Raising retirement age to 65 would help remove pension inequality, researchers say

Move aims to 'help achieve pension equality' but critics fear those without jobs would suffer

PUBLISHED : Tuesday, 24 September, 2013, 12:00am
UPDATED : Tuesday, 24 September, 2013, 10:52am

The mainland's efforts to overhaul its pension scheme have drawn intense controversy, most recently over an academic report suggesting drastically raising the retirement age.

Under the current system, pensions may kick in when some workers turn 50, and payments range widely among different work sectors.

A sentiment of unfairness, coupled with pressures that are expected to arise as the population ages, has the Ministry of Labour and Human Resources scrambling to find the best solution to reform the scheme.

But in recent weeks, a research report proposing an increase in the retirement age triggered a public outcry. The study suggested revising the age of retirement up to 65 from the current minimum age of 50 for female factory workers and 60 for male workers and most employees at government and state-owned organisations.

The study, conducted by Tsinghua University and released last month, also proposed to phase out discrepancies in the pension amount paid among government employees, private-sector workers and those who were unemployed, and to put in place a single pension scheme for all by 2035.

The research was among several studies the government had commissioned to explore options for changing of the pension scheme.

Yang Yansui , who led the Tsinghua study, said that the rapidly ageing population meant the country had no choice but to tackle two problems at the same time: the inequality of pensions among different social groups and the low retirement age.

China became an ageing country at the turn of this century, when for every 10 workers, there was one elderly person who needed to be cared for.

The country will have to deal with a critically ageing population from 2035, when there will be one elderly person needing to be supported for every three workers or fewer.

Yang said that compared to some developed countries like the United States and Australia, China had been ill-prepared for an ageing population as far as pension schemes go. The burden for those in the workforce in would be heavier , she said, if the one-child family planning policy were factored in.

"Another pressing issue is that we can't expect our economy to grow more than 8 per cent each year forever. We should be prepared to tighten our belts," Yang added.

On top of the proposal for a major change in the retirement age, Yang said that Tsinghua's research could help rein in pension inequality. The nationwide average monthly pension for retired factory workers was 1,720 yuan (HK$2,165), she said, while government or state-owned company employees usually received between 4,000 and 5,000 yuan a month - although that amount could be as much as 7,000 to 8,000 yuan.

The Tsinghua proposal aims to gradually abolish this disparity by 2035. But the study has been unpopular because of its proposal to push back the age of retirement. Critics say the plan puts at risk people who do not work for government and state-owned organisations and do not have the same level of job security.

Yin Qing , a former factory worker from Qingdao who retired in June and receives a monthly pension 1,600 yuan, said that many civil servants would want to stay in their jobs with handsome salaries for a few extra years, while never having to worry about unemployment.

"But for factory workers like me, what if they can't find another job after they reach 50? How will they support themselves until they reach 65?" "

Wang Jiangsong , a professor at the China Institute of Industrial Relations, said the Tsinghua proposal was typical of a study that was meant to please policymakers while avoiding other important considerations.

"Policy on retirement age must take into account supply and demand in the job market, as well as how best to protect disadvantaged groups," he said.

Controversy over the proposal has pushed Yang and her team to quickly add a section on better safeguards for those who were forced out of work for health reasons, and retraining programmes for the unemployed, particularly women.

Zhu Junsheng , a vice dean of the School of Labour Economics at Capital University of Economics and Business, said that that study, as an academic study, was headed in the right direction by proposing a single pension scheme for everyone regardless of their jobs.

But instead of an automatic cut-off age for retirement, Zhu said that needed to be flexibility for people whose job prospects were not good because of a lack of training or health problems.

"Some should be allowed to access their pensions at a reasonably earlier age, for a discount, while those who stay on the job longer should be rewarded with higher pension payments upon retirement," he said.

"Both academics and policymakers need to bear in mind that there are people out there who need special protection, and that is what a pension plan is all about."