Declining pension budgets

The country, which currently has among the world’s lowest retirement ages is facing significant pressure to dole out pensions. The pensions are administered at the provincial level with at least 11 of China’s 31 provinces being already burdened with high deficits. This step would allow older workers to stay longer at work by delaying pension payouts. If they continue at the current rate, the state-run Chinese Academy of Sciences sees pensions running out by 2035.

Increased burden on the employed

The decline in pension budgets is compounded by the pressure on a decreasing pool of employed workers to support the retired population. Reuters reported that each Chinese retiree is now supported by the contributions of five workers, half of what it was a decade ago.

Increasing life expectancy and an ageing population

China’s life expectancy rose to 78.6 years in 2023, from about 44 years in 1960 (around the time the retirement ages were fixed) and is expected to increase further. The population aged 60 and older is expected to increase from 280 million currently to over 400 million by 2035. This can be credited in part to China’s one-child policy which remained in place from 1980 to 2015.

This is an archive article published on September 13, 2024

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Why is China raising retirement ages for its labour force?

The proposal to raise the country’s retirement ages is part of a series of resolutions adopted at the Third Plenum of the Communist Party, and would be the first such increase in 40 years

Workers at a port in Ningbo, China, on March 27, 2024. (Photo - New York Times/Gilles Sabrie)

Written by: Anagha Jayakumar

2 min readNew DelhiSep 13, 2024 12:50 PM IST First published on: Sep 13, 2024 at 08:01 AM IST

The National People’s Congress, the highest organ of government in China, is deliberating this week on a plan to raise the country’s retirement ages, currently among the lowest in the world.

The proposal could be approved as early as Friday and would mark the first ever increase in 40 years.

The proposal to raise the country’s retirement ages is part of a series of resolutions adopted at the Third Plenum of the Communist Party. In July, the CPC Central Committee had said, “The proposal to raise the country’s retirement ages is part of a series of resolutions adopted at the Third Plenum of the Communist Party.”

Currently the retirement age for men is 60. Women in factories retire at 50, while those in white-collar jobs retire at 55.

Further details about the proposed retirement ages have not currently been revealed.

Why is the government increasing the retirement age?

01
Declining pension budgets
The country, which currently has among the world’s lowest retirement ages is facing significant pressure to dole out pensions. The pensions are administered at the provincial level with at least 11 of China’s 31 provinces being already burdened with high deficits. This step would allow older workers to stay longer at work by delaying pension payouts.

If they continue at the current rate, the state-run Chinese Academy of Sciences sees pensions running out by 2035.
02
Increased burden on the employed
The decline in pension budgets is compounded by the pressure on a decreasing pool of employed workers to support the retired population. Reuters reported that each Chinese retiree is now supported by the contributions of five workers, half of what it was a decade ago.
03
Increasing life expectancy and an ageing population
China’s life expectancy rose to 78.6 years in 2023, from about 44 years in 1960 (around the time the retirement ages were fixed) and is expected to increase further.

The population aged 60 and older is expected to increase from 280 million currently to over 400 million by 2035. This can be credited in part to China’s one-child policy which remained in place from 1980 to 2015.

Concerns about the proposal

The proposal comes at a tricky time for China. While the need to increase retirement ages is imperative, the country is in the middle of a deflation cycle, marked by sluggish economic growth, falling investment and property prices, and most crucially, high youth unemployment at 21.3 per cent in June. For most citizens, resolving the employment crisis would be a higher priority.

The move could also expose the disparities among different sections of the working class. Blue-collar migrant workers have already expressed fears of further exploitation from the proposed policy, as they already struggle to find jobs that pay social security for 15 years, the prerequisite for earning a pension after retirement, and are forced to work well after retirement age without job security.