Are young Chinese spendthrifts? Report Nyt
China wants young people to put money aside for retirement, but amid society's rapidly aging society, labor market difficulties and uncertainty about the future, young people are rejecting the idea of saving for old age. The New York Times article
China wants young people to save money for retirement, writes the New York Times . Tao Swift, an unemployed thirty-year-old, isn't interested in hearing it. “Retire with a pension?” he asked. “I don't have much hope of being able to get it.”
Tao, who lives in the southern city of Chengdu, isn't the only one who thinks so. On social media forums and among friends, young people are wondering whether they should save for their old age. Some give up, citing job shortages, low wages and their ambivalence about the future.
AN AGING CHINA
Their skepticism betrays the enormous challenge facing China's leaders. In less than three decades, the country has gone from a young to an aging society. Seven consecutive years of declining births are hastening the day when there will be fewer workers than retirees.
The rapidly changing demographic profile is putting a strain on China's already underfunded pension system. The average retirement age of 54, among the lowest in the world, has made this stress more acute.
The economic slowdown, the worst since China embraced capitalism four decades ago, is leaving many people jobless or with little room to put money aside.
China has crossed the demographic Rubicon, like many other countries before it. The problem of underfunded pension programs is not unique to China. But China's demographic and economic problems are overlapping, causing confidence in the pension system to falter.
China is aging so rapidly that in the next quarter century, 520 million people, or nearly 40 percent of the current population, will be over the age of 60. And public pensions will run out over the next decade, according to the Chinese Academy of Social Sciences, a government research institute.
“Due to the aging population, people are skeptical about their future pensions,” said Tao Wang, chief China economist at UBS. “They fear that payments will be lower in the future.” Chinese leaders could begin to address the problem by raising an "alarmingly low" retirement age, he said. They have talked about doing it gradually, but have not yet acted.
THE CHINESE PENSION SYSTEM
Recent history has also contributed to the problem. Until the 1980s, China had a planned economy and state-owned enterprises paid workers salaries until they died. As officials undertook market-oriented reforms, they also set out to create a more inclusive pension system.
In the first decades after China opened up to the world, the Communist Party prioritized growth, forgoing the investments needed to build a broader social safety net. And when officials reformed state-owned enterprises in the 1990s, tens of millions of people lost their jobs.
Officials began to create a new pension system that would eventually cover most of the population under three pillars. The first is a public and mandatory program that has the largest number of members, with just over a billion people. It consists of a basic plan for rural and urban unemployed and migrant workers, covering more than 550 million people, and an employment-based plan covering 504 million workers.
The second pillar of China's pension system is private and employment-based. It is voluntary for companies and covers a much smaller number of people.
The third and most recent, also private and voluntary, is the personal pension. It was introduced in 2022. As the public pension comes under increasing financial stress, officials have begun offering tax benefits similar to those of an individual retirement account in the United States.
PRIVATE PENSIONS DOWN
The launch of private pensions, which are still in pilot programs in dozens of cities, coincided with alarming news: China's population was starting to shrink for the first time in its modern history.
Working professionals like Xuan Lü, 27, have to contribute part of their salary to one of the public pensions. Xuan, who works as an exhibition designer in Beijing, said he doesn't think too much about the roughly 5% of his income that is set aside each month. “It's too early to worry about these things,” he said.
But in the last year another problem has emerged: More and more people, whether they are unemployed or doing part-time or freelance work, are suspending their contributions or simply giving up.
“The number of people who have tactically decided not to pay contributions or not join the system is quite high,” said Dali Yang, a professor at the University of Chicago. “It has increased substantially.”
Experts also warn that if China does not change its retirement age, it will have to reduce benefits, which they say could be too generous in some cases. In 2022, the national average of monthly payments for the public employee pension was $500 and just $28 for the basic state pension. But contributions and benefits varied dramatically by city and county.
There are thousands of different pension schemes, each of which is managed by a local authority. The amount pensioners receive is linked to a local government's finances and the size of a given pensioner pool. According to one study, some pensions have as few as 30,000 participants.
In some prosperous regions, as many as eight workers support every retiree. But in the poorest areas, there are about two workers for every pensioner.
THE PRESSURE FROM THE AUTHORITIES AND THE REJECTION OF YOUNG PEOPLE
As pressure mounted, worried Chinese officials and experts began encouraging young people to save and enroll in private pension schemes.
A well-known professor has urged young people to skip the daily coffee and put the money in a fund. Another warned young people that their basic pension will not be enough to survive when they are old.
For some young people, the urgent appeals are backfiring.
“Their appeal backfires,” said Lumiere Chen, 27, a private insurance agent in Beijing whose clients are in their mid-30s. “We are bothered by an ever-increasing number of appeals.”
Even those who are a little older are not easy to convince.
“To be honest, I don't expect to have to live on my retirement salary and cover my future retirement life with it,” said Leon Li, 37, a driver for Didi, China's equivalent of Uber. Last year, Li lost his job at a market research firm, after working there for more than a decade. He had a pension with the company which he will continue to pay for the next two years to reach the minimum threshold of 15 years to be entitled to benefits after retirement.
Cesar Li, 27, has not signed up for the basic public pension plan because, according to him, it is too expensive. Li, a freelancer, said he has noticed that more older people are applying for pensions and fewer young professionals are paying into the system. He echoed a concern expressed by other young people, that their retired parents or grandparents sometimes receive double the salary of their working family members.
Cesar Li and his friends sometimes discuss the future and joke about who will take care of them when they are old. “We could find ourselves alone and die at home,” he added.
With fewer young people and more old people, the gap between workers and pensioners will only increase.
(Excerpt from the foreign press review edited by eprcomunicazione )
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/di-risparmiare-per-la-pensione-i-giovani-cinesi-non-ne-vogliono-proprio-sapere/ on Sun, 14 Apr 2024 05:25:26 +0000.