Is Economic Development Threatening Elder Support in China?

1. Is Economic Development Threatening Elder Support in China? Ben Cmejla & Christian Gettermann

2. Chinese Elder Support Over Time • Pre-Communist Era: Family-based support rooted in ancient Confucian notions of filial piety • Communist Era: The Iron Rice Bowl and Rural Collectives; mostly institutional elder support • Reform Era: Breakdown of pre-reform institutions; elder support reverts largely to family-based care based notions of filial piety.

3. Chinese Economic Development and Elder Support Theory: As an economy develops and grows, elder support gradually moves from family-based care to institution-based care. China: • Not a gradual development, limited time to adjust. • Old Maoist elder support system dismantled rapidly • Elder support fell back on traditional Chinese notions of family-based care Problem: Effects of Chinese economic reform, e.g. rapid urbanization and rural to urban migration, have made family-based care untenable, highlighting the urgent need for government sponsored elder support.

4. Chinese Economic Development and Elder Support Theory: Gradual economic development --> population booms -->Demographic dividend --> economic surplus finances elder support for aging population China: • One Child Policy lead to rapid population ageing • Less time to yield surplus from demographic dividend • The 4-2-1 age structure means a small cohort will be supporting two larger cohorts Problem: The One Child Policy ageing has compressed the time China has to develop a solution for providing elder support to a rapidly ageing population

5. Problems in a Nutshell • Filial Piety and Family Based Care: After reform there was no institutional elder support and relying solely on family-based care infeasible • One Child Policy: Rapid ageing, compressed demographic dividend, shorter time to solve the elder support problem

6. Reforms in the Urban Social Safety Net • 1990’s reforms: the expansion of insurance coverage and the growth of pension pools • 1991 Decision on the Reform of Enterprise Pension System • Called for a multi-pillar social security structure incorporating government aid, enterprise-sponsored pensions and the accumulation of individual savings • Increased participation • . From 1989 to 2003, the number of urban workers participating in the old age insurance system increased from 48.17 million to 122.5 million

7. Stagnation in Rural Social Security Reform • Loss of low-level collective based social security • Bureaucratic inefficiencies and reductions in rural participation • Between 1994 and 2004, farmer participants dropped 28.7 percent • Low levels of coverage • Only 5.4 percent of rural elders live on pension benefits and 1.5 percent live on old age insurance while 85 percent rely on family support

8. Future Problems and Limitations • Aging population • Between 2002-2025, life expectancy increase from 72 to 77 years • People aged 65 and over are projected to nearly double their share of total population over the same period (Ikels) • Inherited liabilities in the system • Old age pensions are still operating under a pay-as-you-go system Increased participation • 1997, the process of borrowing individual deposits to supplement funds in the social pools resulted in 14 billion Yuan worth of empty accounts (Wang)

9. References Ikels, Charlotte (2006), "Economic Reform and Intergenerational Relationships in China", Oxford Development Studies, Vol. 34, No. 4, December 2006, pp. 388-400. Wang, Dewen, (2006), "China's Urban and Rural Old Age Security System: Challenges and Options", China and the World Economy, Vol. 14, pp 102-116. Zavoretti, Roberta, (2006), "Family-based care for China's ageing population", AEJ, vol. 4, pp. 211-228. Zimmer, Zachary; Kwong, Julia (2003), "Family Size and Support of Older Adults in Urban and Rural China: Current Effects and Future Implications", Demography v40, n1 (February 2003): 23-44.