Aging population + shrinking workforce = retirement funding challenges. Many countries face this equation, and the fact that the world’s most populous one is among them underscores how widespread that problem has become. Recent research outlines China’s problem and what the likely responses to it may be.
By July 2013, China’s estimated population reached more than 1.3 billion. The government has followed tough policies to control population growth for more than 30 years; that approach has succeeded, but with that have come unintended circumstances. These include a shrinking workforce, which is increasingly ill-timed as the average age of the population rises. This means more and more retirees that younger workers will have to support.
China’s retirement age exacerbates the situation: The mandatory retirement age is 50 for women and 60 for men. At the same time, according to the CIA World Factbook, life expectancy in China in 2013 was 73 for men and 77 for women.
According to Bloomberg News, Vice Minister of Human Resources and Social Security Hu Xiaoyi has indicated that the government recognizes the difficulty this poses. Xiaoyi said in December that the retirement age is likely to rise by about five years by 2020. A majority of analysts told Bloomberg that they agree that retirements will begin at those ages by that year, if not even older.
The timing could not be better, given pension shortfalls China’s official Xinhua News Agency has reported. In China, governments as well as private-sector employers provide pensions; however, this coverage does not necessarily translate to greater solvency.
Employees in China recognized at least two years ago that all is not well regarding retirement planning and readiness, according to Mercer. A study the HR consulting firm released in September 2011 reported that fewer than half of the employees in China whom it studied — 45% — said they were satisfied with their retirement benefits. Even fewer — 41% — said the entity for which they worked was doing enough to help them prepare for retirement. The Mercer study does show that employees there are aware of the importance of retirement savings and value retirement benefits, which is a kernel of heartening news.
Bloomberg says that the Chinese government is not limiting its efforts to address the problem to raising the retirement age in order to delay paying retirement benefits. The government also seeks to foster stronger economic growth that will better generate income that can be set aside for retirement, encourage migration to cities and relax China’s one-child policy, at least in part to bolster the size of the workforce than can help support an aging population.
John Iekel is a writer/editor for ASPPA and its sister organizations, including NAPA Net.
