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Retirement - PowerPoint Presentation

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Retirement - PPT Presentation

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

rural employment retirement urban employment rural urban retirement women men older trend charls 1990s declined trends age agriculture history

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Slide1

Retirement

Trends in China

Yaohui

Zhao, Peking UniversityPrepared for “SIEPR Conference on Working Longer and Retirement”, Stanford University, October 8-9, 2015

1Slide2

China has one of the fastest ageing population in the world.Slide3

3

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)

6Slide7

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

8

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

10Slide11

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

20

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

21

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.

47Slide48

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.

48Slide49

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.

49Slide50

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