Why raising retirement age is good for China
China reportedly wants to postpone the retirement age.
If the authorities raise retirement age by one year, the nation’s gross domestic product growth rate will increase by more than 0.5 percentage points according to studies.
At present, those who have reached the retirement age set by the state have to retire.
That has led to the wastage of human resources.
China has 215 million elderly people defined as those aged above 60, nearly 16 percent of the population, according to the China National Committee On Aging.
It’s estimated that the nation’s aging population will reach 418 million between 2015 and 2035.
According to the Ministry of Civil Affairs, China will add 10 million senior citizens on average each year in the next two decades.
By 2050, the elderly population will account for one-third of the total.
By that time, China’s old population will exceed that of all developed nations combined.
However, China has set the world’s lowest retirement age.
At present, China's official retirement age for most men is 60. For women, it is 55 for civil servants and employees of state enterprises, and 50 for others.
On average, the retirement age in China is below 55 compared with 65 in most other countries.
About 25,000 people retire each working day according to reports
As such, the dependency ratio has dropped to the lowest level in seven years, according to a report by the Ministry of Human Resources and Social Security last year.
Delaying the retirement age is, therefore, a practical solution to ease the pressing issue of aging.
An adjustment also makes sense because the existing mandatory retirement policy was set in 1978 when China’s average life expectancy was 68.
However, China’s average life expectancy had reached 76.1 by the end of 2015, close to the 78 in developed nations, according to data from World Health Organization.
Average life expectancy in major cities such as Beijing and Shanghai is 80.
But will the postponement of retirement age lead to vicious competition between the elderly and young people?
Not if the elderly are encouraged to work in sectors that face severe labor shortages such as community service and elderly care, which are typically unpopular with young workers anyway.
China’s working population peaked at 925 million in 2011 and started to contact in 2012 by 3.45 million.
Keeping the status quo, the nation’s working force is likely to fall by 7.6 million every year from 2030.
And the total working population will slump to 700 million by 2050. Sustained contraction in labor supply will seriously slow economic growth.
Experts say if China gradually raises its statutory retirement age over the next five years, it would boost the urban workforce by an extra two to three million people, offsetting the impact of population aging.
This article appeared in the Hong Kong Economic Journal on Sep 26
Translation by Julie Zhu
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