Lin Min

    linmin67@126.com

    THE Ministry of Human Resources and Social Security early this month floated the idea that it would be unavoidable for China to delay the retirement age and said it would put forward a proposal later this year.

    Officials and experts cited the huge shortfalls of the country’s pension funds — which amounted to 1.9 trillion yuan (US$301.58 billion) as of the end of 2010 — and higher life expectancy as reasons for a delay in the retirement age. They say that the current retirement age, 60 for men, 50 and 55 for women, makes the pension system unsustainable as the population ages.

    The idea of a delay has met with strong opposition from netizens even before a detailed proposal is raised. A total of 93.9 percent of respondents to a poll by the People Daily’s Web site as of June 12 opposed a delay in the retirement age. Online polls may not tell the full truth, but a landslide “vote” like this deserves serious reckoning by policymakers.

    Before the retirement age is postponed, authorities have to address the existing problems of the pension scheme.

    First, the government has to fulfill its responsibilities in making up for the current shortfalls in the pension funds. Under China’s pension system, employers pay 20 percent of employees’ monthly salaries to cover the pension payment of current retirees while employees pay 8 percent into their own personal accounts, which are aimed at easing pension payment stress in the future. However, when the pension fund system was introduced in 1997, the government did not pay for the initial pool of money needed — which can be considered the cost of a historic reform in which State-owned enterprises abandoned a decades-old cradle-to-grave welfare system. As a result, money in the personal accounts of pension fund contributors has been used to cover pension payments to retirees, resulting in huge shortfalls. Now it is time for the government to make up for the shortfalls caused by the 1997 reform.

    Although China has over the years used part of the profits from State-owned enterprises to reduce the deficits, the amounts were not sufficient. China’s notoriously huge amounts of wasteful public spending could prove to be a source of funds if the government can rid itself of its “big spender” practices, particularly lavish official banquets, traveling and car use that cost the country at least 900 billion yuan a year.

    The government is also obligated to increase the investment returns of the pension funds. At present, those returns mainly come from interests from bank deposits and treasury bonds, as a result, the country’s pension funds receive less than 2 percent in investment returns each year, much lower than inflation rates.

    Many opponents to a retirement age delay also expressed their anger at the unfair “twin-track” pension system, in which public servants do not contribute to the pension funds but enjoy much higher pension payments after they retire. In 2010 alone, the government used 21.8 billion yuan in taxpayer money to dish out lavish pensions to retired civil servants. Huang Ruilin, a lawmaker in Guangzhou, complained in 2011 that a government official at a department chief level can receive around 8,000 yuan a month after he retires, even though he has not contributed a single yuan to the pension funds. In comparison, a company manager who pays 1,000 yuan a month will receive no more than 1,700 yuan when he retires. Such unfairness has to be tackled if a revamp is to win public approval.

    A “flexible” retirement age policy can also lead to an unfair situation where officials try to cling to power for as long as possible while many people, especially blue-collar workers, face unemployment in their senior years with no income but still pension bills to pay.

    From the perspective of jurisprudence, when employees start paying to pension funds, they are considered to have entered into a “contract” with the government, expecting to receive a certain amount of pension each month from the age set by current rules. A change in retirement age is in fact a major amendment to such a “contract,” which requires the consent of both parties.

    While it may be inevitable for a delay in the retirement age in the long run, the government should avoid rushing to a change, particularly at a time when young people find it difficult to land a job. And when such a revamp is warranted, ensuring fairness and equality is essential, because it is asking hundreds of millions of people to make sacrifices.

(The author is editor of the Shenzhen Daily News Desk.)