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China's Population and Employment Policies for Inclusive Development

China's Population and Employment Policies for Inclusive Development

Cover and Title Page Catalogue and Summary Main Body

Title : China's Population and Employment Policies for Inclusive Development

Commencement Date : Tue Mar 06 2018--

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Abstract Summary :

Due to China’s adoption of the reform and opening up policy in the late 1970s, along with its unprecedented economic performance, the social policy system has been formed to support inclusive development, characterized by giving priority to people’s livelihoods and development sustainability. Such an inclusive social policy is manifested in the formation and implementation of family planning policy and proactive employment policy. This report is intended to illustrate how the family planning program has coordinated population, resources and environment he and how the employment policy has accomplished the tasks of full employment and sharing of outcomes of the growth. The report also raises the urgent challenges facing the two policies and points out the direction of policy reform in the related areas.
Due to China’s adoption of the reform and opening up policy in the late 1970s, along with its unprecedented economic performance, the social policy system has been formed to support inclusive development, characterized by giving priority to people’s livelihoods and development sustainability. Such an inclusive social policy is manifested in the formation and implementation of family planning policy and proactive employment policy. This report is intended to illustrate how the family planning program has coordinated population, resources and environment he and how the employment policy has accomplished the tasks of full employment and sharing of outcomes of the growth. The report also raises the urgent challenges facing the two policies and points out the direction of policy reform in the related areas.

Introduction :

Due to China’s adoption of the reform and opening up policy in the late 1970s, along with its unprecedented economic performance, the social policy system has been formed to support inclusive development, characterized by giving priority to people’s livelihoods and development sustainability. Such an inclusive social policy is manifested in the formation and implementation of family planning policy and proactive employment policy.

This report is intended to illustrate how the family planning program has coordinated population, resources and environment he and how the employment policy has accomplished the tasks of full employment and sharing of outcomes of the growth. The report also raises the urgent challenges facing the two policies and points out the direction of policy reform in the related areas.


Content :

1. Contents, Effects and Evolution of Population Policy

Family Planning Policy and Its Intention of Putting People First

As early as in the 1970s, the Chinese government started to encourage “late marriage, longer interval between two births, and less birth”. In the early 1980s, the globally famous “one-child policy” was pul into practice. This policy has so far been implemented for several decades and impacted the pathway of China’s development.

In 1991, the central government issued a document emphasizing the strict implementation of the family planning policy, followed by introduction of provincial-level legislation on family planning in all Chinese provinces. Because all provincial policy measures of implementing family planning were approved by the local Standing Committee of the People’s Congress, the family planning policy officially became a nationwide law.

The enhancement of the standard of living of the Chinese people has always been the primary objective of policy formation and implementation. In the famous letter openly addressed to all Chinese youths on September 25th, 1980, the Central Committee of the Communist Party of China (CPC) explained the family planning policy as an important measure related to the speed and future of China’s modernization, and to the health and happiness of future generations, inclusive of both short- and long-run interests of all Chinese people.

The promulgation of the strict family planning policy in the early 1980s was consistent with Deng Xiaoping’s strategic thinking on the goal and roadmap for building the well-being of society. In the late 1970s and the early years of the 1980s, Mr. Deng Xiaoping was devotedly engaged in studying, consulting and thinking about the feasibility of doubling the national output and achieving the wellbeing of society (Yang, 2011). On the eve of the 13 th National Congress of the CPC in October 1987, he explained his famous “Three Steps Strategy” for China’s economic development to visiting foreign guests. As the first step, China would double its gross national product (GNP) in the period of 1981 -1990, fulfilling the needs of food and clothing. As the second step, total GNP would double again in the period from 1991 to the end of the 20,h century. And as a result, people’s living standards would reach a level defined by the well-being of society. As the third step, by the mid-21st century, China’s per capita GNP would reach a level comparable to that in middle high-income countries, in which people become relatively rich and modernization would be basically accomplished.

In 2002, the 16th National Congress of the CPC embedded a period of building a higher level of societal well-being into the “third step”. That is, by 2020, China will reach a specifically defined higher level of societal well-being in order to lay a solid foundation for reaching the final goal in the mid-21sl century. The coordination of the population, resources, and environment is also viewed as a vital guarantee for building such a higher level of societal well-being.

From this brief review of the formation of Chinese family planning policy, one can see that the ultimate intention of this policy is to help implement national strategies aiming to spur economic development and improve the standard of living of the Chinese people.

Changes in Implementation and Motivation of the Policy

Given that the Chinese population policy is intended to serve the people’s interests, the authority has been seeking compatibility of incentives in implementing the policy. At the early stage of the implementation, because a large gap existed between the policy objective and households’ intention of fertility, administrators, who tirelessly implemented the policy, could only leave people dissatisfied. As the fertility rate has declined, the approach to implementing the population policy has become more and more incentive-oriented. In an attempt to avoid the disobedience of the policy, the administration at all levels has tried to implement the policy by providing more reproductive health services, establishing interest-oriented mechanisms related to family planning, enhancing incentives for family planning, establishing social security programs conducive to population and development, and safeguarding various rights of women.

The existing population policy has been formulated by both national and regional legislation adjusted in accordance with the changes of the population and socioeconomic development through decades-long practice. Provinces, autonomous regions and municipalities directly under the central government have formulated their own policies and regulations according to local conditions. In fact, that some observers often regard the characterization of China’s one-child policy as inaccurate. Due to the varieties of regional conditions in terms of social and economic development, fertility policies vary among regions, between rural and urban areas, and across ethnic groups. In general, regulations are looser in rural areas, western regions, and for ethnic minorities. On average, the policy-required fertility rate is 1. 47 for the country as a whole, and the one-child policy is only applicable to about 60 percent of the total population.

In recent years, while the general policy has been smoothly implemented, some local governments have made some minor revisions to local fertility policies. For instance, in all provinces, a second birth is allowed for couples in which both the husband and wife are only children. In rural areas of 7 provinces, couples in which either the husband or wife is an only child are allowed to have a second child. Dozens of provinces canceled or eased the interval requirement between two births, while birth control for second marriages was deregulated in some other provinces.

Unprecedented Demographic Transition and Fertility Decrease

Though the dramatic decline in total fertility rate (TFR) in China - namely, a drop from 5. 8 to 2.3, happened in the period of 1970 to 1980, China still had a TFR above the replacement level in the early 1980s. By virtue of the socioeconomic development and implementation of family planning policy during the reform period, China has seen its fertility rate plummet. As can be seen in Figure 1, in the early of 1990s, TFR went down below the replacement level of 2. 1.

 

In Figure 1, the yearly figures of national TFR before 1998 are the levels the government officially declared and those after 1998 are the levels scholars trust to be true. From the figure, one can see that the TFR of China has been below 1.5 for many years, a very low level in international comparison (Gu and Li, 2010). According to the United Nations (2010), China’s TFR was 1.4, a level lower than the world average (2. 6), the average of developed countries (1.6), and the average of less developed countries after excluding the least developed countries (2. 5).

Impacts of Demographic Dividend on Economic Growth

In the entire period of the dual economic development since the reform and opening up policies initiated in the late 1970s, China’s unprecedented rapid growth has benefited substantially from the demographic dividend, which can be predicted by economic theory and proven by the Chinese experience. The impact of the demographic transition on economic growth can be understood by examining the sources of the growth.

Firstly, the declining dependency ratio contributes to the capital formation necessarily conditional for rapid economic growth, which helps China maintain a high savings rate. In addition, sufficient supply of labor prevents diminishing returns on capital. Such a determinant of growth is embodied in the contribution of the fixed assets formation in production function estimation.

Secondly, the continuing rise of the working-age population guarantees an adequate supply of labor and that, together with the enhancement of years of schooling of the workforce, endows China with strong competitive advantages for participating in economic globalization. The impacts of those factors on growth are manifested in contributions made by labor growth and the increase in years of schooling of the labor force.

Thirdly, in the reform period, the massive labor migration from low productivity ( e. g. agriculture) sectors to high productivity ( non-agricultural) sectors creates resources for reallocating efficiency, which is a major source of the improvement of the total factor productivity.

Finally, the declining population dependency ratio - namely, the ratio of the dependent population to the working-age population, which can be viewed as a proxy of the pure demographic dividend - contributes to the fast economic growth in the period of dual economic development.

An estimation of the production function on the Chinese economic growth since the early 1980s decomposes the relative contribution made by each of the relevant variables, including fixed assets formation, total employment, years of schooling of employed workers, dependence ratio, and residual. The findings show that the GDP growth in the period of 1982 to 2009, of 71 percent, was attributed by capital input, 7. 5 percent by labor input, 4. 5 percent by human capital, 7. 4 percent by decline of the dependence ratio, and 9. 6 percent by improvement of total factor productivity (Cai and Zhao, 2012).

1. Proactive Labor Market Policies and Their Effects

Reaping the demographic dividend from a favorable population structure is conditioned on full employment. During the period of economic reform and opening up, especially after the entry into the World Trade Organization, China has witnessed the largest labor migration and the fastest expansion of employment in its history, to which the proactive employment policy and labor market reform contribute significantly.

Formation and Perfection of Proactive Employment Policy

With long-term practice, great efforts, and even painful prices, the framework of proactive employment policy was gradually established in China. Prior to the late 1990s, when the employment system began to be reformed, the labor market mechanism of urban employment played a marginal role in allocating new entrants and the state and collective sectors absorbed the majority of urban laborers. At the time, economic growth was considered synonymous with employment expansion. Employment per se was not an independent target of macroeconomic policies. In the objectives of monetary and fiscal policies, employment was not explicitly mentioned.

In the late 1990s, when the economic growth slowed down due to the East Asian financial crisis, state enterprises encountered severe operational difficulties and had no choice but to lay off workers, which caused unprecedented massive unemployment. To tackle the situation and secure people’s livelihoods, the government started to implement proactive employment policies by introducing a host of policy measures in promoting employment and re-employment. Meanwhile, employment became an important goal of the macroeconomic policies. Such proactive employment policy has been realized through managing the macroeconomy, training and assisting in job searches, stimulating demand for labor the force, and strengthening ability of economic growth to absorb employment.

In his speech titled “Employment Is the Base of People’s Livelihood” at the National Conference of Re-employment, on September 12, 2002, the Chinese President Jiang Zemin prioritized employment. As he pointed out, tackling the employment problem is a test of the governance ability of the Party and the government. In the same year, the 16th National Congress of the CPC announced that the state would implement long-term strategies and policies to promote employment, listing expanding employment as one of the four macroeconomic policy objectives, along with spurring economic growth, stabilizing prices, and maintaining balance of international payments. In all official announcements and documents, employment was enshrined as a priority of economic and social developments.

In tackling the negative impacts of the global financial crisis in 2008 and 2009, the Chinese government implemented more proactive employment policies and accomplished the objectives of economic growth, enhancement of people’s livelihoods, and social stability through stabilizing employment expansion. A more proactive employment policy, with its key focus and major targeted groups, was clearly written into China’s 12th Five-Year Plan.

Labor Market Development and Employment Expansion

China’s rapid economic growth has always been accompanied by tremendous employment expansion ( Cai, 2010). Some researchers conclude that the economic growth and employment expansion in China have not been isochronous, because they are puzzled by the incompleteness and inconsistency of the employment statistics. First, migrant workers are not included in the urban employment figures. Out-migrants who had been away from their home townships for more than 6 months totaled 158.6 million in 2011 (Department of Rural Social and Economic Survey, National Bureau of Statistics (NBS), 2012). Second, since the late 1990s urban informal employees have emerged, dominated by new entrants and re-employed laid-off workers. Because they are not included in statistics of sectoral and regional employment, any disaggregated analysis of employment cannot help but miss them. In 2009, over 90 million urban resident employees were in this category, accounting for 28.9 percent of the total. In addition, rural laborers engaged in non-agricultural sectors of local townships are often ignored by researchers. While the size of this category remains little changed, its characteristics should not be neglected. In recent years, stable employment in such category has reached nearly 100 million people.

In order to show a relatively complete picture of employment and labor demand and supply, we try to explore the actual employment of urban sectors, which can be taken as a proxy of labor demand. Since the numbers of laborers engaged in agriculture are in a declining trend and the non- agricultural sectors in rural areas are not expected to expand, the increase of urban employees with the inclusion of informal and migrant workers can well represent the overall demand of the Chinese labor economy.

By combining various sources of employment data, we found that in 2009, 12. 5 percent or 39 million of 310 million reported urban employees were migrant workers, which is much lower than the actual number of migrants. If we assume that the urban labor survey in 2000 did not cover migrants and the proportions of migrants in urban labor survey in the following years increased at the same speed, increasing to 12.52 percent in 2009, we can determine the proportion of migrants in urban employment statistics each year. And we can calculate the number of urban resident employees, which does not include migrants.

The total number of migrant workers, who are defined as out-migrants away from their home townships for more than 6 months, totaled 145 million in 2009, of which 95. 6 percent migrated to cities. We assume that the distributions of migrant workers between urban and rural areas during the period of 2000 to 2011 are the same as that in 2009. Based on this, we can calculate the annual number of migrant workers in cities according to data from monitoring survey reports on migrants by NBS. Then we can compare the number of urban resident employees and migrant workers with the working-age population of the country as a whole (Table 1).

From the table, one can see that in the period of 2002 to 2010, the growth of total urban employment - that is, the sum of urban resident employment and migrant employment - was faster than the growth of the working-age population of the country as a whole, which implies that China’s economic growth is not one without employment growth. On the contrary, urban employment expansion accompanied by urbanization cannot be ignored. As a result of active employment policies, rural surplus laborers, the urban unemployed and redundant personnel have decreased significantly.

Labor Mobility: The Effect of Alleviating Poverty and Raising Income

The expanded opportunity of rural laborers in non-agricultural sectors has reduced the rural poverty and blocked, if not completely eliminated, further widening of the rural-urban income gap. The household responsibility system, which is characterized by the even distribution of farmland among households and equal rights of residual claimants of farm production, guarantees free choice for rural laborers in search of higher pay and better lives. Therefore, even if the wage rate remained unchanged for many years, the expansion of the scale of migration could sufficiently increase farmers’ income, which can be observed from three aspects.

The first aspect is the effect of migration on poverty alleviation. Except for those with labor ability, most migrant households fell into poverty and suffered from the lack of employment opportunity. Studies show that in general it is easier for those with skills and/or networks to find non- agricultural employment in rural areas, whereas poor households do not have such skills and networks necessary for grasping employment opportunities in rural areas. Rural-to-urban migration, therefore, is relatively a democratic opportunity for the poor to participate in the labor market and earn higher income. Du et al. find that poor households, by migrating out of rural areas, can gain an 8. 5 to 13. 1 percent increase in per capita income (Du, Park and Wang, 2005). However, households short of labor ability hardly benefit from migration.

The second aspect is the contribution of wage income to the increase of total household income. According to the categorization of NBS, net income of rural households consists of wage income, income generated by households’ business operations, income from properties and transferred income. The massive expansion of non-farm employment via labor mobility has significantly enhanced the share of wages in households’ income, contributing overwhelmingly to income growth of rural households. Official statistics show that the share of wages in rural households’ income increased from 20. 2 percent in 1990 to 41. 1 percent in 2010, while wage income contributed 48. 3 percent to the increase of households’ income in 2010.

The third aspect to note is that a significant part of migrants’ earnings is missing from official statistics. When NBS conducts the household surveys in rural and urban areas separately, on the one hand, migrant households are excluded from the chosen samples of urban households because they usually do not have stable housing in destination cities and therefore they are not considered practical survey samples. On the other hand, they are excluded from the chosen samples of rural households because they have been away from their hometowns for a long time and are usually not considered usual rural residents. As is explained in the notes on main statistical indicators of China Statistical Yearbook, those family members who have been away from home for 6 months or more are not considered usual rural residents, unless they keep close economic relations with their family by sending the majority of income to the household. The exception described as “close economic relations” is hard to define in practice, and those who permanently live and work outside registered places usually are not counted as usual rural residents and their income is omitted from rural households’ survey.

Therefore, migrant workers’ income is significantly underreported. Some researchers found the trend of income distribution improvement by digging into and revising incomplete statistics. Trying to avoid the flaw of the present household surveys conducted separately between rural and urban areas, Gao et al. selected some households, including NBS samples and others, in Zhejiang, a developed province, and Shaanxi, a relatively underdeveloped province, to observe the degree to which the migrant workers’ income is being underreported. This study concludes that the existing imperfection of the statistical definition in surveying households’ income alone leads to overestimation of urban residents’ income by 13. 6 percent and underestimation of rural households’ income by 13. 3 percent. That is, the income gap between rural and urban households has been overstated by 31. 2 percent (Gao et al. , 2011).

The Building of Labor Market Institutions and Workers' Rights

In the process of coping with mass unemployment and lay-offs in the late 1990s, proactive employment policy was formed, including wider coverage of social safety nets, employment-oriented macroeconomic policies, active assistance with re-employment, and provision of public employment opportunities. Starting with tackling the financial crisis of 2008 and 2009, the Chinese government has strengthened the proactive employment policy by introducing more policy measures to help stabilize employment. One such measure focuses on providing special assistance to migrant workers, college graduates, and urban vulnerable workers.

As China passed its Lewis turning point, characterized by significant reduction of surplus laborers in agriculture, labor shortage became widespread in all sectors. At the same time, the favorable policies towards agriculture, rural areas and farmers have enhanced profitability of farming, which helps strengthen bargaining power of migrant workers in employment relations and thus leads to increases in wages in all sectors, convergence of wages, and improvement of working treatment.

Since 2004, through various efforts made by the central and local governments such as legislation, regulation, enforcement of laws, and adjustment of policies, the policy climate for migrants to work, live, and receive equal treatment in relation to public services in cities has been significantly improved. Though the institutional changes and policy adjustments are far from completion, among those who have closely observed the entire process of labor migration from rural to urban areas, it might be well agreed that since the year of 2004 signaling the Lewis turning point, labor migration policy has entered its golden age (Cai, 2010).

Meanwhile, the central government has actively advanced legislation and law enforcement to regulate the labor market and strengthen social protection, while local governments have raised the level of minimum wages with great enthusiasm under the requirement of the central government, which helps form a normal mechanism of wage growth.

3. Demands for Policies in a New Stage of Development

China's rapid economic growth has typically been characterized by duality since the beginning of the 1980s. The demographic transition has been accompanied by massive migration of rural surplus laborers and expansion of urban employment. With the coming of the new stage of China’s demographic transition and economic growth, the economic growth pattern will be transformed after a series of turning points.

The Coming of Two "Turning Points"

A labor shortage first appeared in the coastal areas in 2004 and has become widespread all over the country since then. In 2011, most manufacturing enterprises suffered difficulties in recruiting workers. While the growth of labor supply has slowed down, the demand of China’s economic growth for labor still remains strong. Urban employment has been growing rapidly. China is moving away from unlimited supply of labor. The marginal productivity of labor in agriculture is not as low as the theory assumes any more. The wages are not determined by subsistence levels and are is more sensitive to labor supply and demand.

The rise in wage levels of migrants accelerated since 2004 after a long stagnation. They began to increase at an annual rate of 12.7 percent in the period of 2004 to 2011. Manufacturing and construction are characterized as employing unskilled workers. In the period of 2003 to 2008, the annual growth rates of wages were 10. 5 percent and 9. 8 percent, respectively, in these two sectors.

In the period of 2003 to 2009, the annual growth rates of daily wages of paid workers in grain production, cotton production and pig farming with 50 pigs or more were 15. 3 percent, 11.7 percent and 19. 4 percent, respectively86.

According to the definition set by development economics, the emergence of widespread labor shortage and constant increase of wages for unskilled workers imply that China has reached the Lewis turning point. Though there are different opinions on this judgment and on whether the Lewis model is applicable to China, the big challenges to China’s economic growth posed by these changes need more attention.

The long-lasting low fertility gives rise to a change in population age structure. That is, though the size of the working-age population aged 15 to 64 has been growing, its growth has slowed down. The year 2013 is China’s turning point at which the working-age population will stop increasing and begin shrinking afterwards. At the same time, the population dependency ratio (ratio of the dependent population to the working-age population) will decrease to the lowest point and afterwards it will start increasing rapidly (Figure 2). Many researchers take the population dependency ratio as a proxy indicator of the demographic dividend. The reversal of the population dependency ratio trend is the turning point at which the demographic dividend will disappear.

Taking 2004 as the Lewis turning point and 2013 as the year in which the demographic dividend disappears, one can understand the unique feature of China’s demographic transition - namely, growing old before getting rich - by observing the interval of time between the two turning points in comparison with other East Asian countries. According to studies on the turning point, the Japanese economy passed its turning point in 1960 (Minami, 1968) and Korean economy passed its in 1972 ( Bai, 1982). The population data shows that the dependency ratio began to rise in Japan in 1990 and in Korea in 2013. That is, the time span between the Lewis turning point and demographic turning point was 30 years for Japan, over 40 years for Korea, and less than 10 years for China.

Taking 2004 as the year of the Lewis turning point and 2013 as the year of the disappearance of the demographic dividend is a useful approach to understand the challenges facing the Chinese economy. Apparently, the length between the two turning points has something to do with the Chinese characteristics of the demographic transition, and it raises an alert for China to tackle the resulting challenges.

New Trends and New Tasks of the Labor Market

The Lewis turning point implies that the labor market gradually transforms from a dual to a mature one. In a developed market economy, employment pressure is mainly reflected in three types of unemployment, which are cyclical unemployment caused by macroeconomic fluctuations, structural unemployment caused by a mismatch between labor skills and employers’ demand, and frictional unemployment caused by time costs of searching for jobs. Structural unemployment and frictional unemployment are called natural unemployment. Natural unemployment usually is persistent and its level is relatively stable in the long run. China will face these three types of unemployment more and more.

Under conditions of a typical market economy, the cyclical fluctuation of the macroeconomy is inevitable and cyclical unemployment is inevitable correspondingly. At the current stage, rural laborers migrating to cities have no stable jobs and usually suffer more from cyclical unemployment since they do not legitimately have urban hukou. For example, the shock caused by the financial crisis in 2008 on China’s real economy and employment made millions of migrant workers return home ahead of schedule before 2009 Spring Festival, which is a reflection of cyclical unemployment.

With the acceleration of industrial restructuring, some traditional jobs will inevitably disappear when some new employment opportunities are created. If the skills of workers who need to change jobs can not meet the requirements of new posts, these workers will be faced with the risk of structural unemployment. Since China’s labor market has not been developed very well and the allocating mechanism of human resources is still imperfect, frictional unemployment also exists. The new entrants including all kinds of graduates need time to match their skills with the demand of the labor market. The urban laborers with deficiency of human capital and new skills need more time to meet the labor market demand. These two groups are more likely to suffer from structural unemployment and frictional unemployment.

Challenges Posed by Population Structure

Thanks to the implementation of strict family planning policy and economic development, the size of China’s population has effectively been controlled. However, challenges faced by the population structure have gradually emerged, which are mainly reflected on the following aspects:

First, sex ratio at birth has kept at a high level. Sex ratio at birth is the ratio of boys to girls at the time of birth. Since the fourth census in 1990, this ratio in China has been exceeding the normal level significantly. It was 119. 5 in 2009 - that is, boys outnumbered girls by 19. 5 percent. Gender discrimination in the labor market and imperfect social security system are two important reasons for the gender imbalance.

Second, population aging has been speeding up. On one hand, population aging is the outcome of economic and social development and an irreversible trend of population development. An “aging society” with a large share of oid people will be the normal situation of the society we arc faced with.

On the other hand, China’s “aging before affluence” brings about severe challenges for the ability of providing for the aged, the social security system and economic and social development, which need to be actively addressed. We should accelerate the improvements of the basic pension system covering both urban and rural residents. The consensus on providing for and respecting the aged and the ability of providing for the aged should be improved. An “active, healthy, secure and harmonious” strategy should be implemented to cope with population aging.

Third, population quality cannot meet the demands of economic and social development. The educational levels of Chinese people are still fairly low. The illiteracy rate of the population aged 15 and above was 7.8 percent in 2008 and the average years of schooling were only 8.5. The total incidence of monitored birth defects has been increasing. The share of children with a visible congenital abnormality at birth and with defects appearing gradually after birth is 4 to 6 percent. And the annual number of children with defects is about 800 thousand. Disabled persons of all kinds total 82. 96 million. The situation of reproductive health is not optimistic.

4. Policy Revisions Focused on the Comprehensive Development of the Population

The formation of the family planning policy characterized by a one-child policy was closely related to the planning economy and the dualistic economic structure. The original intention of this policy was to release the demographic dividend to the largest extent in the short run. China is in a new stage of economic development and demographic transition and the population has been changing greatly. A new population situation is forming.

We should conform to the principle of maintaining sustainable economic growth and improving the standard of people’s lives when we think about future policy directions in order to carry out population and family planning comprehensively. To realize balanced development of the population and make it really become an active factor of sustainable development, we need to start from many aspects such as population human capital, structure and quantity. Namely, we have to achieve significant improvements of population education, reasonable age structure and sex ratio and the sustainability of population quantity. In what follows we pul forward some policy suggestions from three perspectives: educational development, population aging and family planning policy.

Improving Human Capital Comprehensively

With the disappearance of the first demographic dividend, the traditional factors driving economic growth need to be reallocated and economic growth sources which are more effective in the long run and will not produce diminishing returns are needed to meet higher requirements, in particular, tapping and creating the second demographic dividend to avoid falling into middle-income trap requires improving the overall human capital level of the nation significantly.

First, compulsory education lays the foundation of lifelong learning. It is key to establish the same starting line for kids between urban and rural areas and between families with different income. The governments have unshirkable responsibilities to invest in this sufficiently. Preschool education has the highest social return rate. Government payment for it conforms to education law and the principle of benefiting the whole society. Preschool education should be brought into compulsory education.

In recent years, with the increase of job opportunities, there have been strong demands for unskilled workers. Some children, especially those from poor rural families, drop out of junior high school. The governments should make earnest efforts to reduce the proportion of family spending on compulsory education and consolidate and improve the completion rate of compulsory education. Bringing preschool education into compulsory education to keep poor and rural kids from losing at the starting line is helpful for improving their completion rates of primary school and junior high school and increasing equal opportunities of going on to higher levels of education.

Second, there is scope for improving the enrollment rate of senior high school significantly and promoting mass higher education. The enrollment rates of senior high school and higher education promote and interact with each other. The number of students who are willing to go to college will be bigger if there is a higher enrollment rate of senior high school. More opportunities of entering college will motivate children to go to senior high school. In the current stage, the low proportion of government budgetary funds on senior high education, the heavy burden of family expense, high opportunity costs and the low success rate of entering college make high school education the bottleneck of future education development (Cai and Wang, 2012). Therefore, starting from the continued acceleration of mass higher education, the governments should promote free senior high education as soon as possible. Comparatively speaking, we should bring into play the roles of nongovernmental sectors in running schools and family investment in higher education.

Finally, great efforts to develop vocational education by labor market guidance should be made. China needs a group of high-skilled workers, which depends on secondary and higher vocational education. The share of students receiving vocational education at the right age is usually more than 60 percent in European and American countries and sometimes up to 70 to 80 percent in countries like Germany and Switzerland, which are significantly higher than the figure in China. Starting from the requirements of medium and long-term development of labor quality, China should devote more efforts to promoting development of vocational education and training. In addition, the entrance channels between secondary vocational education, higher vocational education and higher academic education should be established. The reform of the education system, teaching model and content should be accelerated to give students more choices for achieving comprehensive development.

Coping with Population Aging Actively

Population aging has been accelerating in China. By the end of the 12th Five-Year Plan period, China will still be in the stage of middle income. Meanwhile, old people aged 60 and above will exceed 200 million, accounting for 15 percent of the total population. To achieve sustainable growth, China needs to tackle the severe challenges brought about by aging before affluence.

First, it is necessary to improve the social pension system to cover urban and rural residents and migrants, as well as upgrade the standard of its security and social pool. The social pension system should achieve overall coverage of urban and rural residents as soon as possible, make great efforts to develop social services and guarantees for old people, and gradually improve the living standard of elderly persons with no family and elderly persons with disabilities. Population aging affects thousands of families and impacts social harmony and the sustainability of development. Under the circumstance of the governments providing the related basic public services, we should comprehensively improve the abilities of society, families, communities and the aging industry to provide for the aged. We should also promote the establishment of an old age service system, which is supported by secure funding and service and focused on solidifying family care for the aged, enlarging community support, improving service ability of institutions and promoting the development of aging service industries.

Second, it is important to create conditions to tap new consumption demand brought about by population aging and transform it into a driving force of economic development. Old people comprise a special consumption group. They have spiritual and cultural demands including exercise activities and leisure and material demands including family care for the aged and social services for the aged. Their demands should be supported and encouraged by the state with tools such as fiscal policy, taxation policy, financial policy and business administration policy. These demands caused by population aging should lead the government to promote generation of some new service sectors and should become a new driving force of economic development.

Finally, developing human resources of the aged rationally, creating jobs suitable for the aged and exploring a flexible retirement system should be considered. According to a study, in the range of ages between 24 and 64, each additional age of 1 year reduces the years of schooling by 10. 2 percent. Such a negatively marginal effect becomes more significant at older ages - in the range of 44 to 64, every additional age of 1 year reduces the years of schooling by 16. i percent (Wang and Niu, 2009). It is obvious that the conditions for raising the retirement age are still not mature and need to be created through developing education and training, so that the participatory rate of the aged can be improved in the future. This can alleviate the problem of the insufficient social resources for providing for the aged and extend the period of the demographic dividend.

Gradually Perfecting Population Policy

Under the guidance of the scientific outlook, of development - namely, putting the people first - the Chinese population policy should be adjusted in accordance with the changed situation. Though the demographic transition has been ultimately driven by economic and social developments and the trend of population aging shall not be reversed, the alteration of population policy can to a certain extent contribute to balancing the population structure.

There are reasons for population policy adjustment - namely, relaxing the one-child policy to allow families to decide the desired numbers of children, since population size no longer imposes any significant pressure on China.

Firstly, there exists the difference between policy fertility and intended fertility, which can provide room for China to balance its population age structure in the future. According to surveys on childbearing intention conducted in 1997, 2001 and 2006, the intended fertility rate is 1. 74, 1. 70 and 1.73, respectively (Zheng, 2011). That is, compared to the current policy-allowed fertility rate of 1.5 and actual fertility rate of 1.4, such a childbearing intention means that the birth rate can be moderately increased if the policy relaxes in the near future.

Second, the one-child policy has in essence accomplished its initial goal. In 1980, when the Chinese leadership formally announced the policy, it was to be implemented as a one-generation policy. As the official document puts it, “in 30 years from now, at present, extremely intense problem of population growth mitigates, an alternate population policy shall be carried out then. ” Since the conditions for “alternate population policy” have been much stronger than was expected at the time, the policy adjustment has its sufficient legitimacy today.

Third, local experiences in adjusting the one-child policy have revealed the pathway and roadmap of reform. While the family planning policy is implemented nationwide, local governments have some autonomy to decide on policy details in conformity to the local specific situation. Presently, the overwhelming majority of the Chinese regions enforces the policy that allows married couples where both spouses are only children to give birth to a second child. When the policy relaxation gradually evolves to allow married couples where either spouse is an only child to give birth to a second child, the spectrum covered by the new policy will be sufficiently widened.

Creating Institutional Conditions to Achieve Gender Equality

The discrimination against females in the labor market and raising of sons for old age as a result of the imperfect social security system are two important reasons for the gender imbalance. A comprehensive approach to address both the symptoms and root causes should be adopted to solve this problem. The rising trend of sex ratio at birth could be effectively curbed through promoting gender equality, eradicating gender discrimination in employment, improving the social pension system and eliminating birth gender preference.

The enforcement of the Employment Promotion Law should be enhanced in order to eradicate the discrimination against females in the labor market. The discrimination against females in the labor market usually takes two forms: wage discrimination and employment discrimination. Wage discrimination means that female workers are paid lower wages than male workers who have the same jobs and productivity. Employment discrimination means that female workers who have the same productivity as male workers are assigned jobs with lower wages by their employer and male workers are assigned jobs with higher wages. The supervision of the implementation of labor laws and regulations should be strengthened and equal opportunities created in order to eliminate wage differentials between females and males with the same jobs. In addition, the labor market should be developed actively and institutional barriers and access to jobs should be reduced.

5. Implementing More Inclusive Employment Policy

With the passing of the Lewis turning point and the turning point of the demographic dividend, quantitative contradictions of China’s employment have gradually been transformed into structural contradictions. This transition brings new connotations to proactive employment policy, putting forward new tasks for enhancing its inclusiveness, fn what follows we make some policy recommendations focusing on changes of employment policy, integration of the labor market and the building of labor market institutions.

The Transition of the Focus from Quantity to Structure

To cope with the increasingly prominent cyclical, frictional and structural unemployment, the first principle we should follow is to put employment first in the formulation of macroeconomic policies and to establish policy directions and policy intensity based on the employment situation, reducing the risk of cyclical and natural unemployment. In the 12th Five-Year Plan, the central government’s expression of employment’s importance was elevated from giving employment expansion a more prominent position in economic and social development to implementing the strategy of developing employment first.

In order to implement the principle of developing employment first, in the overall requirements of macro control, we should not only consider the goal of GDP growth, but also should directly declare the goal of employment growth and the goal of controlling the surveyed unemployment rate, which could reflect the level of cyclical unemployment. To achieve the goals of employment growth and unemployment control, on one hand, we should set a rational speed of economic growth and take maximizing employment as an important consideration when establishing policy directions, policy measures and policy intensity of macro control, reducing the shocks of economic fluctuations in employment. On the other hand, we should take exp

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