China's new one child policy and its impact on the workforce availability.

In the recently concluded top legislator meetings China unveiled its ambitious five year plan. One of the key among it is the relaxation of the one child policy which was framed in the 1970's.

This one child policy has apparently helped china in a terms of averting an estimated 400 million births.It is difficult to say if this has helped the country or not. However it is certain that this has created a major demographic shift in china where the average age of the working class has steadily increased.

So the question here is whether this relaxation is going to bring a baby boom?.  Some statistical figures estimate that this would lead to about 1 million new births /year. However there a few things to note,

1. The implementation dates are left to provincial governments so a lot of this would be based on how these local provinces are going to react and implement this.
2. The policy is just " relaxed" and not entirely scrapped . The policy allows parents to  have more than one child especially if one of them were single child. Earlier it was applicable only if both were single or to some ethnic minorities.
3. Very often people forget that the if you pay a certain amount of fine to the government you still could have had more than one child, which basically meant that a lot of rich and middle class people had more than one children in china.  With the higher cost of education and lifestyles many are opting for one child even if they have an option for more than one children. I don't think this would change much with the new policy.
4. Though the government has put a lot of emphasis in creating job in rural areas, the key attraction for jobs is in metro cities like Shanghai or Beijing. Unfortunately the" Hukou" ( residential permit) system has not changed even in this new policy guidelines making it difficult for migration within the country.

Overall the country has reached what is called the  " Lewis turnover point" and any factory manager can tell you you that there is an overall surplus of demand for workers than the supply in that country. Though the country saw a drop of 18 year old children by one- fifth from 2000- 2008, the college enrollment tripled from 2.2 million to 6.6 million from 2000- 2010. This has resulted in a younger generation which wants to go beyond a "factory worker"  and would change the status of china from being called  the "world's factory" .

Though there are companies which still consider china as an LCC ( low cost country), this is fast disappearing and when there is a mismatch between what the new generation workforce wants and what the companies there set up shop for, you see very low levels of employee engagement and productivity. The latest survey from Gallup shows that the China with 6% employee engagement level is the lower in the whole world followed by India, both critical growth economies.