China’s top legislature approved a proposal to raise the country’s retirement age, the official Xinhua news agency reported on Friday, prompting an overhaul of decades-old laws to deal with economic pressure from a shrinking workforce. The retirement age in China is currently one of the lowest in the world.
Reform is urgent, with life expectancy in China rising to 78 years in 2021 from around 44 years in 1960, and projected to exceed 80 years by 2050. At the same time, the number of working residents needed to support the elderly is decreasing. The retirement age will increase for men to 63 years from 60 years, for women working with white collars it would increase to 58 years from 55 years. For women in blue-collar professions, it will be adjusted from 50 years to 55 years.
The changes are due to take effect on January 1, 2025. If people worked longer, it would ease the pressure on pension budgets, as many Chinese provinces are already reeling from large deficits. But postponing pension payments and requiring older workers to stay in their jobs longer may not be welcomed by everyone.
Hundreds of thousands of people took to social media after Xinhua reported that China’s top lawmakers discussed the issue on September 10, with many expressing concern that more job seekers would be looking for too few vacancies. By raising the retirement age, the government can increase the labor force participation rate, which will help mitigate the adverse effects of an aging population, said Xiujian Peng, senior research fellow at the Center for Policy Studies at Victoria University in Australia.
“The government needs to take action. If the population continues to decline, the shrinking workforce will accelerate, which will further negatively impact economic growth.” Xing Zhaopeng, ANZ’s chief China strategist, said the move was unlikely to have “any impact on the short-term economy. In the long run, it will help avoid premature labor shortages and maintain stable productivity growth.”
