If there are no surprises, China will overcome the middle-income trap during the Fourteenth Five-Year Plan period and enter the ranks of high-income countries in terms of per capita GDP levels. General Secretary Xi Jinping pointed out at a symposium of experts in the economic and social fields held on August 24, 2020, that it does not mean that there will be fewer conflicts when the level of economic development increases, but rather, it is possible that the increase in the level of economic development will bring about new conflicts. At the new stage of development, the demographic dividend has disappeared quantitatively, while the education level of the population has yet to be raised significantly, and these two are the most noteworthy focal points of the moment.
According to demographers’ projections, China’s total population will peak at a little over 1.4 billion in a few years, and then enter a period of negative growth. For many years, China’s birth rate has been declining and at low levels, with the population aged 20 to 24 years contracting around 2010, and the rate for those aged 15 to 64 years declining around 2010. At the same time, the number of people over the age of 65 is growing rapidly as health standards improve.
Faced with this reality, a policy has been put in place to gradually postpone the retirement age in order to ease the pressure of an ageing population on economic growth and the payment of pensions. Another initiative is the deregulation of births. Unfortunately, birth deregulation has not had a significant effect on the birth rate, which rose slightly since the implementation of the comprehensive two-child policy in 2016 and then declined again for several years. China’s current total fertility rate has fallen to 1.6, already below the level of some developed countries.
In the face of an aging population, another more proven strategy to deal with the problem is to increase labor productivity, which in turn relies on urbanization and improving the education level of the population.
Let’s start with urbanization. The increasing number of rural laborers going to work in cities is driven by the laws of economic and social development and is not shaped by anyone’s preferences. The industrial structure in rural areas is more dependent on agro-tourism and natural resources, which are limited by land, tourist receptivity and the natural resources themselves, respectively, and have little room for total economic growth. In urban areas, on the other hand, the manufacturing and service sectors continue to grow, thanks to both capital accumulation and technological progress. Even if rural areas have a small amount of manufacturing and service industries, they lack economies of scale compared to urban areas. Thus, the main battlegrounds of the modern economy are cities, and it is the cities that are capable of creating large numbers of jobs. Between cities, large cities and their surrounding metropolitan areas have more powerful spaces for economic growth and job creation than smaller cities. The above reasoning has led to the global phenomenon of increasing urbanization rate and the concentration of population around large cities.
In China’s current economic structure, agriculture accounts for less than 8 percent of the total. Manufacturing and service industries are concentrated in cities, with the service sector being heavily concentrated in cities. Therefore, given the total amount of labor, the migration of people to the urban sector can both raise income and consumption levels at the individual level and provide more labor for the manufacturing and service sectors at the macro level. Such a process of urbanization can greatly improve the efficiency of labor allocation, which has the effect of “making a bigger cake”.
At the same time, if the quality of the labor force can be improved through education, then the quantitative dividend of the population can be transformed into a qualitative dividend. Compared to developed countries, there is still a significant gap in the level of education in China: in 2018, the average number of years of education for people aged six and above in OECD countries was 12.89 years, while the average level in China was 9.13 years, a difference of nearly four years. Another figure shows that the proportion of the population aged 25-64 with an education at the upper secondary level or above reached 75 percent in OECD countries. In China, this indicator is only about 25 percent, according to China’s 2010 census.
When I participated in a symposium of experts in economic and social fields convened by General Secretary Xi, I suggested that the country should speed up the reform of the household registration system and promote urbanization, while implementing 12-year compulsory education as soon as possible, based on the above-mentioned understanding of the contradictions facing China’s new stage of development, in the hope of gaining the consensus of the whole society. If 12 years of compulsory education does come soon, then the focus will be on raising the educational level of children from rural hukou, as most children from urban hukou have in fact already received 12 years of education. It is logical, then, that at the focal point of both urbanization and improving education is the education of left-behind and migrant children from rural households.
As stated earlier, urbanization is an objective law of economic and social development and is irreversible. If the labour force is moving between rural and urban areas and between cities, what about their children? Ideally, children and parents should go to the city together. On the one hand, family reunification is ensured, on the other hand, parents working in the city can earn a higher income, while the city also has an adequate labour force. If obstacles are placed in the way of rural children being educated in their parents’ cities, one result is that the parents go to the city and the children stay behind, resulting in family separation, which is the cause of the phenomenon of more than 60 million children left behind without at least one parent. Another possible outcome is that some of the rural labor force chooses not to go to the cities, with the result that they find it difficult to increase their incomes, while urban labor shortages and urbanization are hindered. The current urbanization rate in China is significantly lower than in other countries at the same stage of development, for institutional reasons related to the fact that education in urban areas does not adequately cover the children of migrant workers.
Solving the problem of education for left-behind children should be a national strategy, and the only feasible way to do so is to continuously promote the movement of children and their parents to the cities and their access to education. It is particularly important for children to go to the cities to receive an education. On the one hand, the quality of education is related to the investment in schools, and there are economies of scale in the investment in schools, which means that the quality of education is better in cities than in rural areas. Of course, education in rural areas also requires investment, but this can only be done for equity reasons and cannot fundamentally change the reality that the quality of education in rural areas is lower than that in cities. Parents of children know this, and although the state has long since implemented the nine-year compulsory education system in rural areas, parents living in rural areas today are doing their best to send their children to schools in their counties.
Another issue that is easily overlooked is that when children go to the city to study, they are not only learning what they can learn in school, but they are also learning how to live in the city. A recent study by myself and Wei Dongxia, an associate professor at the Guangdong University of Finance and Economics, found that the earlier rural residents go to the city, the more likely they are to earn a higher income in the present, and the more likely they are to work in the productive services sector, and the more likely they are to start their own businesses and become entrepreneurs. We call this phenomenon “going to the city means learning”. In the future, China’s service sector is set to become more and more important, and the demands on people’s ability to interact with each other will continue to grow. If children from rural areas go to the cities as early as possible, they will be better able to integrate into the cities. If, on the other hand, children from rural areas are prevented from entering the cities early because of the system, the later the delay, the more they lose, and the individual losses add up to losses for the country as a whole.
Limited educational resources can no longer be used to deny rural children access to education in the cities. Educational resources can be increased through greater investment in the process of economic growth. The government’s public finances should not just be short-sightedly spent on investing in hardware, but on investing in human capital for long-term returns. Even if local governments have limited resources, the central government should give greater financial support for the development of education in areas of population inflow. I also suggested at a recent symposium of experts in economic and social fields convened by General Secretary Xi that investment in education should be increased through the joint efforts of the government, the market and society. In particular, private funds should be encouraged to enter the education sector to alleviate the problem of limited public resources owned by the government.
In recent years, my colleagues and I have been calling for accelerated reform of the household registration system and urbanization, so that those who voluntarily move to cities for employment and residence can smoothly realize their aspirations for a better life. At the same time, we also call on policymakers to work from multiple angles as soon as possible so that left-behind children can move into cities and migrant children can get better education. It is not an overstatement in any sense to consider improving the education of children from rural households as a national strategy.
(Author Lu Ming is a Distinguished Professor at the Antai School of Economics and Management, Shanghai Jiao Tong University, Executive Director of the China Development Research Institute, and Research Fellow at the China Institute of Urban Governance)
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