Why China’s decision to extend the retirement age will not address fairness and sustainability issues
The controversy over China’s extended retirement age is a fresh reminder of the deep-rooted problems inherent in the country’s national income distribution system.
For many working Chinese, particularly those born in the 1980s and 1990s, Beijing’s decision to raise the retirement age by three years brings a sense of loss and betrayal. It means they have to work longer and pay more to get less from a major social contract.
An internet meme that went viral reflected Chinese millennials’ frustration over the government’s flip-flop in birth and pension policies: “When I was born they said there were too many; when I gave birth they said there were too few; when I wanted to work they said I was too old; and when I want to retire they say I’m too young.”
While increasing the retirement age is a global trend amid ageing populations and falling birth rates – and is always an unpopular move that triggers protests and unrest – the pain inflicted on China’s generation Y is particularly acute because of the country’s problematic policy design. A higher retirement age cannot address inherent unfairness and unsustainability in the country’s social welfare system.
One common complaint about China’s social welfare is that it is fragmented and unbalanced. The government started asking urban corporate employers and employees to contribute to a state pension system as far back as the early 1990s, but public sector employees were exempt from making pension payments until 2014.