The government wants to raise the retirement age to 65 by 2045. But China’s pension system is already not working as it should. Civil servants and employees have regular social security coverage, but those who commute to work in the city from rural areas face discrimination. Young people are also concerned about high unemployment rates.
Beijing () – The ageing and shrinking of the working population are putting an increasing strain on China’s pension system, which, on current trends, could run out of social security resources by 2035. Despite the pension reform carried out in 2021 to raise the retirement age to 65 by 2045, there are a number of problems and disparities among workers, according to an analysis by the National Institute of Statistics and Geography (NIGGE). China Labour Bulletinand workers, self-employed workers and young people entering the workforce have expressed some opposition to the measure proposed by the government.
In China, men can retire at age 60 and women between 50 and 55, provided they have made at least 15 years of contributions. But there are huge disparities between urban workers, employees in public agencies and state-owned enterprises, and migrants from rural areas: the percentage of urban workers who retire at age 50 is 63.4%, double the 31.1% of those from the countryside.
This is due to differences in pension coverage between categories of workers, which have remained substantially unchanged over the years. Indeed, city workers were previously not required to pay annual social security contributions, but were nevertheless guaranteed a pension and medical coverage. Even after the transition to the employment contract system in the 1990s, the situation remained unchanged and early retirement pensions were also granted.
Instead, immigrant workers are discriminated against by the system.hukou“, according to which services, including social security, are provided based on place of residence. At the end of 2022, although the population living in the city was 65%, only three-quarters had a hukou urban. According to estimates by Tsinghua University, this means that around 200 million people do not have the right to access basic services.
In addition, workers from rural areas are often paid in cash. According to 2017 data, only 35% of migrant workers had regular employment with a contract. The problem is particularly felt in the construction sector, where workers are called up on a daily basis (often waiting in the street to be picked up by trucks that take them to work) and therefore have no form of social security.
In these cases, if workers receive anything from their employers at the end of their careers, it is very small amounts, such as 174 yuan (25 dollars) per month, compared to 3,326 (460 dollars) for an urban employee. Workers in the so-called “gig economy,” such as delivery drivers, also in most cases do not have any form of social security coverage, sometimes simply due to a lack of information. A reality that, according to the China Labour Bulletin, will continue to grow in the near future.
Another discrimination affecting older workers is that finding factory work after the age of 40 is almost impossible in China, and if a worker is dismissed without having completed 15 years of seniority, he or she runs the risk of not having access to a pension. And he or she will have to continue working without a legal employment contract.
In short, all these problems translate into one reality: many people continue to work after reaching retirement age, despite the current regulations that prevent companies from legally hiring people over 60 years of age. And therefore, those who work beyond retirement age do so illegally and without the possibility of continuing to pay contributions.
These difficulties were compounded by the economic crisis that began in 2020. Today, many Chinese people, especially those who are self-employed, prefer to pay only 15 years of contributions to access the minimum pension, or not pay them at all to have more money available.
Raising the retirement age is therefore viewed with suspicion: workers fear that they will be forced to work longer, giving up an amount of money that they doubt will bring them benefits in retirement. This mistrust is also shared by young people, who fear that the youth unemployment rate, currently at 15%, will continue to rise if ever older workers continue to fill the available jobs.
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