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As China becomes a rapidly ageing society, public concern over its huge pension fund deficit will only grow. There is certainly no panacea. But that does not mean exploration of alternative solutions is not important. Instead, by shedding light on the complexity and difficulty of pension-related problems, any suggestion for early policy response is valuable and demands serious consideration by policy-makers. One of the latest suggested answers to the country's pension fund deficit is to raise the mandatory retirement age. In China, the current legal retirement age is 55 for male workers and 50 for female workers, with a five-year extension for officials and professionals with special expertise. But the actual average retirement age is 51.2 10 years younger than that of many other countries. The logic behind the suggestion is that raising the legal retirement age will not only delay the payment of the pension, but will also tap the professional talent of senior workers. The benefits of later retirement are crucial to solving some mid- and long-term ageing problems. On the one hand, to ensure smooth operation of the currently under-funded pension system, later retirement can help check payment growth as the life expectancy of workers increases. While the government is pumping public expenditure into the social security fund, the chance is slim that the fund can make its ends meet if pension payments are allowed to rise freely. On the other hand, changes to the retirement age make it easier to re-hire skilled senior workers to cushion the national economy against a shrinking working-age population in coming decades. The number of Chinese aged 65 or above already hit 100 million several months ago. As the demographic trend predicts, the growth rate of China's working-age population will begin to shrink dramatically as early as 2015. Nevertheless, arguments against later retirement also have credit in emphasizing the short-term impact on the country's unemployment situation. As a stopgap measure, the country allowed earlier retirement in the mid-1990s, when many State-owned enterprises were undergoing their most difficult periods of reform. A number of workers retired several years before the legal retirement age with full pension benefits to help alleviate the heavy unemployment pressure at that time. In coming years, a sudden rise in the retirement age will surely undermine the country's ability to absorb new labour forces. It will take a much longer period for China to fundamentally change its growth pattern to create adequate jobs before the world's largest population finally peaks. The pros and cons of later retirement make it a worthy topic for public debate. Policy-makers do not need to rush to embrace the idea before a comprehensive review of the feasibility of raising the mandatory retirement age. (China Daily November 29, 2006) |
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