Development Bank. 41

42 United Nation. (2017) World Population Prospects: the 2017 Revision. Wei, Shang-Jin, and Xiaobo Zhang. (2009) The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China, NBER Working Paper No Wang, Fei, Liqiu Zhao, and Zhong Zhao(2017) China s family planning policies and their labor market consequences, Journal of Population Economics, January 2017, Volume 30, Issue 1, pp Zhang, Junsen "The Evolution of China's One-Child Policy and Its Effects on Family Outcomes." Journal of Economic Perspectives, 31 (1): ( Other materials 国务院转发, 卫生部军管会 商业部 燃料化学工业部 关于做好计划生育工作的报告 国发文 51, 号, 1971, Acknowledgement The lecturer has been greatly supported by Dr. Keiichiro Oizumi for this lecture materials. 42