China's Social Dilemma: Retirement

Courtesy of King of Hearts, CC BY-SA 4.0 <https://creativecommons.org/licenses/by-sa/4.0>, via Wikimedia Commons

China’s top legislative body—The Standing Committee of the National People’s Congress—assessed and passed the bill for a delayed retirement age. They passed the bill in response to China’s sluggish economic growth, aging population, and low birth rate after COVID-19.

The plan was initially announced on July 18, 2024, at the Third Plenary Session of the 20th Central Committee of the CCP,  and the bill was submitted and passed by the Standing Committee of the National People’s Congress (NPC) on September 13, 2024. Typically, bills that are proposed by the Central Committee of the China Communist Party are subject to a number of consultations before they are submitted to the Standing Committee of the National People's Congress (NPC) for consideration. Delayed retirement was first proposed at the 18th conference of the CCP in 2012, but after repeated consultations the bill was not put into effect, nor was it submitted to the Standing Committee of the NPC. However, at the meeting of the NPC Standing Committee, following the Third Plenary Session on September 13, 2024, the bill was immediately passed, which is an uncommon occurrence.

The plan to delay retirement will be implemented gradually. Starting on January 1, 2025, over 15 years, the statutory retirement age for male employees will be extended from the original 60-63, and the age for female employees will be extended from the original 50-55 for normal female employees and from 55-58 for women in management positions. Additionally, the contribution period for social security, which refers to the time when one can start receiving a pension once the required amount of contributions has been made, has been extended from 15 to 20 years. The retirement age in China is significantly lower than in other countries, with the policy originating in 1951 from the Labor Insurance Regulations of the People's Republic of China. However, these regulations remain in place today.

The public opinion on this issue is divided. Supporters believe that the policy is an inevitable trend, while opponents claim that the changes will have negative consequences due to China's poor social security condition and highly competitive industry: “I may lose my job or even my life even before I retire.” said Wang Zhian, a former China investigative journalist. Wang believes that the incremental plan is to “calm the public’s latent sentiment and discontent.” Wang also projects that the policy will further raise the age of retirement in the future.

Based on China’s pension system, the fund of the pension is collected from employment. With the raise of aging problem, there are fewer laborers and more seniors who are waiting to collect their pensions. While the life expectancy was increased to 79 years in 2022, and the projected rate of seniors will reach 28% of the whole population by 2040, the Chinese population decreased by 2.08 million in 2023. In addition, the number of newborns in 2023 was nine million, with fewer births than deaths. With the birth rate lower than the death rate, China's population has entered a negative growth phase. This means that on average, each working young person has to provide for more elderly people in the future because there are more seniors and less laborers to provide enough funds for the pension system. 

The government has been attempting to enact other laws to make up for pension shortfalls in the Social Security system, allowing individuals and insurance companies to invest in personal Pension programs. The administration also plans to abolish the "dual-track" pension system by 2024, which means government employees no longer have their special fund for pensions. The new policy is expected to prolong the working period to fill the gap between the collecting and spending funds of China’s social security system—more people will be employed to provide social security funds, and fewer people will get their pensions in the future.

This strategy may be a resort to makeshift solutions. Some social media users claim that seniors “will occupy a longer time in their position, which indirectly squeezes employment opportunities for young people.” According to official reports in July 2024, without the data collected from enrolled students, the youth unemployment rate rose to 17.1%. Many young people think that this will reduce their job opportunities because more senior citizens will saturate the market. With fewer people employed, there is less money being put into the social security fund, and “while inflows may not change much, outflows will be delayed, buying time for local governments to close their budget deficits," explains Sheana Yue, an economist at Oxford.

 The implementation of the delayed retirement policy marks a significant step by the Chinese government in addressing the challenges of an aging population and economic pressure. As the policy gradually takes effect, its long-term impact on the labor market and social security system will be key areas to watch in the coming years.