Age-old question raises a retirement dilemma
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E-mail China Daily, June 25, 2012
'Double-track' system
"People are not simply opposed to delaying their retirement, but they are also against the inequities inherent in the pension system," said Zhang.
China operates a "double-track" system. The State pays the contributions of employees of governmental organizations and institutions, but the rules are different for those working for other enterprises, who have to pay for themselves. Generally, employees of government organizations and institutions receive a much higher pension than enterprise employees.
"The enterprise employees' pension insurance system was reformed in 1995, but the system for employees of government organizations and institutions wasn't reformed at the same time," said Zheng Gongcheng, director of China's Social Security Research Center at Renmin University.
The double-track system emphasizes the many differences between the two groups. The pensions of enterprise employees only increase marginally with inflation, but former employees of government organizations and institutions have pensions that rise in tandem with the salaries in their old workplace, leading to a widening gap between the two groups.
"When you look at pension provision in other countries, almost all of those systems are designed to promote fairness. Obviously, China's current pension system is not," said Zheng. "We can't say the government didn't make an effort, but the fact is those attempts failed to have any obvious effect. Why do the reforms so seldom work? Many people from government organizations and institutions don't want to give up their high pensions. That's why graduates are so keen to take the examination for government service. Besides, a rational, practical reform plan is not available," he added.
The pension gap
Miao Liang, 57, a Beijing resident, was made redundant from his job in a steel foundry 10 years ago. "To tell the truth, I have never earned 3,000 yuan a month in my life. Now I work on a construction site as a doorkeeper and the salary is 1,500 yuan, out of that I have to use 500 yuan for my pension account," he said.
"When I was in the foundry, I was often voted employee of the year, but sadly, it went bankrupt. Even as a doorkeeper, I am still contributing to society. Why do civil servants receive more than 4,000 yuan a month when they retire, but ordinary workers only get about 1,000 yuan. I'm in poor health now and if the retirement age is raised, maybe I won't even reach pensionable age. It's just unfair," he said.
"So many problems related to the system have not been solved yet, so to promote the extension of the retirement age will not only fail to solve the real problems, but will also increase public resentment," said Zhang Zhanxin.
"The reform of China's pension system should be carried out as soon as possible, but it should be undertaken on a step-by-step basis, to minimize any resistance in the future," said Zheng Gongcheng. He urged that the first step should be the establishment of a basic pension insurance system for employees of government organizations and institutions and said that they need to pay a certain proportion of the pension insurance themselves, just as enterprises workers do. Second, the country needs to gradually reduce the pensions of workers in government organizations and institutions to narrow the gap with enterprises workers. Third, the mechanism whereby the government workers' pensions increase in lockstep with salaries needs to be scrapped.
Tang of CASS also called for a fair and uniform national pension system. "A self-sustaining social security system should depend on contributions from new workers and effective investment. However, on the one hand, there are more pensioners than contributors in an aging society, and on the other, it's difficult for pensions funds to beat inflation through investment when many countries are facing a financial crisis," he said.
Every province, municipality and autonomous region in China has its own system, so the profits and losses of pensions funds vary because the number of retirees and contributors changes from region to region.
The pensions pot is also suffering because tens of millions of workers in State-owned enterprises were forced to retire in 1998 to reduce staff numbers and improve efficiency. Those workers retired at an average age of 47, but were not obliged to put extra cash into a public fund, meaning that their pensions are being funded by today's employees, according to Tsinghua's Yang.
Caring for a country's elderly population is more a problem of wealth distribution than insurance. Formulating a balanced distribution system and implementing the reforms rapidly would be more effective and be more popular with the general public than simply imposing a heavier burden such as extending the retirement age, said Tang.
