Counting the cost of China's one-child policy

It may be having an impact that extends further, and deeper, than some people realize.

The Wall Street Journal notes:

Is one really best?

New census data from China suggest the economic costs of Beijing’s one-child policy are more serious than the government is prepared to acknowledge.

The government claims the fertility rate, the number of children an average woman is expected to have over the course of her life, is 1.8. That is lower than the 2.1 needed to keep a population stable.

But what if the government is being optimistic? Chinese demographers have been arguing that the fertility rate actually is considerably lower than official claims suggest. The results of a decennial population census by the National Bureau of Statistics in 2010 shows they might be right. Prof. Wang Feng, a specialist on China’s demographics at the Brookings-Tsinghua Center in Beijing, says the census data confirm the fertility rate is 1.5 or below.

The difference between 1.8 and 1.5 might not seem that great. But with a population as large as China’s and over a long time horizon, the consequences of small differences in the fertility rate are far reaching. If the fertility rate has been running at 1.8, the working-age population will be close to a billion through 2030, according to projections by the United Nations. A rate of 1.5 means it peaks in 2015 and by 2030 is down to 940 million, according to projections by the U.S Census Bureau.

According to Conference Board chief economist Bart van Ark, an expanding labor force contributed an average 0.9 percentage point annually to China’s economic growth during the first 20 years of the reform era, which started in the late 1970s. Even as growth accelerated, a surplus supply of workers kept wages down and inflation low. In the first decade of the 21st century, the annual change in consumer prices averaged just 1.9%.

Whoever is right about the fertility rate, there will be no more positive contribution to growth from increases in the labor force. On either set of projections, the size of the labor force already has peaked. After 2015, if the government is right that the work force will stay stable, there will be no negative impact on the growth rate. If the demographers are right, a shrinking work force will mean a drag on gross-domestic-product growth.

Meantime, this report indicates that the Chinese people themselves are increasingly concerned about being able to even afford more than one child:

With ever-rising costs in cities such as Beijing, the question for many is not whether they want another child but whether they can bear the cost.

“I can’t even get this one into kindergarten,” complained housewife Li Tong, 29, out walking with her three-year-old son in Beijing’s fashionable Sanlitun shopping district.

“Education is a real concern for us. I have many friends who don’t want children at all. One is enough for me.”

Like the residents of Hong Kong and Singapore, which have among the world’s lowest birthrates, China’s urbanites are starting to believe that the expense of maintaining larger families outweighs the benefits.

That’s the view of Wang Gui, 35 and father of a four-year-old boy.

“We actually would like another, and according to current rules we can,” said Wang, who works for one of China’s state-owned oil giants. “But I think the cost would be prohibitive.”

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