Pot luck for pensions?

Pension reform is not normally the stuff of social media. But starting from last Wednesday it has keeping netizens busy in China. How so?

Because the central government has finally decided to make its 40 million state employees pay retirement-fund contributions along with everyone else.

The split-system whereby private sector workers gave up 8% of their salaries every month, and doctors, teachers and civil servants didn’t, has been a bone of contention for some time.

Now both state employees and their employers will have to make a monthly contribution just as those in private sector do. For state firms that will mean paying out a fee equivalent to 20% of employee salaries every month.

But why did such an issue – millions of weibo comments have been made so far – generate so much chat?

Firstly it speaks to the love-hate relationship most Chinese have with the civil service. Millions apply for public sector jobs every year because they are still perceived to be an “iron rice bowl” opportunity – reliable, well paid, and a relatively easy life. But these perceptions also mean that many others feel that the system needs to be overhauled. “Another dent in the Iron Rice Bowl! I support this move wholeheartedly,” celebrated one impassioned weibo user.

“Few perks means fewer corrupted officials!” another proclaimed.

In total, there were over 3.4 million weibo messages on the reforms. Many of them missed a key point: the struggle to keep China’s pension system solvent. And it is not clear how much this latest change will help with that – if at all.

Collecting contributions from state players should mean more money in the pot. Indeed as several reports pointed out last year, cash is already tight, with the government plundering the personal accounts of today’s payers to fund its current outgoings.

An aging population means this is not a sustainable model. Perhaps for this reason the Human Resources Ministry has decided to put the new public sector payments into a separate fund designated for public employees. That will ringfence it from the underfunding of the existing system, meaning the state employees will still be at an advantage versus the bulk of the workforce.

As one netizen pointed out: “They want to make sure their pensions are safe. They don’t want to put their money where other people can spend it!”

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