Delayed Retirement:Pressure’s on Who?

Qiu Hui

The State Council ofthe People’s Republic of China recentlyissued guidelinesto promote thedevelopmentof nationalundertakings for the aged and improve the elderly care service system during the 14th Five-Year Plan period （2021-2025）. Thedocument indicated that Chinawould soon start nationwidepooling of basic pension fundsand gradually increasing theretirement age. The policies onraising the statutory retirementage in a phased manner are set to be rolled out officially during the 14th Five-Year Plan period.

Phases

After the proposal of raisingthe retirement age was included in the 2020 Report on theWork of the Government， localgovernments started solicitingpublic opinion. In 2022， policiesto gradually defer retirement willstart rolling out in cities.

According to a documenton measures related to basicenterprise pensions issuedby the Department of HumanResources and Social Securityof Jiangsu Province in January2022， insured employees needto submit an application andacquire approval from theemployer to defer retirement.The application is filed withthe administrative departmentof human resources and socialsecurity. Requested extensiontime cannot be shorter than one year. The measures went intoeffect on March 1， 2022.

Jiangsu thus became China’s first province to test postponing retirement for enterpriseemployees.

In January 2022， theHuman Resources and SocialSecurity Department ofShandong Province issueda document on specificregulations for enterprise andpublic institutions to raisethe retirement age for seniorprofessionals， making Shandong the first province to implementthe policies nationwide.However， professions qualifying for deferring retirement wererestricted to “technical type ofwork，” and only those with sub-senior or senior professionaltitles are allowed to voluntarilydefer retirement by one to threeyears.

Dong Dengxin， director of theInstitute of Financial SecuritiesofWuhan University， noted thatthe pilot efforts in several cities to postpone the retirement age arebeta testing methods to roll outnational policies. It would not take long for most Chinese cities toraise the retirement age according to a national action plan.

A national action plan to defer retirement age would makeadjustments on the standardsof statutory retirement age.Dong said that the efforts toraise the retirement age in aphased manner， as outlinedin the guidelines to promotethe development of nationalundertakings for the aged andimprove the elderly care servicesystem during the 14th Five-Year Plan period， would focus on detailed and elaborate measuresto avoid negative public opinion towards a longer working career.

“Flexible retirementregulations will allow peoplewith health issues to retire at the normal time or even earlier，” said Dong. “But people who are stillin perfect condition can chooseto work if they want. Raisingthe retirement age can facilitateoptimization of labor resources，increase the supply of wealthand， most importantly， relievepressure on young people to pay for social insurance.”

Dong added that Jiangsuand Shandong provincesare relatively economicallydeveloped and have greatermobility of labor resources，making them more suitablefor trial runs on raising theretirement age. Importantly， such measures tend to be more easilyaccepted in more developedcities.

Aging Population

China’s current policy onretirement was enacted in the1950s when the average lifeexpectancy was around 50years. In the late 1970s， the StateCouncil further clarified that the statutory retirement age for men， female office workers and femaleblue-collar workers was 60， 55 and 50 respectively.

With rapid socioeconomicdevelopment over the pastdecades， life expectancy hasnotably increased， and theaging population has become apressing problem. According to the seventh national population census in 2020， China has 264million people aged 60 yearsand above， accounting for 18.7percent of its total population，and the population over the age of 65 is about 190 million， 13.5percent of the total.

Many experts， including Dong， maintain that the retirement age in China is relatively low andvaries for different occupations.Raising the statutory retirementage is essential for tackling many of the problems associated withthe aging population.

Zheng Bingwen， director ofthe Research Center of WorldSocial Security at the ChineseAcademy of Social Sciences， has been calling to defer retirement age for many years. He hasargued that the problem of theaging population will persistfor a long time， and extendingemployment time is just onenecessary measure to mitigatethe negative impact of the agingpopulation.

In June 2020， Zheng noted that the old age dependency ratio in the 14th Five-Year Plan period （2021-2025） would be 10 percent higher than in the last Five-Year Plan period. From 2021 to 2025， China will enter a stage where two people in the labor force pay the pension for one retired person.

Zheng stressed that it is imperative to raise the retirement age because “pressure on payment of basic pension insurance will incrementally grow.” Zheng believes that deferring retirement is the most effective and direct way to reduce the deficit and maintain a balance between income and expenditure.

Raising the retirement age slowly and gradually also aligns with the national strategy clarified in the 14th Five-Year Plan to respond to the aging population. The basic principles are slow and gradual steps， flexible measures， encouraging people to defer retirement， and respecting personal decisions in the context of the national regulations.

Labor Market

The policy to defer retirement mainly affects employees who would legally retire at 60， 55 and 50 years old respectively.

“The retirement age will be raised in a phased manner， so it will only affect people retiring several years from now，” said Dong. The policy won’t apply to those now nearing retirement.

As early as November 2013， the proposal to study and make policies on gradually raising the retirement age was submitted at the third plenary session of the 18th Central Committee of the Communist Party of China. The Ministry of Human Resources and Social Security also includedthe proposal in its 13th FiveYear Plan issued in July 2016. Specific measures on how to defer retirement have undergone comprehensive discussion in industry and academia.

Some fear that keeping more of the senior labor force around longer will make things harder for young job seekers. Dong commented that raising the retirement age does not directly affect young people’s employment. Since the birth rate has been decreasing in recent years and the labor force has already registered negative growth， new entries into the labor force are relatively few. Dong predicted a labor shortage in the near future.

“Meanwhile， China is undergoing industrial and economic transformation， so new jobs are created by new business models， new technologies， and new industries，” said Dong. “If it’s a brandnew job， you don’t need to wait for a position left by a retiree.”

Dong added that mechanization and artificial intelligence have greatly lowered labor intensity， relieving work pressure and providing material and technological support for veteran workers to extend their careers. “People of any age with health issues will be exempt from the new policy and can retire on the previous schedule or earlier，” he said.

In addition， raising the retirement age will change ideas on sending people out the door just because of age. It will increase the supply of senior workers and hedge against an impending shortage of labor in industries such as senior care and community services. The policy of raising the retirementage will greatly facilitate an improvement in the structure of labor forces， an economic transformation， and industrial upgrading.

Sun Jie， vice dean of theSchool of Insurance andEconomics at the Universityof International Business andEconomics， called raising theretirement age a comprehensive and interlinked task. She saidthat it requires analysis of many aspects such as mandatory agelimits for the payment of socialinsurance， flexible regulationsfor retirement age， statutoryage to draw pensions and thepension replacement rate， aswell as supporting regulationsand public’s acceptance. Thepolicy needs to mesh withthe work force’s demands andsatisfy public expectations soas to promote the growth of theeconomically active population and better coordinate theemployment mechanism andthe pension system.

“As China’s economic growthhas embraced a new normal，development of cutting-edgetechnologies and high-qualityeconomic development havesignificantly influenced labordemand，” said Sun. “The labormarket has undergone profound changes， during which somework disappeared while new jobs emerged.

“In the short term， raisingthe retirement age willalleviate structural problems of employment， and in the longterm， it will tackle insufficientsupply of labor. China isaccelerating high-qualityeconomic development， so new technologies， new industries，and new business modelsare emerging quickly. In thiscontext， economic growth willboost employment， and youngpeople will continue to embrace promising job prospects.”