In rapidly aging China, millions of migrant workers cannot afford to retire, according to China News

BEIJING/HONG KONG — After three decades of selling homemade buns on the streets of the Chinese city of Xian, 67-year-old Hu Dexi would have liked to take it easy.

Instead, Hu and his older wife moved to the outskirts of Beijing, where they wake up at 4 a.m. every day to prepare their packed lunches and then commute more than an hour to a downtown mall, where they each earn 4,000 yuan. $750) per month, working 13-hour shifts as a cleaner.

The alternative for them, and for many of the 100 million rural migrants who will reach retirement age in China over the next decade, is to return to their villages and live off a small farm and a monthly pension of 123 yuan.

“No one can take care of us,” Hu said, still mopping the floor. “I don’t want to burden my two children and our country won’t give us a cent.”

The generation that moved to China’s cities at the end of the last century, building the infrastructure and staffing the factories that made the country the world’s largest exporter, now risks a sharp decline in living standards later in life.

Reuters interviewed more than a dozen people, including rural migrant workers, demographers, economists and a government consultant, who described a social security system ill-suited to a worsening demographic crisis that Beijing is repairing rather than reorganizing as it pursues growth through industrial modernization. At the same time, demand for social services is growing rapidly as the population ages.

“The elderly in China will live long and miserable lives,” said Fuxian Yi, a demographer and senior scholar at the University of Wisconsin-Madison. “More and more migrant workers are returning to rural areas, and some are taking low-paid jobs, which is a desperate way for them to fend for themselves.”

If these migrants were to rely solely on China’s rural pension, they would have to live on less than the World Bank’s poverty line of US$3.65 per day, although many supplement their income by working in the cities or by farming part of their crops to sell.

China’s National Development and Reform Commission, the Ministries of Human Resources and Civil Affairs and the State Council did not respond to faxed requests for comment.

The latest Chinese statistics show that in 2022, about 94 million working people – about 12.8 percent of China’s 734 million workforce – were over the age of 60, up from 8.8 percent in 2020.

That share, while lower than in wealthier Japan and South Korea, is expected to skyrocket as another 300 million Chinese reach their 60s over the next decade.

A third of this cohort consists of rural migrants, who typically lack the professional skills for an economy that aims to move up the value chain.

The main reason China has not built a stronger safety net for them is that policymakers, fearing the economy could fall into the middle-income trap, prioritize growing the pie rather than sharing it, the government adviser told Reuters .

To achieve that, China is focusing economic resources and credit flows on new productive forces, a catch-all term for President Xi Jinping’s latest policy push for innovation and development in advanced industries such as green energy, high-performance chips and quantum technology.

U.S. and European officials say the policy is unfair to Western companies that compete with Chinese manufacturers. They have warned Beijing that it is fueling trade tensions and diverting resources away from households, stifling domestic demand and China’s future growth potential.

China, which has rejected these assessments, has instead focused on improving production, rather than consumption, as its desired path to prosperity.

“It would be easier to solve the equality problem if we could solve the problem of productivity growth first,” said the adviser, who was granted anonymity to speak freely about pension policy debates taking place behind closed doors.

“People have different views” on whether China can make that leap in productivity, the adviser said. “My view is that if we do not reform further and remain at odds with the international community, things could become difficult.”

‘Vested interests’

Pensions in China are based on an internal passport system known as hukou, which divides the population along urban and rural lines, creating wide disparities in incomes and access to social services.

Monthly urban pensions range from roughly 3,000 yuan in less developed provinces to about 6,000 yuan in Beijing and Shanghai. Rural pensions, which were introduced nationally in 2009, are meager.

In March, China increased the minimum pension by 20 yuan to 123 yuan per month, benefiting 170 million people.

Economists at Nomura say transferring resources to the poorest Chinese households is the most efficient way to boost domestic consumption.

But the rural pension increase amounts to an annual effort of less than 0.001 percent of China’s $18 trillion GDP.

The Chinese Academy of Social Sciences (CASS) estimates that the pension system will run out of money by 2035.

Beijing has introduced private pension schemes and is transferring money to provinces with pension budget deficits that they cannot fill themselves due to high debts.

Other countries have tried to increase pension funding by raising the retirement age. In China, this age is among the lowest in the world: 60 years for men and 50-55 years for women, depending on their field.

Beijing has said it plans to gradually raise the retirement age, without giving a timeline.

The government’s concerns that the population would view raising the threshold as a benefit for “vested interests” at the expense of ordinary citizens are hindering the implementation of those plans, the adviser said.

Chinese people think that “civil servants want to retire later to fatten their own pensions,” he said.

Poverty threat

CASS surveys show that the level of health care financing for urban workers was in some cases about four times higher than for people with rural hukou.

“There are not enough social services to solve the problems of these people, who tend to fall back into poverty,” said Dan Wang, chief China economist at Hang Seng Bank.

More than 16 percent of rural residents over the age of 60 were “unhealthy,” compared with 9.9 percent in cities, according to an October article by Cai Fang, a CASS economist and former central bank adviser, published in China Cadres Tribune. a magazine of the Communist Party.

Sixty-year-old Yang Chengrong and her 58-year-old husband Wu Yonghou spend their days collecting piles of cardboard and plastic for a recycling station in Beijing, earning less than one yuan per kilogram.

Yang said she has heart problems, while Wu has gout, but they cannot afford treatment. They fear that their monthly income of 4,000 yuan is unsustainable because “people consume and waste less.”

“Villagers like us are almost working ourselves to death, but we have to keep working,” Yang said, her shoulders covered in snow after a day of cleaning up.

Wu, next to her, said that they dare not retire.

“I only feel safe when I have work, even if it is dirty work,” he said.

Traditionally in China, children were expected to support the elderly.

But most people retiring in the next decade, a group nearly as large as the entire U.S. population, had only one child because of birth restrictions in place from 1980 to 2015.

High youth unemployment exacerbates the problem.

“Relying on families for elderly care is no longer feasible,” Cai wrote in his article.

The positive for some older people is that younger Chinese, despite struggling to find the service sector jobs they went to college for, are rejecting forced labor.

“The mall can’t find younger people,” said Hu, the cleaner. “As long as I can still move, I’ll keep working.”

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