Policy change not enough to address shrinking workforces

In the 1960s and 1970s, as Singapore began its march toward becoming a developed economy, government officials were worried about a growing population overwhelming the job market, supply of housing units, healthcare facilities and other infrastructure. A government campaign followed, with the core message: "Girl or Boy－Two is Enough". The government legalized abortion, offered cash incentives for voluntary sterilization and withdrew the incentives for couples that had more than two children. As a result, by the mid-1980s, the government campaign to persuade parents to "stop at two" children had become a great success.

But it led to projections of labor shortage, prompting officials to change tack and offer financial incentives to encourage couples to have three children. Those "who can really afford it" were encouraged to have more children. Special tax rebates, childcare subsidies and prioritization for government-subsidized housing and the removal of earlier disincentives that discouraged couples to have more than two children followed.

Decades later, Singapore is still struggling to address workforce issues. A richer Singapore has developed a preference for small families that has proven resistant to change. And yet Singapore still evolves and succeeds－ranking No 1 in the world to do business, according to the World Bank.

China's challenge could be similar: how best to evolve to address shrinking workforces and growth rates. As such, changing to a two-child policy may not be enough. Rethinking and harnessing the potential of what an aging population can contribute can be of help in this regard.

As China has found with its stock exchanges, human behavior－like market forces－cannot be fully controlled or predicted. A more confident China should understand that, and allow Chinese people to live as they choose, and to compete, to fail and to succeed on their own.

The author is managing director of advisory firm RiverPeak Group, LLC and Asia fellow at the Milken Institute.

Courtesy: China& US Focus