China’s workforce paradox and how to solve it

China is wrestling with a severe demographic challenge. The National Health Commission expects that by 2025, over 20 per cent of citizens will be over 60, the biggest aged population globally. This, paired with a birth rate that hit a record low of 6.77 per thousand people in 2022, portends a stark 1:1 worker-to-retiree ratio by 2050 compared to 2.26:1 today.

The government has not been standing still. In 2016, it abolished the one-child policy and allowed families to have a second child. In 2021, it effectively scrapped birth restrictions. Other policies include longer maternity leave, tax deductions and even banning private-tutoring companies from profiting from teaching core subjects.

More recently, in Hong Kong, Chief Executive John Lee Ka-chiu announced in his policy address that the government would provide a cash payout of HK$20,000 for each new child born in the city to a parent who is a permanent resident.

Yet, as other developed nations have realised, reversing demographic trends is a formidable task. At the foundation of the Chinese workforce, young professionals in their 20s and 30s have been tied to a punishing “996” work culture, toiling 12 hours a day from 9am to 9pm, six days a week. This relentless grind, fuelled by ultra-competitive corporate cultures, societal expectations and the promise of upward mobility, exerts a substantial toll on their health and well-being.

The challenges don’t end there. As they inch towards their mid-30s, they run up against a widely held societal notion referred to as the “curse of 35”. Beyond this age, they are shockingly perceived as being too old, less energetic and therefore less employable than their younger counterparts. This is particularly prominent in the Chinese internet community.

In response to this unrelenting pressure, a growing number of young Chinese workers are choosing a different path. They are opting out of the grind altogether. Many are scaling down their work schedules in favour of a simpler, less stressful lifestyle. They are ditching high-pressure jobs in favour of those that offer more balance, prioritising personal fulfilment over the need to satisfy societal expectations.

A different set of issues is facing workers at the other end of the age spectrum, those around 55. While once embodying the vigour and resilience of China’s work culture, these people are approaching retirement age, which in China is among the lowest globally – 60 for men, and 55 for women in white-collar jobs.

But thanks to smarter lifestyle choices, better nutrition and wider access to a steadily improving healthcare system, workers in this cohort are living longer, healthier lives than the generations before them.

Many are mentally and physically prepared to continue their professional journey beyond the traditional retirement age. Others have to continue working to fulfil financial obligations.

Regardless of their motivation, they find themselves at the mercy of a system that views them as outdated, even redundant. They are forced to leave the workforce despite their willingness and capacity to contribute.

This problem becomes especially acute in light of the swiftly shrinking ratio of grandchildren to grandparents, another outcome of China’s one-child policy and low birth rate. In the not-so-distant past, people in their golden years derived fulfilment from helping to care for their grandchildren. Sadly, this is becoming a less viable source of purpose and enjoyment for a growing number of older people. There simply aren’t enough grandchildren.

This workforce paradox, where the young feel they have prematurely peaked and the old feel unjustly sidelined, will become one of the biggest misallocations of societal resources if unresolved. There must be solutions.

First, workers across all age groups must embrace lifelong learning. In a world where technology and artificial intelligence are taking centre stage, adaptability is essential. Continuous education and skill development are not merely choices but necessities. For younger workers, they ensure relevance and competitiveness. For the older generation, they offer a pathway to pivot careers or re-enter the workforce.

The emergence of a “slasher” culture where people juggle a variety of roles is another outlet for workers young and old seeking better work-life balance and more meaningful careers. It’s a trend worth watching: a survey conducted by Beijing Youth Daily estimates that there are around 80 million slashers in China.

Joining the ranks of the slashers can help younger workers diversify their income sources and stave off burnout. Older workers who take on multiple roles can capitalise on their deep work experience by branching out as independent experts and coaches.

Employers have an important role to play here as well, by acknowledging the potential of their workers across all age groups and committing to retraining. McKinsey Global Institute’s findings indicate that up to 220 million Chinese workers – or 30 per cent of the workforce – may need to transition between occupations by 2030.

More importantly, while AI and automation pose a threat to the current workforce, necessitating upskilling, they may also hold the key to overcoming China’s demographic challenge. According to McKinsey, AI has the potential to add $2 trillion to China’s economy, primarily by enhancing worker productivity.

This benefit is vital in light of China’s dwindling labour force – AI’s capacity to bridge this shortfall could be indispensable. Recognising this, China is at the forefront, leading the world in industrial robot production and automation, as well as multiple efforts in embracing the potential of generative AI.

Nevertheless, we must remain cognisant of the potential economic upheaval and social disparities these technologies may engender. Used properly, they have the capacity to level the playing field and uplift productivity. But the risk of technology and AI widening the gap between the haves and have-nots and creating even more social disparity is real. China’s demographic conundrum, magnified by its vast population and regional inequalities, is daunting.

We should be optimistic. By leveraging technology, China has made remarkable strides in its economic development, elevating hundreds of millions from poverty. There is no reason technology should not again be the solution to China’s looming demographic challenge.

Joe Ngai is the chairman of McKinsey & Company’s Greater China region