Demographic Change And Its Consequences For The Labor Market

TitleDemographic Change And Its Consequences For The Labor Market
Publication TypeBook Chapter
Year of Publication2015
AuthorsCai, Fang
EditorZhuang, Juhzon, Vandenberg, Paul, and Huang, Yiping
Book TitleManaging the Middle-Income Transition: Challenges Facing the People’s Republic of China
PublisherEdward Elgar
CityCheltenham, U.K.
Keywordsasian politics, China, development economics, economics, People’s Republic of China, politics, social policy

The Lewisian classical theory of economic development holds that developing countries characterized by unlimited supply of labor are bound for a dual economy, whereby modern sectors can source labor from the agriculture sector at constant wages and accumulate physical capital. The pressure on employment caused by labor supply exceeding demand therefore characterizes the entire process of this form of development. A dual economy reaches the so-called Lewis turning point when demand for labor in modern sectors exceeds supply from surplus labor in agriculture at current wage rates. While the theory remains current among many development economists, there has been less study and, indeed, agreement, on the role demography plays in shaping dual-economy development, and on the changes and challenges a country faces as it approaches such a turning point. This chapter aims to fill that knowledge gap by looking at the demographic transition in the People’s Republic of China (PRC) and the country’s experiences in approaching its Lewis turning point. As in many other newly industrialized economies in East Asia, sweeping demographic changes accompanied rapid economic growth in the PRC during its reform period. This has enabled the country to accomplish the transition from a demographic pattern characterized by high birth, mortality, and population growth rates to one of low rates in each of these areas.