Drawing on detailed data from 336 cities between 2000 and 2020, the research shows that China’s long-standing demographic advantage—once powered by a large working-age population—has been steadily overtaken by a new engine of growth: the skills of its workforce. For decades, economic expansion benefited from a favourable age structure, with a high proportion of working-age individuals relative to children and older adults. However, as population ageing accelerates, this advantage is diminishing, prompting a critical reassessment of what will sustain growth in the years ahead.
As lead author Hengyu Gu, Assistant Professor at Nanjing University, explains, past economic gains were closely tied to demographic conditions that are no longer guaranteed. “For decades, economic growth benefited from having many working-age people compared to children and older adults. But as populations age, this advantage is fading. We needed to understand what comes next, and whether growth can still continue.” This shift in perspective reflects a broader concern: whether ageing societies can maintain economic momentum without relying on sheer labour force size.
The study was motivated by a wider effort to evaluate China’s long-term economic prospects in the face of demographic transition. Specifically, it sought to determine whether improvements in workforce skills could offset the economic pressures associated with a shrinking and ageing population. The researchers examined not only the decline of the traditional demographic dividend but also the potential emergence of a new, skill-based foundation for growth, capable of sustaining productivity and innovation.
Findings from the study point to a clear turning point. China’s age-related advantage peaked around 2010 and has been in decline since, marking a transition away from growth driven primarily by labour force size. At the same time, the skill composition of the workforce has continued to improve, playing an increasingly central role in economic expansion. Importantly, the analysis reveals an interaction between these forces: a more favourable age structure can enhance the economic returns to skills. Together, these dynamics suggest that future growth will depend less on how many workers an economy has and more on what those workers are capable of doing.
To capture this transformation, the authors developed a novel approach to measuring workforce skills. Rather than relying solely on educational attainment, their method incorporates the actual tasks performed in jobs across different cities. This allows for a more nuanced understanding of the skill content embedded within local labour markets and provides a clearer picture of how the balance between high- and low-skill tasks contributes to economic performance. As coauthor Yingju Wu, a PhD candidate at Nanjing University, notes, “The key question was whether China can keep growing as its population ages and the workforce shrinks, and what will drive that growth in the future.”
Overall, the findings highlight a fundamental shift from a demographic dividend to a skill-based one, with significant implications for policymakers worldwide. As Guillaume Marois of the IIASA Population and Just Societies Program emphasises, ageing does not eliminate the growth potential but transforms its underlying drivers. Similarly, Wolfgang Lutz underscores that population ageing need not lead to economic decline if countries invest in skills and productivity. The message is clear: sustaining growth in an ageing world will depend less on expanding population size and more on enhancing the capabilities of the workforce.
More information: Hengyu Gu et al, China’s demographic dividend has moved from age-based labor supply to skill-based productivity, Proceedings of the National Academy of Sciences. DOI: 10.1073/pnas.2532906123
Journal information: Proceedings of the National Academy of Sciences Provided by International Institute for Applied Systems Analysis