By Maurits Elen
BRIC (Brazil, Russia, India and China) countries have contributed to almost half of global growth in the past decade, but their high times may be over as they face an aging labor market. The major effects in demographics are already beginning to be seen in China, where its one child policy is holding itself back from growing a strong young labor force, thus raising doubts on how to fund its growing pension bill.
Catherine Liu, owner of Shanghai Worldwide Trading Co., has five factories in Shanghai. In just one year time she had to fire almost two thirds of her low-paid labor force, which was getting too old, and driving up expenses.
”Local workers are getting much older. If you want to train them, they must be young. It’s very difficult to survive.
Young inland workers are not like their parents. They want easier jobs in supermarkets or restaurants. And the surplus of farmers older than 40 don’t want to work in factories or would need months of expensive training.”
According to Goldman Sachs, growth across the BRIC nations is likely to slow down because there are fewer and fewer young people keeping the factories thriving, while on the other hand there are more pensioners to support in those markets.
Nicholas Eberstadt, a demographer at the American Enterprise Institute in Washington:
“Financial markets, businesses and policy makers have failed to recognize that demographic realities are creating pressures for slower future growth.”
The World Bank already reported in 2005 that China’s unfunded pension liabilities could be as high as 1.6 trillion US dollars, but could be larger if no action is taken.
UN forecasts show that the number of young factory workers in China, aged 15 to 24 years old, will decline by 27 percent to 164 million in the upcoming period through 2025. Those over 65 will rise 78 percent to 195 million.
The demographics in China changed rapidly after its one-child-policy was put into legislation in 1979. Chinese authorities claim it has prevented over 400 million births since its implementation.
Now tens of millions of Chinese are on track to grow old without having any pension, or healthcare, let alone have a family to support their well being.