1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Providing Greater Old-Age Security in China

China’s population is set to age fast, owing to low fertility and rising life expectancy. With ongoing migration of the younger cohorts to urban areas the increase in the old-age dependency ratio will be even more pronounced in rural than in urban areas. Very different pension arrangements exist across the country, with diverse and segmented systems in urban areas, belated retirement and low replacement ratios in rural areas, and special rules governing public sector pensions. Labour mobility is impeded by some of features of the current pension system, not least limited benefit portability. Various reforms have been initiated or proposed over the past decade. Some add to the existing fragmentation, while others, notably those providing for greater geographical pooling, have only partly been implemented. Also, under current rules, effective replacement rates are fairly low and projected to decline further, both for rural and urban residents, which may be difficult to sustain with the elderly living less and less with their descendants. Furthermore, as the countryside ages, much of the additional burden will be shouldered by local governments with insufficient resources. These challenges can be addressed by gradually consolidating the various regimes, raising retirement ages and shifting more of the cost of rural pensions to the central government. Even if different schemes for different categories of workers were to persist, each should be unified over time, first provincially and then nationally, phasing out the urban-rural distinction.

English

Keywords: demographic projections, pension system, ageing, labour mobility, benefit portability, China, poverty, replacement ratios, retirement age
JEL: P36: Economic Systems / Socialist Institutions and Their Transitions / Socialist Institutions and Their Transitions: Consumer Economics; Health; Education and Training: Welfare, Income, Wealth, and Poverty; O53: Economic Development, Innovation, Technological Change, and Growth / Economywide Country Studies / Economywide Country Studies: Asia including Middle East; N35: Economic History / Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy / Economic History: Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy: Asia including Middle East; P25: Economic Systems / Socialist Systems and Transitional Economies / Socialist Systems and Transitional Economies: Urban, Rural, and Regional Economics; P21: Economic Systems / Socialist Systems and Transitional Economies / Socialist Systems and Transitional Economies: Planning, Coordination, and Reform; O15: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Economic Development: Human Resources; Human Development; Income Distribution; Migration; J32: Labor and Demographic Economics / Wages, Compensation, and Labor Costs / Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions; J11: Labor and Demographic Economics / Demographic Economics / Demographic Trends, Macroeconomic Effects, and Forecasts; J14: Labor and Demographic Economics / Demographic Economics / Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination; H55: Public Economics / National Government Expenditures and Related Policies / Social Security and Public Pensions; P26: Economic Systems / Socialist Systems and Transitional Economies / Socialist Systems and Transitional Economies: Political Economy; Property Rights; J61: Labor and Demographic Economics / Mobility, Unemployment, Vacancies, and Immigrant Workers / Geographic Labor Mobility; Immigrant Workers; J13: Labor and Demographic Economics / Demographic Economics / Fertility; Family Planning; Child Care; Children; Youth
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