China raise retirement age to address its declining population problem and ageing workforce from next year. It is the first time that China raise the retirement age, and the retirement age is one of the lowest among the biggest economies in the world.
The new policy has been approved by the Standing Committee of the National People’s Congress, which is the country’s law-making body, as reported by state-owned China Central Television (CCTV) on Friday. This comes just a day after a shocking announcement was made in the middle of the week that the policy was under a review. The retirement age will be raised in the next 15 years: for men – at 63, for women it would either be 55 or 58 depending on the kind of work they did during their career.
Currently China has a retirement policy established in the 1950s that states that men retire at 60, while women in labor-intensive industries retire at 50 and women in non-manual jobs retire at 55. These regulations were implemented when the life expectancy in China was approximately 40 years of age. However, due to people living longer than before and having a young demographic divergence, most specialists accept the need to increase the retirement age.
Addressing the Pension Fund Crisis
Xiujian Peng, a Senior Research Fellow at Victoria University, an expert in studying China’s population and economy, has pointed out the necessity of the change. In a recent interview, Peng pointed that at SKE we have many more person retiring which is a big risk on this pension fund. Finally it is high time to act really hard.
Demographically, it is evident that the ratio of aged persons in China has been rising at a very fast pace. According to the statistics, by the end of 2023, China will have more than 300 million population over 60 years of age. It is expected to reach 400 million by 2035, more than the population of the United States. Thus, there has been apprehension about the future of the public pension fund due to this increase in elderly citizens. The Chinese Academy of Social Sciences had estimated that if no changes are made, the pension fund would default in 2035.
Thus, there is a new monetary policy to reduce this fiscal burden: encouraging people to stay in the workforce for as long as possible. That means, under the new structure, the age that the worker is expected to retire depends on the year they were born, and the changes will be incremental in nature. For example, the man who celebrated his birthday on January 1, 1971 will retire on September 1, 2032, when he is 61 years and 7 months old. If a man was born in May 1971, he will be retiring at 61 years and 8 months in January 2033.
The above approach is taken over time with an aim of reducing the pressure on the workers or organizations to accept the emerging changes and new regulations. Nonetheless, the analysts argue that although this yard is correct, it will lead to short-term problems, especially in the existing economic conditions.
Economic and Social Implications
The Chinese authorities are already facing issues in the economic sphere, such as high indicators of youth unemployment and a decreasing rate of economic growth. It is hoped that these will be compounded by the recently agreed amendment to raise the retirement age in the short term as it will limit employment opportunities for young workers, and at the same time retain the older workers in the labor force for longer periods.
Yanzhong Huang, a senior fellow for global health at the Council on Foreign Relations, said that many countries with ageing populations face problems similar to what China is experiencing, including the United States. However, the situation is far worse in China and affects a greater number of people. At this point, Huang and other critics argue that fragmentation is evident in every corner of the globe. The population of the elderly is much bigger in China.
These include the following some of which include The following is a list of Key Risks/Issues affecting organization: 1. Overall, the births in recent years have significantly declined which means young workers are not likely to substitute the retiring generation in the workforce. China recorded a negative population growth for the first time in 2022, with the population decreasing by 850,000 people. Thus, in 2023, the human population has reduced even lower by the number of 2 million.
This demographic change has therefore led to an increased burden of supporting the elderly people on the working-age population. China’s dependence ratio, which is defined as the number of persons in a population of 65 years and above divided by the population of those below 65 years was 21. 8% in 2022. From this we can deduce that on average only about five employees are currently paying for the support of one retiree. With increase in this percentage, the number of workers per each retiree is likely to reduce thereby putting more pressure on the ailing pension systems.
China Retirement Age Increase: Public Reactions
Consequently some of the general public reactions to the new policy have been positive while others negative. Some have welcomed the change such as 52-year-old Beijing resident Mr Lu. For instance, Mr Lu is 57 and is going to retire at the age of 61 instead of the 60 years and he saw the reform in a positive light. ‘I think this is good our society is getting old and actually in the developed countries they have higher retirement ages’.
Some people, though, are not as excited about it as the proponents of the idea are. Thus, Li Bin, 35 years old and currently working in the field of event planning, shared feelings of disappointment regarding the idea of extending working years. She of course was aghast at her revised schedule of work, saying that ‘it is three years less of play time, I wanted to travel after retiring’. Still, she admitted it could have been worse as the retirement age for women in white-collar jobs has only been raised from 55 to 58 years.
There remain some negative comments regarding the policy; however, there are also some people who seem anxious about how the policy changes will affect them in the future. However, the discussion regarding the policy was once again heavily moderated as most of the comments on Xinhua’s news post only contained approximately 0.1% of the 13,000 comments.
China Raise Retirement Age
The reduction in retirement age by the Chinese authorities is a strategic measure to cope with problems of population aging and shortage of workforce. Although some problems are expected in the short term in terms of employment and the economy, it is regarded as the right decision to make in an effort to maintain the sustainability of the pension system.
As the Chinese society slowly ages and birth rates are gradually declining continuously, the government will have to make constant efforts to strike a balance between providing welfare to its citizens and prioritizing the economic progress. Finally, most of the experts seem to concur that this policy change is just the first step in a number of policy adjustments that China has to undertake in order to deal with demographic pressures and ensure a sustainable future.
Stay updated with latest trends on Hubsmate360.
