Legacy of one-child policy could have consequences for elderly welfare

A landmark study shows mainland's elderly still get significant support from their children, but the one-child policy could change that forever

PUBLISHED : Saturday, 01 June, 2013, 12:00am
UPDATED : Monday, 02 November, 2015, 4:11pm

Longstanding concerns that elderly mainlanders will be abandoned by their children as they move away from home appear to be unfounded - for the time being - according to a major new study by a team of international researchers led by Peking University.

The findings of the China Health and Retirement Longitudinal Study, the biggest-ever survey of middle-aged and elderly people on the mainland, shows that even when elderly parents do not live with their children, there is typically a child living nearby.

Only 38 per cent of mainlanders aged 60 and above live with their children, according to the study. But of those who don't, 60 per cent have at least one child living in the same immediate neighbourhood, while 25 per cent have a child living in the same county or city.

"We didn't realise the fact that so many adult children, who did not live with their parents, were living so close to them - even in the same neighbourhood," says John Strauss, professor of economics at the University of Southern California and one of the study's principal investigators. "Our work is among the first studies to show that."

The landmark study surveys 17,708 individuals in nearly 10,300 households, in 150 counties and districts in 28 of the mainland's 31 administrative regions. One person aged 45 or over in each household was interviewed along with their spouse. They will be followed up every two years; the second wave takes place this summer.

The extensive information gathered, ranging from socioeconomic data to physical and psychological health, provides policymakers and researchers with critical insights into the world's most rapidly ageing population.

"It's largely the sons - and the younger sons, not the daughters - who live with the parents," Strauss said.

Thirty-seven per cent of elderly mainlanders live with a spouse. Sixteen per cent live with other relatives such as children-in-law or grandchildren, and nine per cent live alone.

Children who live near their parents, and those who don't, tend to split the burden of providing financial support and spending time with the parents. "The children living very close provide more time than those living farther away," he says. "The ones living further away give more money."

These transfers of time and money from children to parents seem to play an important role. Last year, parents with supportive children received on average 1,700 yuan (HK$2,130), enough to cover 37 per cent of their living expenses. One in five elderly people send money to their children.

Among elderly who don't live with their children, only 53 per cent receive cash, indicating that a large proportion of elderly receive no financial support from children. Children tended to respond to their parents' needs; they would give more if the parents had less income.

Deep-rooted Confucian "filial piety", characterised by money and time spent by children on their parents and multiple generations living under one roof, has helped sustain an informal old-age security. But these traditional Chinese family values of old-age support are changing as households become smaller and society becomes more mobile.

Further, Strauss notes that in 10 to 15 years, people reaching old age will be likely to have fewer children due to the one-child policy, and the "the issue of family support is going to be more of a question mark".

At present, those aged 65 and older have between three and four children on average, while those aged 45 to 49 have fewer than two children.

There are significant differences in the social and economic conditions of urban and rural residents. Urban and rural status is based on whether an individual's official family hukou is non-agricultural (urban) or agricultural (rural).

The poverty rate, as measured by income, among the elderly is much higher than for those aged 45 to 59, at 29 per cent compared to 20 per cent. It is much higher for rural elderly (65 per cent) than in urban areas (11 per cent).

Using consumption (household expenditure per capita) as a measure of living standards, the study found 23 per cent, or 42.4 million, of the elderly lived below the poverty line. The rate is much higher - 29 per cent - for those with rural hukou, or residence permits, than for those with urban hukou (10 per cent). Consumption poverty is regarded as a better measure of deprivation and hence poverty than income.

There is a long history on the mainland of preferential policies towards non-rural residents. Even after three decades of reform, urban residents continue to enjoy more generous subsidies to support minimum standards of living, as well as better health insurance and access to housing.

Family support plays a key role in reducing consumption poverty among rural elderly. The poverty rate based only on the income of respondents and spouses (including pensions) is 65 per cent, but falls to 37 per cent after private and public transfers are included.

Interestingly, private transfers - by parents or children - actually slightly raise the poverty rate among those with urban hukou, from 9.1 per cent to 9.9 per cent. This suggests that elderly people living in cities are more often givers than receivers of financial assistance. Further, public transfers and the urban elderly person's own savings each contribute only a small amount to reducing poverty.

Expanding the the rural pension programme, the researchers say, could help reduce poverty. Fifty-seven per cent of rural elderly people receive no pension, compared to 16 per cent of elderly city-dwellers.

But, Strauss notes, "the generosity of the new pension system is much less and covers only a small part of people's living expenses". The new pensions only cover about 20 per cent of living expenses, compared with almost 2.5 times for government and public agency pensions or nearly two times for basic private sector pensions.

One concern is that an increase in public funding could potentially see children giving less money to parents. "In other countries that has happened," Strauss says. "China might work differently, and it's a question we haven't studied yet. You need at least two waves [of surveys] to answer that well."

Given that older people tend to have much of their wealth tied up in property - 73 per cent for those of average means - the researchers say financial instruments such as reverse mortgages, which allow householders to receive some of the value of their property in cash, to be repaid by the sale of the home on their death, may be important ways for the elderly to leverage their wealth to support higher levels of consumption.

Additionally, if land can become a transferable asset for rural households, then the wealth of the rural elderly could increase and help fund their retirement.

A fresh look at the mainland's retirement age, and reform of pension policies, could also help encourage people to work longer, say the researchers, thereby reducing the financial burden of the ageing population.

The mandatory retirement age for those with urban hukou is 50-55 for women and 60 for men. As a result, the proportion of people in the workforce in cities drops from nearly 80 per cent at age 45-49, to about 40 per cent at age 55-59, and 20 per cent at age 60-64. By contrast, most people with rural hukou work even at the ages of 65 to 69, with rates not dropping below 20 per cent until after the age of 80.

Professor James Smith, distinguished chair in labour markets and demographic studies at the Rand Corporation and a member of the study research team, says China's retirement ages are "ridiculously low".

"It's absurd and based on fallacies, number one being the European model of what it should be. The other fallacy for early retirement is to provide jobs for younger people, and that's been proven in a number of studies to be nonsense," he says.

"Maybe seven or eight years later would be appropriate. China will have to change its retirement ages and it's been really slow in doing so."

With the health and retirement study in place, Smith said it was the perfect time for mainland policymakers to "experiment and monitor, and not jump to quick and easy solutions".

"If you think the first programme you put in place is going to be the answer, you are probably going to be wrong," he says. "The best strategy is to be willing to experiment and try different things."