Raising Retirement Age Won't Avert the Aging Crisis
By YI Fuxian
Yi Fuxian (易富贤) is a demographer and obstetrics and gynecology (OB/GYN) researcher at the University of Wisconsin-Madison and the author of the 2007 book Big Country with an Empty Nest, which criticized China's birth policies. The book was banned in mainland China from the time of publication until 2013 when a Chinese government press published a new edition and promoted the book.
【Editor’s Note： The Chinese government plans to gradually raise the retirement age starting in 2025 to address its aging population. Male, white-collar, and blue-collar workers will see their retirement ages increase over 15 years. However, this measure may be insufficient to avert the impending pension crisis, delayed by years of demographic mismanagement rooted in the one-child policy. The 1955 retirement age structure was set when China had a much younger population. Despite early warnings about the demographic crisis, resistance from influential family planning policymakers delayed reforms. The slow implementation of pension reforms stems from concerns about unemployment, overpopulation, and political unrest. With fewer workers per retiree, China's aging crisis is set to worsen by 2050. Women, who often live longer and have fewer job opportunities, face additional challenges. Without significant adjustments, the country risks a vicious cycle of declining birth rates and an unsustainable pension system, leading to growing economic and social instability.】
The Chinese government has approved a plan to gradually increase the statutory retirement age for male workers, female white-collar workers, and female blue-collar workers over fifteen years, beginning in 2025, from 60, 55, and 50 years old, respectively, to 63, 58, and 55. However, this policy comes too late and with too little force, insufficient to mitigate the looming aging crisis. It merely postpones the political time bomb for the next administration to deal with.
How Did the Pension Crisis Come About?
China's current statutory retirement age was set in 1955. At that time, the median age was only 22, and those aged 60 and older accounted for just 7% of the population. For every elderly person aged 65 or older, there were 11 individuals in the 20-64 labor force, and the life expectancy at birth was only 47 years. China's demographic structure remained essentially unchanged until 1980. Thus, when the one-child policy was implemented, people were convinced by the promises and propaganda that there would be no future pension crisis, and that "family planning is good, the government will provide for old age." When I first called for an end to the family planning policy in 2000, I faced overwhelming opposition and criticism.
In 2004, China Economic Report (《中国经济报告》), a publication under People's Daily (《人民日报》), published my article, "Who Will Provide for the Elderly?" (《老有所养，谁来养？》). It caused a sensation, was reprinted by major media outlets, and was ranked the eighth most important financial news story of the year by NetEase Finance.
Later, I learned that some government departments had been paying attention to my views as early as 2000, which helped influence the national population development strategy launch in 2004. Unfortunately, the group responsible for this was led by Jiang Zhenghua (蒋正华), former deputy director of the National Family Planning Commission, and Song Jian (宋健), a key proponent of the one-child policy. This group included almost all official demographers. In 2007, they published a report recommending the continuation of the one-child policy.
The Ministry of Finance and the Ministry of Social Security were the most concerned about my views, as they had a direct understanding of the financial challenges posed by pension shortages. Then-Minister of Finance, Jin Renqing (金人庆), took five of my internal reports. Government departments were quite frustrated with the Family Planning Commission, which had become a powerful interest group. In 2009, there was even consideration of bypassing the Family Planning Commission and mainstream demographers to organize discussions on adjusting population policies, inviting me to participate. However, this plan was eventually shelved, as the Family Planning Commission's influence was too great.
Why Has Pension Reform Been So Slow?
The Ministry of Social Security has long been aware of the pension shortage crisis. In 2008, they considered raising the statutory retirement age to 65 by delaying it one year every three years. However, at the time, the one-child policy was still in effect. It was as though they were trying to stop the bleeding without first putting down the knife—logically incompatible. At the Third Plenary Session of the 18th Central Committee of the Communist Party of China in 2013, the government announced the "gradual" implementation of a policy to delay the retirement age while introducing the two-child policy for couples where one spouse was an only child. In 2014, before the full implementation of the two-child policy, the Ministry of Social Security rushed to introduce a plan to delay retirement age and intended to officially implement it in 2017.
The delay in pension reform may be due to three reasons:
1. A lack of understanding at the top about the severity of the demographic crisis. In 2012, Cai Fang (蔡昉) and 16 other leading demographers warned that a universal two-child policy would raise the fertility rate to 4.4, and even a selective two-child policy could raise it to 2.4. Zhai Zhenwu (翟振武), president of the China Population Association, similarly warned that a universal two-child policy would increase the fertility rate to 4.5, with 49.95 million births annually. After the selective two-child policy failed, the National Health and Family Planning Commission recommended a universal two-child policy, predicting the fertility rate would reach 2.09 in 2018 and stabilize at 1.75 by 2023 and 2050. However, after the failure of the universal two-child policy, the government did not abandon family planning but instead implemented a three-child policy in 2021. According to Economic Daily (《经济日报》), the three-child policy "can largely ensure the long-term balanced development of China's population," while "completely lifting birth restrictions is not feasible" due to concerns that it would "lead to excessive population growth, repeating the rapid growth seen in the early years of the People's Republic." Even by 2021, the top leaders were more concerned about overpopulation than the pension crisis. It wasn't until now, with an official admission that the fertility rate in 2023 was only 1.0 and just 9.02 million births, that the gravity of the crisis became undeniable.
2. Concerns over unemployment. The reduction of young consumers due to the one-child policy has severely diminished domestic demand, leaving China with over a hundred million "surplus" workers and serious unemployment pressure. The economy is heavily reliant on exports for employment. Delaying retirement would only exacerbate unemployment.
3. Postponing the political time bomb. History shows that delaying retirement is unpopular. In 2011, the UK's pension reform sparked a strike involving 2 million public sector workers. In France, a plan to raise the retirement age from 62 to 64 led to the most significant strikes in 25 years from 2019-2020, with another massive protest in 2023 involving millions. In 2018, Russia's pension reforms, which raised the retirement age for men from 60 to 65 and women from 55 to 63, also sparked nationwide protests. China currently has the earliest retirement age, and its aging crisis will be more severe than in major developed countries with a later retirement age. This process will undoubtedly lead to protests and even unforeseeable political crises.
Delaying reform was once an option, but now it is no longer possible. On the one hand, the issue has become urgent as local governments face financial pressures. On the other hand, the demographic situation has become clear: the world's lowest fertility rate cannot sustain the current pension system.
Some ask why such a significant policy was rushed without sufficient public debate. The answer is twofold: first, pension reform is dictated by demographic structure, not by public opinion; second, the situation has been delayed for so long that there is no time left for discussion.
Women: Deprived of Opportunities in Youth, Forced to Work in Old Age
The UK previously set the retirement age at 65 for men and 60 for women. In 2011, it was reformed, raising the retirement age for women to 65 to match men. Now both men and women retire at 66, and the age will be raised to 67 between 2026 and 2028, and to 68 between 2044 and 2046. Some think tanks have even recommended raising it to 71 for those born after 1970.
In the U.S., those born after 1960 must wait until 67 to receive full retirement benefits, and further increases are expected in the future.
In 2020, China had five workers for every person aged 65 and older, while the UK, Russia, and the U.S. had 3.1, 4, and 3.7 workers per retiree, respectively. Currently, Chinese urban retirees enjoy "unprecedented and unreproducible benefits," even giving rise to the unique phenomenon of "square dancing" in public spaces. However, by 2050, China will have only 1.5 workers for every retiree, compared to 2.2, 2.3, and 2.4 in the UK, Russia, and the U.S., respectively.
According to this pension reform plan, by 2040, China's retirement age for men will be 63, and for women, it will be 55 or 58. Will the population structure at that time support such a retirement age? The demographic structure has more authority than public opinion or politics. If the government suddenly decides to delay retirement without much discussion now, it can just as quickly do so again. In the UK, young people can barely hope to retire before 70; will young people in China retire with dignity in their early 60s?
Failure to delay retirement will result in a brutal competition between the welfare of the elderly and the survival of unborn children. The latter, of course, have no voice, and the consequence will be that young people cannot afford to have children. Fertility rates will continue to decline, exacerbating the aging crisis and plunging the country into a vicious cycle.
Some argue that China's pension crisis is due to an imperfect pension system. In truth, the essence of retirement is not "money to support the elderly," but "people to support the elderly." Labor is the flour; the pension system is merely the technique of baking bread. Even if the retirement age is not delayed, with only a meager pension, the elderly will still be forced to fend for themselves.
Women are the greatest victims of aging, as they tend to live 6-7 years longer than men and are usually younger than their husbands. Pension shortages have forced elderly women back into the workforce. For example, the employment rate of women aged 60-64 in Finland, Japan, and Germany has risen from 16%, 39%, and 10% in 1995 to 64%, 64%, and 62% in 2023. Some Japanese women, who worked little in their youth, are now compelled to seek employment in old age. China's family planning policy denied women the opportunity to have children in their youth, and in old age, they will find themselves with no means of livelihood.
Originally published by Radio Free Asia in Chinese (自由亚洲电台)