China’s National People’s Congress and People’s Political Consultative Conference will debate the contentious proposal to ask Chinese workers in their 50s and 60s to work beyond the current retirement age of 60 amid reports that national pension funds are depleting.
The issue, now being weighed by the Ministry of Human Resources and Social Security, is expected to generate rare spirited debate at the annual “two sessions” political ritual. The proposal, if implemented as expected, will weigh on a whole range of other key issues including pension fund management, balancing the national coffers and job creation for the young.
A draft of the 14th Five-year Plan, a document loaded with all-encompassing economic and social development objectives for the next five years, states that the retirement age change must be implemented. The idea was first broached in 2012 but has not been passed until now.
The question now is what form the change will take. Options apparently on the table include deferring the universal retirement for male workers from the age of 60 to 65, with the age difference between male and female employees to be aligned during a buffer period.
Liu Wei, director of the National Council for Social Security Fund and a proponent of the move, has noted that the previous early retirement bar of 60 was promulgated in 1951 when nascent Communist China was still deep in poverty with an average life expectancy of less than 50 years. Life expectancy in 2019, he noted, was 77.
State media has helped to drum up awareness about the coming change. In a feature about key legislative agendas for the NPC and CPPCC sessions, Xinhua warned pension expenditure, which hit 5 trillion yuan (US$773 billion) in 2019, would eat more deeply into the national budget over the next five years.
The report noted that senior residents aged 60 or above would swell to 300 million in 2025 and 400 million in 2033.
Sun Yongyong, a senior researcher with the Chinese Academy of Social Sciences’ (CASS) Global Social Security Research Center who reportedly penned the draft of the phased scheme, has argued that letting experienced workers go in their “prime age” of 60 was “financially ruinous” and a waste of human resources. He has said patriotic Chinese people’s right to work, pay taxes and contribute to the country must not be deprived.
Sun has drawn flak from wage-earners amid revelations that senior staff at the CASS could retire at 55 and start receiving pension benefits that equal their emoluments.
His peers in pension and social security studies – some are also NPC and CPPCC deputies who will review the new retirement policies – have come up with a counter-proposal advocating even earlier retirement.
Li Jia, a research specialist with the Pangoal Institution, a Beijing-based semi-official think tank, told Caijing Magazine that demographic challenges of an aging population had been compounded by a sliding fertility rate.
“Young people may have less incentive to procreate when their parents have to stay in their jobs, instead of retiring to take care of their grandchildren in the family,” Liu said. He added that late retirement would also put a dent in vacancies available for fresh graduates and young job seekers in an already tepid job market and in turn dampen their desire to start a family.
Liu’s policy recommendation, contained in a report submitted to the NPC’s Social Development Affairs Committee, includes adjustments to retirement policies with other initiatives like relaxing birth control and encouraging childbearing.
He also argues that workers and their employers should have the autonomy to work out flexible arrangements among themselves. It’s not immediately clear how China’s pension funds would benefit from later retirements.
There is no disputing that the aggregate reserves of the nation’s provident and welfare funds are narrowing. A previous CASS actuarial report warned the total pension surplus could dry up by 2035.
It’s, of course, not clear that retirement-age workers are willing to work longer and make related contributions to pension funds rather than collect from them.
Sun, the CASS’s pension and welfare expert, said postponing retirement would not slash pension payments much as the government would have to pay more to retirees in the future.
Zheng Binwen, the director of the CASS’s pension research center and a CPPCC member, has sought to assuage people’s angst over the coming requirement to work longer.
He stressed to Xinhua that pension payments derived from recurrent expenditure funded by continuous contributions from the working population, whose size would remain stable, and that China still had ample financial wherewithal to make up for any emerging shortfall.In February, the eastern Jiangsu province made a one-off allotment of 15.5 billion yuan to replenish the province’s pension fund. More provinces are set to follow suit, Xinhua said.