Preschools turn nursing homes, retirement age raised: China’s demographic crisis explodes – Times of India

NEW DELHI: In a major indication that alarm bells are going off in Beijing due to an impending demographic crisis that could potentially have severe impact on its economy, healthcare and social welfare systems, China’s top legislative body on Friday announced plans to raise the country’s retirement age.
The development also comes as reports have highlighted that over 22,000 kindergartens have been closed across China in the past two years due to plummeting birth rates, with some turning into nursing homes to tend to the elderly.
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Demographic crisis

A slowing economy, shrinking government benefits and a decades-long one-child policy have created a creeping demographic crisis in China. China’s pension pot is also running dry and the country is running out of time to build enough of a fund to care for the growing number of elderly.
Over the next decade, about 300 million people, who are currently aged 50 to 60, are set to leave the Chinese workforce. This is the country’s largest age group, nearly equivalent to the size of the US population.
Significantly, the national population fell in 2023 for the second year in a row.

Reform is urgent with life expectancy in China having risen to 78 years as of 2021 from about 44 years in 1960 and projected to exceed 80 years by 2050.

The number of people aged 60 and older is projected to rise dramatically, with estimates suggesting that this demographic will account for about 30% of the population by 2035, up from 14.2% in 2021.

At the same time, the working population needed to support the elderly is shrinking.

Retirement age raised

The decision to raise the retirement age, marks the first such adjustment since the 1970s and accelerates an overhaul of decades-old laws to tackle the economic pressure of a shrinking workforce.
China’s retirement ages are currently among the lowest globally.
The retirement age will be raised for men to 63 years old from 60, while for women in white collar work it would be raised to 58 years from 55. For women in blue collar work it will be adjusted to 55 from 50.
The changes will come into effect from January 1, 2025 and will be implemented over the next 15 years with incremental adjustments occurring every few months.
“Starting 2030, the minimum year of basic pension contributions required to receive monthly benefits will also be gradually raised from 15 years to 20 years at the pace of an increase of six months annually,” said news agency Xinhua. By 2039, they would have to clock 20 years of contributions to access their pensions.
The new rules will also allow Chinese people “to postpone retirement to an even later date if they reach an agreement with employers”.
Retiring before the statutory age will not be allowed, state news agency Xinhua reported, although people can extend their retirement by no more than three years.

‘An inevitable choice’

The demographic crisis poses severe risks to China’s economy, particularly regarding the pension system. A report from the Chinese Academy of Social Sciences projected that the state pension fund could be depleted by 2035 if no reforms are enacted. The increasing number of retirees, coupled with a declining birth rate, places immense pressure on the pension system, which relies on a robust workforce to support an expanding elderly population.
By extending the retirement age, the government aims to alleviate some of this pressure. Delaying retirement can help stabilise the labour force participation rate and reduce the financial burden on the pension system. Moreover, it allows for a larger tax base to support social welfare programs, which is crucial as the population ages.
But delaying pension payouts and requiring older workers to stay at their jobs longer may not be welcomed by all.
“In the next 10 years, there will be another bill that will delay retirement until we are 80,” one user wrote on a Chinese social media site Weibo.
Further, many younger workers fear that an expanded labour pool will intensify competition for jobs, particularly as youth unemployment rates have soared to alarming levels. In July 2024, the jobless rate for those aged 16 to 24 reached 17.1%, raising concerns about the economic prospects for younger generations

“What a miserable year! Middle-aged workers are faced with pay cuts and raised retirement ages. Those who are unemployed find it increasingly difficult to get jobs,” another chimed in.
However, Mo Rong, director of the Chinese Academy of Labour and Social Security, told the People’s Daily that raising the retirement age was “an inevitable choice for our country to adapt to the new normal of population development”.