China Approves Plan To Raise Retirement Age From January 2025

China approves plan to raise retirement age

What does this mean for China's economy and workforce?

On February 24, 2023, China's top legislature approved a plan to gradually raise the country's retirement age from January 1, 2025. The changes will see the retirement age for men increase from 60 to 65 and for women from 55 (for cadres) or 50 (for workers) to 60.

Why is China raising the retirement age?

The Chinese government has stated that the increase in the national pension is due to a number of social and economic challenges, including a rapidly aging population and a shrinking workforce. In 2022, the number of people aged 65 and over in China reached 209 million, or 14.9% of the total population. This number is projected to increase to 300 million by 2050.

At the same time, China's workforce has been shrinking in recent years due to a decline in the birth rate. In 2022, the number of people aged 15-59 decreased by 6.7 million to 873 million. This trend is expected to continue in the coming years, putting a strain on the country's economy and social security system.

What are the potential impacts of raising the retirement age?

The change in the retirement age will have a number of impacts on China's economy and workforce.

• Reduced labor force: The increase in the retirement age will reduce the size of China's workforce by an estimated 20 million people by 2050. This could lead to a slowdown in economic growth and a shortage of skilled workers in some sectors.
• Increased pension costs: Raising the retirement age will also increase the cost of China's pension system. The government has estimated that the changes will increase pension spending by 12 trillion yuan ($1.7 trillion) over the next 15 years.
• Increased female labor force participation: The increase in the retirement age for women is likely to lead to an increase in female labor force participation. This could help to offset the decline in the male workforce and boost economic growth.
• Improved health and well-being: Some studies have shown that people who work longer have better health and well-being in retirement. This is likely due to the fact that work provides a sense of purpose, social interaction, and physical activity.

What are the challenges of raising the retirement age?

Raising the retirement age will also present a number of challenges for China. These include:

• Age discrimination: There is a risk that older workers will face age discrimination in the job market. Employers may be reluctant to hire or promote older workers, who may be seen as less productive or less adaptable than younger workers.
• Job displacement: The increase in the retirement age could lead to job displacement for older workers. As younger workers enter the workforce, older workers may be forced to retire earlier than they would like in order to make way for them.
• Pension adequacy: The increase in the retirement age will also need to be accompanied by reforms to ensure that the pension system is adequate to support retirees. The current pension system is based on a pay-as-you-go model, which means that current workers pay for the pensions of current retirees. As the population ages, this system will become increasingly strained.

Conclusion

The decision to raise the retirement age in China is a complex one with a number of potential impacts. It is important to weigh the potential benefits and challenges of the changes carefully in order to ensure that they are implemented in a way that is fair and sustainable.