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China: Social Insurance for an Aging Work Force


Asian countries are experiencing an increase in the number of elderly people relative to the overall population. This change can be attributed to declining fertility rates and increasing longevity. Lesser developed nations may find it more difficult to respond to the needs of this growing aging population. [1]



Asian countries are experiencing an increase
in the number of elderly people relative
to the overall population. This change
can be attributed to declining fertility rates
and increasing longevity. Lesser developed
nations may find it more difficult to respond
to the needs of this growing aging population.
[1]

Amid the Asian nations, China faces a
unique situation,. The number of people
over the age of 60 has already reached 143
million, or 11 percent of the population.[2]
By 2010, the elderly population is expected
to increase 174 million, or 12.78 percent of
the total population..[3]This increase translates
into a decreasing labor force.

Developed nations experienced an increase
in the elderly population after modernization,
when the per capita GDP was between
5,000 and 10,000 dollars. China is not fully
modernized or developed, and the per capita
GDP is hardly 1,000 dollars.[4]

The government may not necessarily have
foreseen this development. Traditionally,
younger family members would care for
their elders, but they are not always willing
or able to do so today. Nonetheless, the
elderly are likely to have high expectations
of officials. Until the 1980s, China had a
laudable universal medical care program.
The program deteriorated as the country
began to privatize.[5]

China has already taken measures to restructure
existing social insurance programs
and develop new initiatives. The Chinese
Association of Life Care, founded in April
2006, has addressed issues such as palliative
care, gerontology research, and healthcare
for the elderly.[6] In September, the
China National Committee on Aging established
a national program on the aging for
the 11th Five-Year Program period (2006-
2010). Two areas of great concern include
pension plans and healthcare.[7]

The nation has restructured its outdated,
debt-ridden pension program. Asian nations
employ two different types of systems to
manage the risks associated with retirement
income and medical care. The Central
Provident Funds (CPF) of Singapore and
Malaysia use the defined contribution (DC)
approach. The DC subsidizes large expenditures
such as housing, education, and
sometimes medical care. It also provides a
variable benefit, a lump sum payment that
can translate into 20 to 40 percent of a
worker’s income upon purchasing an annuity.

In contrast, the defined benefit (DB) approach
employed in India, Korea, the Philippines
and Thailand is employee-sponsored
and relies on current contributions. Contributions
vary according to operational costs;
therefore, DB is not as effective if the elderly
population continues to increase. [8]

The new Chinese pension system utilizes a
mandatory DB approach as its first tier, a
mandatory funded DC as its second tier,
and a voluntary saving scheme as its last
tier. The government must continue to improve
access to care, especially for the
65.82 percent of the elderly population in
rural areas. The program currently addresses
the needs of less than one fourth of
the population.[9]

A government medical program aims to provide
care to more senior citizens in poor
areas. There are plans to increase accommodations
in elderly nursing homes by
800,000 in urban areas and 2.2 million in
rural areas within the next five years. At
present, these homes only accommodate
1.2 million people.[10] The government
must see the long term payoff for providing
better healthcare is that the aged labor force
can work longer. Experts are encouraging
the government to postpone the retirement
age to 63 or 65.[11]

The government has been pursuing a policy
of fiscal consolidation so that it can fund
these programs. It also plans to build
10,000 colleges and schools for elderly people
by 2010. [12]

Source: www.asiaecon.org |

 

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