China has one of the youngest retirement ages in the world, which is becoming a major problem for a steadily aging country.
The official retirement age for men is 60. Women in managerial positions have a retirement age of 55, while workers can retire at 50. In many other countries, leaving the labor force at 65 is the norm; Earlier, gender-specific retirement ages in China have been in place since 1951, when the country’s life expectancy was below 50. (It’s now 77.)
China’s pension systems are significantly underfunded for the growing number of people who will be retiring in the coming years, and the costs of maintaining this net will become prohibitive if people can continue to retire as soon as they currently do. Last year, China’s 14th Five-Year Work Plan outlined how it intends to address the pension problem, including raising the retirement age.
When discussed in the past, this idea has proven unpopular with young people, who fear it will delay their own work opportunities, as well as older people, who are anxiously awaiting benefits. But with a shrinking working-age population, it makes sense that China is trying to keep experienced workers in the workforce — and contributing to a welfare system — for as long as possible.
Pension problems in China
China is reforming its pension management and starting to encourage private retirement savings. Yesterday (April 21), the Chinese cabinet (April 21) announced that people would be allowed to contribute up to around $1,800 a year on top of their mandatory contributions, although it’s unclear when this will start. For now, government funding is essential.
Pension systems are underfunded in part because local governments rely on current contributions to pay older generations of state employees – who themselves did not have to contribute – rather than reserving this money for future installments. Company contributions to employee pensions are already high, and in 2020 the state’s main pension fund recorded its first annual deficit after the government allowed companies to cut contributions as a disaster relief. pandemic.
These shortcomings, coupled with growing evidence of China’s rapidly aging population, bring new urgency to the conversation about retirement age. China has not yet set a timetable for changing it, but said the change would be “gradual” and voluntary. This probably means starting by experimenting at the regional level. In March, the coastal Chinese province of Jiangsu, neighboring Shanghai, launched a pilot program (link in Chinese) to encourage workers to voluntarily delay their retirement, if the company and the employee agree. Other provinces sounded out public opinion in meetings with employees from all sectors last year, and several are now drafting rules for their own trials, according to the state trade publication, China Economic Weekly (link in Chinese).
Also unclear is whether China intends to standardize the retirement age for men and women. The current system truncates women’s working lives and reduces the money they have in retirement because they have contributed to the system for fewer years.
China’s Childcare Challenge
A better pension system isn’t the only thing China will need if it wants to raise the retirement age. Retired workers perform a key function for their children: keeping children safe and free. This means that delaying retirement could incidentally harm another of China’s goals: getting young women to have more children.
“There is a lot of resistance to changing the retirement age,” says Ye Liu, a sociologist and senior lecturer in international development at King’s College London. “People want to retire earlier. One of the main reasons is to take care of their grandchildren…women in the one-child generation really rely on the support of parents and in-laws for childcare.
Jane Li contributed reporting.