Deepshikha Maan, Jadetimes Staff
D. Maan is a Jadetimes news reporter covering Asia
China plans to progressively increase the retirement age in response to the ageing population and pension issues
As China faces the challenges of a rapidly ageing population and increasing strain on its pension system, it will gradually increase its retirement age for the first time since the 1950s. Adopted by the highest legislative body on Friday, the decision signifies a significant measure to tackle the demographic issues of the country and guarantee the long-term viability of its social security system.
The reform will entail a gradual escalation in retirement ages, commencing on January 1, 2025, and taking place gradually over the following 15 years. China's today retirement ages, which are among the lowest globally, will be progressively increased for both males and females in various employment sectors.
Notable Modifications to the Retirement Age
For women, the legally mandated retirement age will progress from:
50 to 55 for individuals employed in blue-collar occupations
For women in white-collar jobs, the range is between 55 and 58.
The retiring age for males will increase from 60 to 63. Gradually, these modifications will be implemented, with retirement ages rising at regular intervals until 2039. Premature retirement before reaching the statutory age will be prohibited, however employees are permitted to postpone their retirement for a maximum of three years, as stated by the state media. And starting in 2030, workers will be required to make larger contributions to the social security system in order to qualify for pensions. In order to get their pension benefits, individuals will be required to have made payments for a minimum of 20 years by 2039.
Rationale for the switch?
In response to an imminent demographic catastrophe, the change is being implemented. Due to China's fast population ageing, the nation's pension fund is experiencing considerable pressure. In 2019, the Chinese Academy of Social Sciences forecasted that the primary state pension fund may deplete its funds by 2035, a duration that was established prior to the economic recession triggered by the Covid-19 outbreak.
China's formerly thriving population has been experiencing a downward trend, as the country has documented its second consecutive year of population diminishment in 2023. Simultaneously, the mean life expectancy in China has increasing to 78.2 years. The World Health Organisation (WHO) predicts that by 2040, around 402 million individuals, more than one-third of China's population, will be aged 60 and beyond. Compared to 254 million in 2019, this is a significant surge.
As part of wider initiatives to protect the nation's social security system in response to these issues, the proposal to increase the retirement age is being considered. A declaration from the Ministry of Finance said that the policy adjustments are derived on a thorough evaluation of China's average life expectancy, health status, demographic composition, educational attainment, and labour availability.
Economic Ramifications and Labour Force Allocation
In response to China's pressing need to tackle its declining labour force, the new policy is implemented. Approximately 300 million individuals, now aged 50 to 60, are projected to permanently withdraw from the workforce during the next ten years. This demographic, constituting the most significant portion of China's employment age population, is nearly equal in magnitude to the whole population of the United States.
The declining number of young people joining the labour market in China poses a dual challenge: a potential deceleration in economic growth and the requirement to sustain a growing population of seniors. The government's proposal to increase retirement ages is strategically designed to prolong individuals' employment, alleviate the burden on pensions, and enhance economic productivity.
General Public Response and Apprehensions
Although the government claims that the adjustment of the retirement age is essential for ensuring long-term economic stability, the public has responded with a variety of opinions to the announcement. There has been widespread discontent with the decision, especially witnessed on Chinese social media platforms such as Weibo.
A commenter expressed dissatisfaction with the increasing strain on middle-aged workers, who are already grappling with issues such as salary reductions and job instability, by stating, "In the next decade, there will be another legislation that will postpone retirement until we reach the age of 80." Another article echoing similar worries highlighted the challenges encountered by the jobless in securing fresh employment prospects.
Nevertheless, some individuals have admitted that the move in policy was unavoidable. "This was anticipated, there is not much to discuss," remarked one person. On average, men in the majority of European countries retire at the age of 65 or 67, whilst women retire at 60. Indeed, this will also become the prevailing pattern in our nation.
Notwithstanding the condemnation from the public, the administration seems determined to enforce the new retirement policy as a component of its overarching plan for achieving economic stability and reforming social welfare.
Prospects for the
With the implementation of these reforms, it is evident that China is facing a multifaceted demographic reality. As a result of a declining labour force, a growing elderly population, and rising life expectancy, the government is faced with limited alternatives except to increase the retirement age.
The incremental rise in retirement ages, together with obligatory contributions to the pension system, are intended to ensure the enduring viability of the nation's social security systems. The success of these reforms will rely on their implementation and their ability to achieve a balance between the requirements of China's elderly population and the expectations of its working age residents.
Chinese authorities are expected to encounter more obstacles in effectively handling the consequences of its demographic transition in the next years. However, with the implementation of appropriate policies, the government aims to effectively manage these obstacles while guaranteeing a secure and fruitful future for its citizens.
