Trends in China Yaohui Zhao Peking University Prepared for SIEPR Conference on Working Longer and Retirement Stanford University October 89 2015 1 China has one of the fastest ageing population in the world ID: 556266
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Retirement
Trends in China
Yaohui
Zhao, Peking UniversityPrepared for “SIEPR Conference on Working Longer and Retirement”, Stanford University, October 8-9, 2015
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China has one of the fastest ageing population in the world.Slide3
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4.9
1.4
One of the major challenges of population aging is the shrinkage of working population relative to those in retirement.The current retirement age of 60 will quickly become unsustainable.Slide4
Policy QuestionIs there a potential for raising employment in the future?Slide5
Research Questions:What has been the recent trend of employment/retirement?
The past trend is unknown and under studiedThe recent thee decades have been the most dynamic period of the Chinese historyWhat explains the trend?
However, no nationally representative survey covering the period is availableSlide6
HRS-type biennial panel of nationally representative of population over age 45
Pilot survey in 2008: Zhejiang and Gansu; followed up in 2012
National baseline
survey in 2011-2012: 10,257 households, 17,708 respondents150 counties in 28 provincesFollowed up in 2013 and 2015China Health and Retirement Longitudinal Study (CHARLS)
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CHARLS CountiesSlide8
CHARLS Timeline
Two Province baseline
National baseline
Two province wave 2
: 2 provinces; 32
counties/districts
95 villages/communities
2,850 respondents
2011
.05-2012.03: national random sampling
150
counties/districts across 28 provinces
17,708 respondents
2012.07-08
:
Follow-up survey of
pilot sample
National wave 2
2013.7-
12
:
Follow-up survey of
national baseline sample
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Life history
2014.7-10
:
National sample
National wave 3
201
5
.7
-
10
:
Follow-up survey of
national baseline sample Slide9
Sampling Quality: CHARLS vs. CensusSlide10
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CHARLS Life History Survey 2014Retrospective survey using the event history calendar methodEmployment history – each job lasted 6 months or more
Reconstruct employment rate for particular age groups in past yearsSlide12
Compare with published official census estimates1990, 2000, 2005 mini censusCompare with own calculations from census micro data1990, 2000, 2005 mini censusCompare with actual CHARLS employment from 2011 waveSeparate comparisons for urban and rural estimates with micro-data based census data and CHARLS baseline
Hukou is then1. Validate Life History DataSlide13
Definitional Differences in EmploymentCensus: Did you work for pay at least one hour last week?CHARLS: Did you work at least 10 days in agriculture in the past year?If not, did you work for pay at least one hour last week
CHARLS is expected to produce higher numbers due to seasonality of agricultureSlide14
Despite the gap, CHARLS trends closely mimic that from census. Because urban response rates are lower and LFP are lower too, CHARLS estimates over-estimate participation. With proper weights this gap may reduce.Slide15
Relative to censuses, CHARLS has higher employment rates for women, similar rates for men.Slide16
Overall, CHARLS life history captures the most recent past 25 years quite well.
Census seems to under-report urban employment. Unless probed, urban people tend to be shy in reporting self-employment activities.Slide17
2. The Past Trend17Slide18
There is an overall declining trend in employment rate for both men and women, but interesting patterns exist within various age cohorts.
Employment of men aged 60-64 declined in first half of 1990s than rebounded back.
Employment of women aged 55-59 declined in first half of 1990, rebounded in second half of 1990, declined thereafter.That of women aged 50-54 increased in the 1990s then declined.Slide19
D. Wise, 2014
If we compare with countries in this graph, the Chinese employment is still among the highest despite the decline. The decline is not as pronounced.Slide20
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But if we look at urban and rural sectors separately, stories are vastly different.
Urban older men started with much lower employment rates than their rural counterparts and descended even faster.There appeared to be a rebound in recent years.Note: hukou is then.Slide21
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Urban older women started with much lower employment rates than their rural counterparts, descended even faster and reversed the trend in the recent decade.It is thus desirable to separately analyze urban and rural sectors.Slide22
There are important and interesting trends in rural employment.
Employment rose in the 1990s and declined quite sharply in the 2000s.Slide23
Urban trends are opposite that of rural ones, declined first then stopped.
The reversing trend started with women around 2005 and men around 2010.Slide24
3. Explaining the Rural TrendSlide25
There are important and interesting trends in rural employment.
Employment rose in the 1990s and declined quite sharply in the 2000s.Slide26
Ha: Structure of Urban vs. Rural PopulationsBecause rural people have higher employment, when rural workers shifts to urban status, it mechanically leads to a reduction of rural employment and an increase in urban employment.Slide27
Switch to Urban: % Previous Year’s Rural
hukou HoldersThere are very little hukou changes among older populations, thus it cannot be a driving force behind the trends.Slide28
Hb. Substitute Farm LaborThere has been a massive transition of labor out of agriculture
Young persons moved firstOlder and female farmers stayed put to take care of land This led to the
aging and feminization of agricultural labor forceSlide29
Young men led the growth of off-farm employment, followed by older men, young women, and eventually older women.Slide30
Migration is an important part of the off-farm employment. Migration has been shown to be more concentrated among younger and male workers.Slide31
CHARLS life history probably underestimates out-migration because we have a six-month rule in the definition. Nevertheless, the rising trend is clear.Slide32
T
he change in labor force participation of older rural people correspond very well with the change in agricultural employment. In other words, older and female workers increase their labor force participation as younger and male workers exit agriculture.Slide33
Hc: Grandchildren Care
The number of grandchildren in need of care increased in the 1990s, declined after 2000, contradicting the retirement trend. Thus childcare can not be the main factor.As children leave for off-farm work in the early 1990s, grandparents shouldered both child care and farming. Slide34
Hd. Mechanization of Agriculture
With accelerated mechanization of agriculture since 2000, demand for farm labor declines. This may be responsible for the decline in employment of older farmers.Slide35
He. Wealth Effect?
Income growth is monotonic, thus can not be the explanation for the whole trend, but might have contributed to the decline since the 2000s.Slide36
4. Explaining the Urban TrendSlide37
Urban trends are opposite that of rural ones, declined first then stopped.
The reversing trend started with women around 2005 and men around 2010.Slide38
Ha: Job InformalizationThe
state sector faces rigid wage structure and forces workers to leave once they reach the retirement age (men: 60; women: 50 or 55)By working in non-state sectors, this constraint
is removed.Non-state sector, especially self-employment, becomes a bridge if someone wants to work longer.Slide39
Retirement hazard rates have spikes:
Urban men at 60, women at 50 and 55
None for rural people
Employee Pension Encourages RetirementSlide40
State sector employment experienced sharp reductions in the mid-1990s due to restructuring, which led to reduced LFP.
Recent rise in non-state and informal sector employment is associated with rising LFP in recent 5 years, especially among pre-retirement age men and women.Slide41
Hb: Pension Coverage
In the recent decade, younger cohorts have reduced coverage of employee social security pension. Thus the retirement behavior is less distorted by the retirement age policy.Slide42
The pattern holds even if we exclude people who received urban
hukou after age 30.Slide43
Hc: Early Retirement Early retirement was granted liberally in the 1990s, but less early retirement has been
granted in recent years.Slide44
Hd. Educational Changes
The share of younger cohorts with college degrees has gone up recently.Because retirement age of college educated women are 5 years later, improved education attainment among women
may have contributed to later retirement.Slide45
He. Grandchildren
Rapid reduction in the number of grandchildren in need of care enabled urban people to stay in the work force.Slide46
Mortality selection?Slide47
Summaries and ConclusionsDue to vast differences between urban and rural employment among older populations, it is necessary to study the two sectors separately
Since 1990 LF participation of older rural women (45-59) declined by about 10 percentage points. Rural men’s decline was smaller.Among rural people there were varying trends in the first decade – mid-aged women and older men first increased work slightly before starting a long decline.
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Even though urban men and women started at much lower LFP,
they had similar declines of about 15 percentage points.Both urban men and women have reversed the declining trend, starting at about 2000 for women and 2005 for men.
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Rural TrendsIn rural areas, massive exit from agriculture by younger and male workers seems to explain the increase in employment of mid-aged women and older men in the 1990s.Since 2000 the mechanization of agriculture seems to explain the withdrawal of older and female work force.Increased availability of economic resources and reduction of # grandchildren are also related to a gradual release of rural elderly people from the hardship of farm and family labor.
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Urban TrendsSOE restructuring and liberal use of early retirement policy seem to explain the decline of employment in the 1990s.
Rapid growth of non-state and informal sector employment, tightened early retirement, and a large reduction in the number of young grandchildren are all associated with delayed retirement since 2000.I
mproved educational attainment contributed to later retirement among younger men and women.50