Here’s a story we’ve heard before: revenue in pension accounts falling short of expectations; the government considering reforms to ensure the system remains solvent; concerns that the changes might reduce opportunities for younger workers to find jobs.There’s one detail about this story that’s different, however: it comes from China. The retirement age in China was set in the 1970s, when life expectancy was far lower than it is today. Men were allowed to retire at 60, women at either 50 or 55, depending on the nature of their job. But like their American and European counterparts, government officials in China are finding out that the arithmetic simply doesn’t add up.The English-language China Radio International has the story:
The annual pension report for 2011 indicates that the revenue in the public and individual pension accounts in 14 provinces and municipalities fell short when it came to paying the pensions and the deficit was almost 70 billion yuan. It is unrealistic for the central coffers to always subsidize the pension funds in the long run. Thus, extending the retirement age seems to be the best solution for filling the void. The extension would add 4 billion yuan to China’s pension fund annually and cut expenditures by 16 billion yuan.But some worry that extending the retirement age will reduce the opportunities for young job seekers. The number of university graduates will be around 6.8 million this summer. The Chinese Academy of Social Sciences estimates that more than 800,000 will remain unemployed upon graduation, not including unemployed graduates from previous years. The extension of the retirement age will make it even more difficult for them to land a job.
It’s often overlooked that China’s old age problem is much worse than America’s due to the one child policy. With fewer workers to support large numbers of old people, China faces a problem unique in the history of economic development: it may get old before it gets rich. A generous social security system has traditionally been the preserve of wealthy countries.Older Chinese people are well aware of this situation; one reason why many Chinese save so industriously is because with only one child and a weak government safety net they know that only their own thrift can protect them from want in old age. The one child policy was one of the most extraordinary exercises in social control in the history of the human race. Few governments have ever tried to control such an intimate personal decision on such a broad scale. At times the policy has been enforced harshly and brutally; the leaders who made this decision, however, believed that this was the only way to bring the country out of some of the most shocking poverty in the world.Maybe, maybe not, but coping with the consequences of the one child policy is going to be one of China’s biggest social issues in the decades to come.