Contraction or expansion? Impact of population aging on corporate employment in China

Amid demographic shifts and rising labor costs worldwide, an important question arises: does population aging constrain corporate employment? This study uses panel data from A-share listed companies in China spanning 2007–2022 to examine the mechanisms through which aging influences enterprise employment. The findings reveal that population aging negatively impacts corporate employment, which is particularly pronounced for labor-intensive firms, those with low research and development investment, and nonsuperstar firms. Mechanism analysis indicates that the employment decline is primarily driven by factor substitution, reduced production scale, and reduced labor investment efficiency. We also extend the analysis to income distribution, determining that aging weakens firms’ monopsony power in the labor market. By exploring demand-side economic consequences of aging, this study offers a theoretical basis for refining labor market policies and employment stability. • This paper examines the impact of population aging on labor employment from the demand-side perspective. • The findings reveal that population aging exerts a negative effect on corporate employment levels. This impact is particularly pronounced in labor-intensive firms, those with insufficient R&D investment, and non-superstar companies. • Mechanism analysis indicates that the decline in employment is primarily driven by factor substitution, reduced production scale, and diminished efficiency in labor investment. • Furthermore, the paper extends the analysis to income distribution and finds that aging weakens firms’ monopsony power in the labor market.