An age-old question

Protest over retirement age: France today, Shanghai tomorrow?

Few would accuse the French of being retiring people – they hold strong opinions on everything from wine to Warhols. And it would seem that their view of when they should actually retire from work is one of their most strongly held opinions.

Television footage last week broadcast scenes of crippling strikes, that saw as many as 3.5 million French nationals take to the streets in protest at government plans to reform the pension system. Gallic anger was sparked by new legislation that will up the minimum retirement age from 60 to 62. The move is part of an effort to repair state finances and avoid the pension system running up a $123 billion deficit by 2050.

Sagging pension provision and unhelpful demographics are not just affecting the French: they are a problem throughout Europe. But WiC’s regular readers will know they are also about to beset China too (see WiC73 for a fuller discussion of the challenges of an aging population).

In one city, at least, remedial action is already underway. While the French ponder future protest (time to torch the Eiffel Tower, perhaps?), over in Shanghai the local government has made the first move to raise the retirement age by five years.

The problem is particularly pressing for Shanghai because it has one of the oldest populations in China. At the end of last year, Shanghainese statisticians reported that 3.15 million residents were over 60. That is 22.5% of the city’s population, far higher than the national average of 12.5%.

Something about Shanghai’s air seems to make the locals live longer too: life expectancy in the city is 81.73 years of age, fully nine more than the national average.

That’s wreaking havoc with the city’s pension fund, which has been in deficit since 1999. Last year its pension expenditures were Rmb71 billion versus income of Rmb61.8 billion, and Party Secretary Yu Zhengsheng now bluntly admits the fund “has a serious hole in the bottom”.

That all explains why Shanghai is at the vanguard – in China, at least – of moves to raise the age at which its citizens are able to retire.

The policy change will be the first raising of the retirement age since the 1950s when Mao was bestowing the fruits of the proletarian revolution – allowing women to draw a state pension at 55 and men at 60.

But Shanghai’s new ‘pilot’ scheme will mean men can still work till 65 before claiming their pension benefits.

The local authorities are labelling the change as ‘flexible retirement’ and explain that the scheme is initially targeted less at the masses than at professionals and those with special technical qualifications. As such, they claim, it’s as much about helping companies deal with human resources problems – i.e. scarcities of qualified staff – as it is about resolving some of the city’s pension fund difficulties.

The scheme requires that the employer and employee reach agreement that the person is healthy, able to work and keen to delay retirement past the statutory age. Many who choose this option will no doubt prefer to continue drawing an income than rely on the state pension.

While the scheme isn’t mandatory, many view it as a first step towards delaying the age at which all Shanghainese retire by five years. The effect would be dramatic. Local academics have calculated such a move could cut the ratio of pensioners to those in paid work from 30.8% to 20.2%.

Should that happen, there may be protests in Shanghai too. Given the city has an area called the French Concession, no doubt that’s where they’ll likely take place.

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