Definitions of working age as 15-64, and dependency ratios derived from that are obsolete, but still used because of the conservatism of statistical agencies. This range made sense when most young people didn't complete high school, and when the demands of physical work meant few could work past the pension age of 64. A more appropriate range would be something like 20-70. That wipes out the effects of about 30 years of population aging.
This point could be stated more neutrally as "productivity peaks in the mid-50s", I think. That suggests that pronatalist initiatives won't pay off maximally until late this century by which time technology will have changed just about everything (if we don't blow ourselves up or cook the planet)
"Long run investments take a long time, so lets not care about them."
I mean if you're just trying to project GDP over the short/medium term, having kids is always going to be a bad deal. South Korean leadership figured this out early on and tried really hard to reduce fertility because it juiced GDP growth and added political stability. Now look at them.
I get the political reasons for short-termism on the fertility front, but such a rich society prioritizing current consumption over new births strikes me as feckless.
how is productivity measured in professional fields? Am mid-40s and honestly don't know whether I am more productive or not vs. my 20s. I work a lot less hard but make higher leverage decisions that swings outcomes more. But i assume economists look at my productivity purely from POV of how much i make (which is many multiples more than in my youth)? A fair portion of that I would argue though is rent extraction not true productivity (also gotta pay the senior people more so that young folks can see what they can make once they grab hold of brass ring and stay motivated).
There's no reason for rent extraction to persist in a competitive marketplace, however. Basically, if all you do is extracting rents, why wouldn't a competitor just get rid of people like you and profit more?
what i meant is we have a nice business, there is a pot of economic value to be shared, senior people make the decisions on who gets paid, so guess who ends up getting paid. And I don't know a single firm in my industry where things work differently so competition isn't going to end this - if anything comp at startups in my space is even more lopsided / weighted towards senior folks, and they pay their more junior people less because the overall pot is smaller overall. Not sure rent-seeking was the right term for this phenomenon.
But if the junior folks are the ones who are adding value beyond what they are paid while senior management are useless bloodsucking rentiers, what is keeping the junior people from just leaving and starting their own company, instituting what you deem a more fair share for the junior people, thus attracting the best junior people and eating everyone else's lunch?
Because they would lack the credibility to get any clients. Clients like the illusion of having bunch of experienced folks working for them. And i woudlnt say the senior folks are useless, they just get paid a lot more than actual contribution because they control the means of salary allocation.
So many industries are monopolies/oligopolies with giant moats.
If you're running a restaurant then I guess these Eco 101 things apply.
But if your like the one hospital group in the area is there really some kind of competitive pressure on you from some radical new way of delivering healthcare?
Yes, many industries have moats/monopoly/monopsony/oligopoly/principal-agent issues. But others don't. I suppose a lot depends on the industry the poster I responded to is in.
Automation has hardly begun in China, or the rest of the world. Most firms still employ relatively little automation.. There are only around 3.4 million industrial robots globally, while the rate at which automation is 'improving' (able to do more physical and mental tasks) is still exponential. The scope for robots/AI/AR/VR in industrial, commercial and construction applications, and even the home, is hardly tapped. The problem is not lack of workers... it is how to shift the economy from 'growth' based on 'growing population' to 'growth' based on continuous improvement in the natural and built environment, as well as growth in 'living standards'. Towns and infrastructure, as well as 'the natural world', can always be improved and better maintained/rehabilitated. In time, China can have fewer firms building new houses/apartments and more renewing what is there to cater for a falling population with a shifting age profile. With a Universal Basic Income set to keep the labour market in 'dynamic balance', China can have it all, so that at some point people will feel secure enough, and with enough 'free time', to again want to have the 'obligatory' 2.1 kids to stabilize the population. Hopefully, this takes place only after the population has shrunk to say half its size now.... the same with the rest of the world.
Most industry employs relatively little automation, so long as you use the term automation to refer to all the things that businesses aren't doing. If you include coffee makers, printers, and automobiles, then automation is pretty universal among wide swaths of industry.
True. Back in the 90's I did a presentation about the 'paperless' office. Everyone scoffed at the time. However, even then there were many paperless offices. The fact that most people miss is that when you get rid of the paper, in most cases, you got rid of the office... even by the nineties we did not need the number of 'clerks' that were once employed. Every boss once had a secretary sitting outside in their own office, as well as a typing pool, and clerks preparing purchase orders and invoices, and tea ladies would bring around drinks and bikkies, and women worked the switchboard, and the mailroom sorted the incoming and outgoing mail... all gone.
very hard to know whether this is true, but this guy https://www.nytimes.com/2023/08/28/opinion/chinese-economy-yi-fuxian.html has been claiming for a while that Chinese stats about how many children there are in the country are significantly exaggerated, apparently because local governments get funding based on number of heads so they cheat and report more kids than they actually have. Also ethnic minorities which weren't subject to the one-child policy didn't have as many children as models assumed. All this is entirely possible and I wouldn't put any of this beyond the CCP, but on other hand this Yi guy has also been arguing for decades against one-child policy and warning of demographic collapse, so he has incentives to present picture as worse than maybe it is as well. All am saying is Noah is basing this article on the premise that (ahem) wikipedia data is reliable, when in reality fog of war is very much real regarding anything China related.
China is going to have 400 million retirees not too far into the future, without a proper pension system to take care of them. While that won't necessarily "cripple" the Chinese economy, it's going to force the country to become a lot more self-centered. It's these kinds of statistics that have me much less worried about an invasion of Taiwan (especially given how much more practical it would be to take over Taiwan within the next 50 years via covert soft-power operations rather than running an economically disastrous war). Nobody hates sending their kids to war more than the parents of only-children, especially given the implicit state-promise of every generation doing better than the previous one.
"the wars of history were fought by “spare” male children. Even as late as the mid-20th century, the average European family had several children. In agricultural households, one male could inherit the family’s land, another might advantageously marry a land-owning wife, and one more might go into the Church — or off to war. If he failed to return, the survivors might miss him most intensely, but the family would not be extinguished."
Regarding China:
"President Xi is, by all accounts, a bellicose man who enjoys threatening war against Taiwan. And yet, curiously, in 2020 he took eight months to reveal that one PLA officer and three soldiers had died during the fighting on India’s Ladakh frontier. During that period of official silence, the families of the four were re-housed and provided with welfare payments or better jobs; the officer’s wife who taught piano in a village school was elevated to the Xi’an Conservatory of Music, with a new house to go with it....Later, the names of the four were added to many highway bridges to remind all of their sacrifice."
"The good news, then, is that because of China’s low birth rates, the post-heroic syndrome makes it unlikely that Beijing will act on its pugnacious threats. Given the regime’s most elaborate response to four combat deaths, how could it cope with the 4,000 that might be lost in one day in a war for Taiwan?"
am confused. you mention surplus male children at top of your post. china has massive surplus of male children (compared to number of girls that they could marry). doesn't that suggest higher likelihood of going to war?
Exactly. The US will have to shape up and compete. It will be the biggest competition the US has ever faced and it might not win. China is a mega trend, China is legit.
No wishful thinking to come to the rescue. The US needs to step up technologically, demographically and with better long term political and economic policies.
Finally a post that doesn't make me pullout my hair and tend my clothes in despair. I'm somewhat less concerned about a great power China than you. The authoritarian structures Xi has put in place insure that the Chinese economy is going to be much less efficient. Telling the truth can be a capital offense in that sort of society. So people stop talking or start lying in the interests of self-preservation.
Would this also be an opportunity to reform internal migration / the hukou system? Many people in China are trapped in poverty and low education because they cannot become lawful residents of the major cities, and do not have access to those cities' public services, including schools. With low birth rates, schools might have spare capacity, and China will need its newest generations to be even better educated than their predecessors to make up for the inevitable population aging.
The thing is, it’s not 100% clear that gen alpha bulge exists. I really, really wish people would spend more time engaging with Yi Fuxian. It’s an important thing to figure out!
Your ideas about boosting college enrolment for Chinese people, while looks nice, do not seem that good when there are high young unemployment rate in China, especially for college-educated people due to skills mismatch. (You might remember that's the reason why China stopped publishing young unemployment rate since the end of 2022, and why 2 of the main trends for young Chinese are "lying flat" and "letting it rot"!)
So to resolve this dilemma, do you think China should focus more on developing consumer and service economy, to reabsorb these young and educated people in the labor market?
(Also, in India case, even though its service economy is very developed, the young unemployment rate still hit record high, with millions of young Indians competing for these service or government jobs. Then again, probably the difference here could be due to lower level of manufacturing compared to GDP of India though!)
We also hear a lot about youth unemployment being a major problem in China these days. Does that in some way diminish the positive impact of their coming Alpha baby bulge?
In fact, although China is facing the huge challenge of aging, a strange phenomenon is emerging. Most companies and positions do not recruit people over 40 years old. Some Internet companies do not even recruit employees over 35 years old. Many people's careers face an awkward vacuum period between the ages of 35 and 65. If you are interested, you can use Google Translate to view the following two Chinese press releases.
The US should focus more time and energy on fixing our problems than worrying about China. The US has real strengths which require fixing that can help us beat China far more than anything China can do to overtake us
I reached the same conclusion in my own analysis here (China’s Demographics and Growth Potential in an Age of Machine Knowledge Capital - https://papers.ssrn.com/abstract=3998364). I would emphasize two things: (a) the human capital gain that China makes from the replacement of retiring cohorts with limited education by much more highly trained entrants; and (b) the lifting of the Baumol effect - the slowdown in growth in post-industrial societies due to the limited scope for scaling human capital - as eminently scalable machine knowledge capital progressively supports services sector growth in place of non-scalable human capital. My punch line was that China picked a good time to get old.
One factor should also be included, sex ration of population, one child policy and sex selective abortion accelerated imbalanced sex raio.In 2020, the sex ratio of China's total population was 105.07 to 100（ gaps between provinces, and several provinces exceed 110.）, of which 34.9 million men were more than women; What's interesting is that there are more women than men in higher degrees, such as master's degrees. Nowadays, because of the slowdown of economic development, the unemployment rate is rising, and the social crime rate (mainly male) is also rising. I don't know the connection between this and the war, but it is indeed a complicated problem.
"In fact, the shrinking of the population isn’t actually the problem"
It's the shrinking of the population that is a problem too, as there will be fewer innovations. All things equal, innovation and technological development will be faster with 1 billion people than with 10 million people, even if they innovate at equal rates per capita.
Imagine Earth (all things equal) with 1000 people and Earth with 1 billion people. Even if they innovate at equal rates per capita, an Earth with 1 billion people will be much more technologically advanced because it will have many more scientific discoveries. One will have a thousand discoveries and the other a million. That is, the Earth with 1000 people will be in the 19-th century and the Earth with 1 billion people will be in the 21st century on a level of technological development.
So the number of people matters, and it is not a per capita issue either.
That is, even if two groups innovate at equal rates per capita, the one with the more people will be much more technologically advanced.
Then why is nearly all of the world's innovation currently occurring in countries with relatively low birthrates? Because when people have fewer kids, they can afford to invest more in the kids they do have. Quality over quantity, basically.
That's good news for China. 2050+ is far enough out that I wonder if questions of aging and demography will even mean the same thing as they do now - there's a non-zero chance that we have some meaningful anti-aging/longevity medicine by then.
Definitions of working age as 15-64, and dependency ratios derived from that are obsolete, but still used because of the conservatism of statistical agencies. This range made sense when most young people didn't complete high school, and when the demands of physical work meant few could work past the pension age of 64. A more appropriate range would be something like 20-70. That wipes out the effects of about 30 years of population aging.
Well, maybe, but there's also evidence that productivity goes down a lot after the mid-50s.
This point could be stated more neutrally as "productivity peaks in the mid-50s", I think. That suggests that pronatalist initiatives won't pay off maximally until late this century by which time technology will have changed just about everything (if we don't blow ourselves up or cook the planet)
"Long run investments take a long time, so lets not care about them."
I mean if you're just trying to project GDP over the short/medium term, having kids is always going to be a bad deal. South Korean leadership figured this out early on and tried really hard to reduce fertility because it juiced GDP growth and added political stability. Now look at them.
I get the political reasons for short-termism on the fertility front, but such a rich society prioritizing current consumption over new births strikes me as feckless.
for example: AI
how is productivity measured in professional fields? Am mid-40s and honestly don't know whether I am more productive or not vs. my 20s. I work a lot less hard but make higher leverage decisions that swings outcomes more. But i assume economists look at my productivity purely from POV of how much i make (which is many multiples more than in my youth)? A fair portion of that I would argue though is rent extraction not true productivity (also gotta pay the senior people more so that young folks can see what they can make once they grab hold of brass ring and stay motivated).
There's no reason for rent extraction to persist in a competitive marketplace, however. Basically, if all you do is extracting rents, why wouldn't a competitor just get rid of people like you and profit more?
what i meant is we have a nice business, there is a pot of economic value to be shared, senior people make the decisions on who gets paid, so guess who ends up getting paid. And I don't know a single firm in my industry where things work differently so competition isn't going to end this - if anything comp at startups in my space is even more lopsided / weighted towards senior folks, and they pay their more junior people less because the overall pot is smaller overall. Not sure rent-seeking was the right term for this phenomenon.
But if the junior folks are the ones who are adding value beyond what they are paid while senior management are useless bloodsucking rentiers, what is keeping the junior people from just leaving and starting their own company, instituting what you deem a more fair share for the junior people, thus attracting the best junior people and eating everyone else's lunch?
That's the economic logic I'm referring to.
Because they would lack the credibility to get any clients. Clients like the illusion of having bunch of experienced folks working for them. And i woudlnt say the senior folks are useless, they just get paid a lot more than actual contribution because they control the means of salary allocation.
What competitors?
So many industries are monopolies/oligopolies with giant moats.
If you're running a restaurant then I guess these Eco 101 things apply.
But if your like the one hospital group in the area is there really some kind of competitive pressure on you from some radical new way of delivering healthcare?
Yes, many industries have moats/monopoly/monopsony/oligopoly/principal-agent issues. But others don't. I suppose a lot depends on the industry the poster I responded to is in.
Automation has hardly begun in China, or the rest of the world. Most firms still employ relatively little automation.. There are only around 3.4 million industrial robots globally, while the rate at which automation is 'improving' (able to do more physical and mental tasks) is still exponential. The scope for robots/AI/AR/VR in industrial, commercial and construction applications, and even the home, is hardly tapped. The problem is not lack of workers... it is how to shift the economy from 'growth' based on 'growing population' to 'growth' based on continuous improvement in the natural and built environment, as well as growth in 'living standards'. Towns and infrastructure, as well as 'the natural world', can always be improved and better maintained/rehabilitated. In time, China can have fewer firms building new houses/apartments and more renewing what is there to cater for a falling population with a shifting age profile. With a Universal Basic Income set to keep the labour market in 'dynamic balance', China can have it all, so that at some point people will feel secure enough, and with enough 'free time', to again want to have the 'obligatory' 2.1 kids to stabilize the population. Hopefully, this takes place only after the population has shrunk to say half its size now.... the same with the rest of the world.
Well-said with regard to "up-defining growth"
Most industry employs relatively little automation, so long as you use the term automation to refer to all the things that businesses aren't doing. If you include coffee makers, printers, and automobiles, then automation is pretty universal among wide swaths of industry.
True. Back in the 90's I did a presentation about the 'paperless' office. Everyone scoffed at the time. However, even then there were many paperless offices. The fact that most people miss is that when you get rid of the paper, in most cases, you got rid of the office... even by the nineties we did not need the number of 'clerks' that were once employed. Every boss once had a secretary sitting outside in their own office, as well as a typing pool, and clerks preparing purchase orders and invoices, and tea ladies would bring around drinks and bikkies, and women worked the switchboard, and the mailroom sorted the incoming and outgoing mail... all gone.
very hard to know whether this is true, but this guy https://www.nytimes.com/2023/08/28/opinion/chinese-economy-yi-fuxian.html has been claiming for a while that Chinese stats about how many children there are in the country are significantly exaggerated, apparently because local governments get funding based on number of heads so they cheat and report more kids than they actually have. Also ethnic minorities which weren't subject to the one-child policy didn't have as many children as models assumed. All this is entirely possible and I wouldn't put any of this beyond the CCP, but on other hand this Yi guy has also been arguing for decades against one-child policy and warning of demographic collapse, so he has incentives to present picture as worse than maybe it is as well. All am saying is Noah is basing this article on the premise that (ahem) wikipedia data is reliable, when in reality fog of war is very much real regarding anything China related.
Yi Fuxian is a monomaniacal crank.
I interviewed 5 folks age 20-22 the other day and every single one of them had siblings. Two of them had 2 siblings.
China is going to have 400 million retirees not too far into the future, without a proper pension system to take care of them. While that won't necessarily "cripple" the Chinese economy, it's going to force the country to become a lot more self-centered. It's these kinds of statistics that have me much less worried about an invasion of Taiwan (especially given how much more practical it would be to take over Taiwan within the next 50 years via covert soft-power operations rather than running an economically disastrous war). Nobody hates sending their kids to war more than the parents of only-children, especially given the implicit state-promise of every generation doing better than the previous one.
but nobody loves sending kids to war more than autocratic leaders with a big sense of own historical role...
There was an interesting article in UnHerd recently that societies with the stomach for warfare tend to be those with surplus male children.
https://unherd.com/2024/06/who-will-win-a-post-heroic-war/
"the wars of history were fought by “spare” male children. Even as late as the mid-20th century, the average European family had several children. In agricultural households, one male could inherit the family’s land, another might advantageously marry a land-owning wife, and one more might go into the Church — or off to war. If he failed to return, the survivors might miss him most intensely, but the family would not be extinguished."
Regarding China:
"President Xi is, by all accounts, a bellicose man who enjoys threatening war against Taiwan. And yet, curiously, in 2020 he took eight months to reveal that one PLA officer and three soldiers had died during the fighting on India’s Ladakh frontier. During that period of official silence, the families of the four were re-housed and provided with welfare payments or better jobs; the officer’s wife who taught piano in a village school was elevated to the Xi’an Conservatory of Music, with a new house to go with it....Later, the names of the four were added to many highway bridges to remind all of their sacrifice."
"The good news, then, is that because of China’s low birth rates, the post-heroic syndrome makes it unlikely that Beijing will act on its pugnacious threats. Given the regime’s most elaborate response to four combat deaths, how could it cope with the 4,000 that might be lost in one day in a war for Taiwan?"
am confused. you mention surplus male children at top of your post. china has massive surplus of male children (compared to number of girls that they could marry). doesn't that suggest higher likelihood of going to war?
Spare in this context means the kid dying won't end the family lineage
Exactly. The US will have to shape up and compete. It will be the biggest competition the US has ever faced and it might not win. China is a mega trend, China is legit.
No wishful thinking to come to the rescue. The US needs to step up technologically, demographically and with better long term political and economic policies.
Finally a post that doesn't make me pullout my hair and tend my clothes in despair. I'm somewhat less concerned about a great power China than you. The authoritarian structures Xi has put in place insure that the Chinese economy is going to be much less efficient. Telling the truth can be a capital offense in that sort of society. So people stop talking or start lying in the interests of self-preservation.
Would this also be an opportunity to reform internal migration / the hukou system? Many people in China are trapped in poverty and low education because they cannot become lawful residents of the major cities, and do not have access to those cities' public services, including schools. With low birth rates, schools might have spare capacity, and China will need its newest generations to be even better educated than their predecessors to make up for the inevitable population aging.
The thing is, it’s not 100% clear that gen alpha bulge exists. I really, really wish people would spend more time engaging with Yi Fuxian. It’s an important thing to figure out!
Your ideas about boosting college enrolment for Chinese people, while looks nice, do not seem that good when there are high young unemployment rate in China, especially for college-educated people due to skills mismatch. (You might remember that's the reason why China stopped publishing young unemployment rate since the end of 2022, and why 2 of the main trends for young Chinese are "lying flat" and "letting it rot"!)
So to resolve this dilemma, do you think China should focus more on developing consumer and service economy, to reabsorb these young and educated people in the labor market?
(Also, in India case, even though its service economy is very developed, the young unemployment rate still hit record high, with millions of young Indians competing for these service or government jobs. Then again, probably the difference here could be due to lower level of manufacturing compared to GDP of India though!)
We also hear a lot about youth unemployment being a major problem in China these days. Does that in some way diminish the positive impact of their coming Alpha baby bulge?
In fact, although China is facing the huge challenge of aging, a strange phenomenon is emerging. Most companies and positions do not recruit people over 40 years old. Some Internet companies do not even recruit employees over 35 years old. Many people's careers face an awkward vacuum period between the ages of 35 and 65. If you are interested, you can use Google Translate to view the following two Chinese press releases.
https://www.thepaper.cn/newsDetail_forward_21601062
https://www.thepaper.cn/newsDetail_forward_10118666
The US should focus more time and energy on fixing our problems than worrying about China. The US has real strengths which require fixing that can help us beat China far more than anything China can do to overtake us
I reached the same conclusion in my own analysis here (China’s Demographics and Growth Potential in an Age of Machine Knowledge Capital - https://papers.ssrn.com/abstract=3998364). I would emphasize two things: (a) the human capital gain that China makes from the replacement of retiring cohorts with limited education by much more highly trained entrants; and (b) the lifting of the Baumol effect - the slowdown in growth in post-industrial societies due to the limited scope for scaling human capital - as eminently scalable machine knowledge capital progressively supports services sector growth in place of non-scalable human capital. My punch line was that China picked a good time to get old.
One factor should also be included, sex ration of population, one child policy and sex selective abortion accelerated imbalanced sex raio.In 2020, the sex ratio of China's total population was 105.07 to 100（ gaps between provinces, and several provinces exceed 110.）, of which 34.9 million men were more than women; What's interesting is that there are more women than men in higher degrees, such as master's degrees. Nowadays, because of the slowdown of economic development, the unemployment rate is rising, and the social crime rate (mainly male) is also rising. I don't know the connection between this and the war, but it is indeed a complicated problem.
"In fact, the shrinking of the population isn’t actually the problem"
It's the shrinking of the population that is a problem too, as there will be fewer innovations. All things equal, innovation and technological development will be faster with 1 billion people than with 10 million people, even if they innovate at equal rates per capita.
Imagine Earth (all things equal) with 1000 people and Earth with 1 billion people. Even if they innovate at equal rates per capita, an Earth with 1 billion people will be much more technologically advanced because it will have many more scientific discoveries. One will have a thousand discoveries and the other a million. That is, the Earth with 1000 people will be in the 19-th century and the Earth with 1 billion people will be in the 21st century on a level of technological development.
So the number of people matters, and it is not a per capita issue either.
That is, even if two groups innovate at equal rates per capita, the one with the more people will be much more technologically advanced.
Then why is nearly all of the world's innovation currently occurring in countries with relatively low birthrates? Because when people have fewer kids, they can afford to invest more in the kids they do have. Quality over quantity, basically.
AI means it is no longer necessary to involve a human in development of technology. Throwing bodies at a problem is now obsolete.
That's good news for China. 2050+ is far enough out that I wonder if questions of aging and demography will even mean the same thing as they do now - there's a non-zero chance that we have some meaningful anti-aging/longevity medicine by then.