Will China’s Declining Workforce Pressure Beijing to Raise Retirement Ages?

In the past three years, China has lost a workforce almost the size of Germany’s with the number of working people declining by over 41 million.  Directly related to a now declining population, research by the Lowy Institute projects that the worker-to-retiree ratio of 3.74 in 2020 will decline to 1.68 by 2045. 

China’s shrinking population is not only a legacy of the one child policy.  Despite relaxing the rules and providing incentives to have more children (such as housing support), the birth-rate reached an historical low of 7.52 births per 1000 people in 2021.  Among the contributing factors is the significant cost to raise a child in China (surpassing both Japan and the USA), and the decision by women to have children later in life.  Additionally, China has net negative migration, as more young people migrate from China to countries such as the USA and Australia.

China’s retirement age was established in the 1950s, at time when life expectancy was lower and manual and agrarian jobs dominated the workforce.  The statutory retirement ages of 60 for men, 55 for women, and 50 for female blue-collar workers, is exacerbating the economic and social impact of a rapidly aging population.  Changes to the retirement age were heralded in 2021 as part of the 14^th 5 Year Plan, but have been slow to materialise.  However, some sources cite 2023 as the year when change may occur, with the rationalisation to 55 for women in all sectors.

Outlook for Employers: Previous plans to raise the retirement age in China led to a significant backlash from worker populations, particularly those keen to retire and access their pension.   Private retirement funds to supplement social security are in their infancy in China.  Backlash from younger workers is to be expected; with unemployment of 20% in the 15-24 age group, there is little support for retaining older workers who are ‘blocking the funnel’.