The Impact Of Workforce Aging On Labor Productivity And Its Theoretical Mechanism

The process of workforce aging in Western developed countries has a history of a hundred years.But that of our country is far faster than that of the developed countries.Living standerd in china has been improved since the openning up policy which has cut down the mortality rate.Meanwhile,in order to control the excessive popluation growth,China implemented a family planning policy in the last century.It has rapidly lowed the population growth and changed the age structure of Chinese laborforce.The two national policies has made China became an ageing country when China's GDP per capita was only about $800.Presently,the growth rate of Chinese laborforce is negative,and a tremendous change has been taken place in China's labor supply.The reduction of labor supply has gradually reduced the demographic dividend at the initial stage of opening-up policy.It will affect labor supply,workforce productivity,human capital,age structure structure,and social security.At the same time,it also has profoundly impact on our economy growth and people's livelihoodBased on the existing theories and literature,this paper discussed the impact of workforce on the base of differences exist in various regions of China.This paper utilizes the macro data from 2002 to 2015 as the sample of the study,and empirically analyzes the impact of the workforce ageing on the productivity in China.The results of this paper show that workforce ageing has a negative impact on labor productivity.Then,this paper analyzes the intrinsic mechanism of reducing the labor productivity due to the aging of labor force.In the subsequent study,the paper also find that the workforce ageing reduces labor output by reducing TFP and human capital.According to the regional sample,the central and eastern regions also exhibit the same result like that of full data : workforce ageing mainly reduces labor output by reducing TFP and human capital.However,the regression result of western region shows that the workforce does not have a significant negative effect on labor output and TFP.In order to discuss how to reduce the adverse effects of workforce ageing on TFP,control variables such as marketization index,R&D and medical progress are added to the model.Our study found that medical progress that increased human capital significantly delayed the adverse effects of workforce on TFP.The improvement of marketization is conducive to realizing the flow of resources from inefficient sectors to highly efficient sectors,which will increase the growth of TFP.This paper proposes corresponding policy recommendations based on the above findings.Firstly,the policy makers should promote the popularization of higher education,strengthen investment in human capital,and optimize the quality of the workforce.Secondly,more policies should be implemented in order to improve the medical and health conditions which can lengthen the life of human capital.Flexible retirement policy should be implemented based on different industries.Finally,marketization reforms should be implemented in the central and western China.In order to improve TFP growth,market should play adecisive role of the market in the allocation of resources.