Over the past several decades, Chinese laborers have typically opted for early retirement. However, this trend is set to alter.
The Chinese administration is about to alter the scenario as they legislation drafted on Friday, gets approved. This legislation aims to postpone retirement ages over a period of 15 years, starting from January 1, as per the state news agency Xinhua.
Before this legislation, men in urban areas could retire at 60 and receive pensions, women at 50 or 55 depending on their profession. This new legislation gradually raises the retirement age to 63 for men and 55 and 58 for women, respectively.
The legislation, endorsed by the country's most prominent legislative body following a signal from a significant Communist Party body in July, also declares plans to increase the minimal working period required for pension benefits from 15 to 20 years, with changes scheduled to start from 2030.
Additionally, this legislation offers flexibility in the retirement age, primarily for those who have completed the minimum working period.
This shift, which the government has considered for approximately ten years, is taking place as China's economy is slowing while the government confronts looming implications of an ageing population and a pension funding crisis.
This announcement has triggered widespread discussion and criticism on Chinese social media.
Some social media users have expressed hope that the changes aren't more drastic and that there is some flexibility. One comment on the Weibo-like social media platform garnered thousands of likes, stating, "As long as there are options to retire or not based on our will, I have no objections."
However, others have voiced dissatisfaction about delayed pension access and additional years of work, along with concerns about how this policy may strain China's already tough job market, where unemployment amongst young people remains persistently high.
"Delayed retirements mean you can't obtain your pension until you turn 63, but it doesn't imply everyone will have a job until then!" a user expressed.
Chinese state media recently praised this anticipated change as an urgent and essential reform for an outdated system, emphasizing how the previous policy had remained unchanged since the 1950s when life expectancies and education levels were both lower.
"The current retirement policy framework has remained unchanged for 73 years. Especially since the reform and opening-up (starting around 1978), the demographic, economic, and social landscape has drastically changed," demographer Yuan Xin was reported to have mentioned earlier this week.
According to Yuan, who is the deputy head of the China Population Association and a demographer at Nankai University in Tianjin, China's existing retirement age is incompatible with present "national realities" and the new normal of future economic and social development.
China's existing retirement ages are lower than those in numerous significant economies. The average standard retirement age across Organization for Economic Co-operation and Development (OECD) countries in 2022 was 63.6 years for women and 64.4 years for men.
Other countries have also grappled with managing the retirement age. Severe protests occurred in France in 2023 in response to the government's attempt to increase the retirement age from 62 to 64. In the US, a retirement reform debate is taking place, with increasing retirement ages and Social Security incentives for retirees who delay taking benefits until age 70.
Demographic and economic challenges
These changes are happening as China's leadership has grown increasingly concerned about the country's demographic challenges, which economists caution could lead China into the trap of "aging before becoming wealthy."
China's population has shrunk for two consecutive years, and its birth rate in 2023 reached its lowest point since the establishment of Communist China in 1949, despite the reversal of the country's one-child policy in 2016 and government initiatives to encourage childbirth.
China's elderly now account for more than 20% of the population, as reported in a report from the Ministry of Civil Affairs earlier this month, stating that 297 million people aged 60 and above were present by the end of the last year.
Demographers predicted that between 2030 and 2035, the elderly population will make up 30% of the overall population. It is expected to surpass 40% of the population by mid-century, making China a "super-aged society."
These predictions have prompted the government to intensify efforts to expand elderly care services and strengthen private-sector efforts to establish a "silver economy."
It has also increased focus on addressing the capability of China's pension system to manage a shrinking workforce alongside its burgeoning elderly population.
A 2019 report by the Chinese Academy of Social Sciences, a top government think tank, projected that China's state pension fund will run out by 2035 due to a dwindling workforce. The impact of long-term pandemic-related restrictions, which have diminished local government finances, may exacerbate the pension shortage.
In 2021, thousands of elderly people protested in several big cities against significant cuts to their medical benefits payments, fearing that local governments were drawing from their individual accounts to fill the gaps in the state pension fund.
Even for individuals of working age, finding employment remains a significant challenge following the pandemic and various government-led industry crackdowns in recent years. In July, the youth unemployment rate reached 17.1% for those aged 16 to 24 who were not students, and was 6.5% for those aged 25 to 29 that month, according to state media.
Employers continue to decrease hiring as the economy slows, and individuals, particularly in the tech sector, have noted age discrimination in hiring for individuals over 35.
The fresh guidelines also encourage the government to boost youth employment and business ventures, intensify the advancement of job positions for mature workers, and enhance the management and prevention of age discrimination in the workplace.
Credit for this report goes to Joyce Jiang from CNN.
This new retirement legislation in China, affecting both men and women, could potentially impact the world's retirement age norms, as it aligns China's retirement ages closer to average OECD standards.
As the world watches, China's moves to tackle its demographic challenges, such as an ageing population and a pension funding crisis, may inspire similar discussions and reforms in other countries facing similar challenges.
