Recently, some scholars have once again raised the so-called "dependency ratio" issue, claiming that if China does not raise the retirement age, by 2050 China's dependency ratio will drop from 4.9 in 2010 to 1.4 in 2050. This means that in 2010, five young people supported one elderly person, but by 2050, one and a half young people will have to support one elderly person, and they will be overwhelmed.

The dependency ratio refers to the ratio of the non-working-age population to the working-age population in a population.

This is not the first time someone has raised the "dependency ratio" issue. But I believe that the so-called "dependency ratio" is not the key to the problem. Using the "dependency ratio" as a reason for delaying retirement is untenable, and delaying retirement has no practical significance. China's elderly care problem is not as serious as people imagine.

The so-called "dependency ratio" is a surface phenomenon

Whether it is 10 working people supporting 1 retiree or 1 working person supporting 1 retiree, it is a surface phenomenon. It cannot explain the problem, nor can it prove whether the elderly can be supported or supported well. This issue has no substantive significance and cannot serve as a basis for decision-making.

It is a simple truth, just like a family: if 10 children all have low incomes, even though there are many of them, they will find it difficult to support their parents. Conversely, if in a one-child family the child has a high income, the parents can be well supported. The key is the total income of the family, not how many children the family has.

The same is true for a country. More than 30 years ago, China's so-called "dependency ratio" was much lower than it is now. There were far more working people than retirees nationwide, and the total number of retirees was much smaller than now. It was roughly 10 working people supporting 1 retiree. More than 30 years ago, the total number of enterprise retirees nationwide was only about 10 million, while now it is about 80 million. More than 30 years ago, the average monthly pension for enterprise retirees was 40 to 50 yuan; now the average monthly pension is 2,000 yuan. Moreover, more than 100 million rural elderly people over 60 now receive a monthly pension of 50 to 100 yuan. The support situation and quality of life for people over 60 in China are already vastly different and cannot be compared with the past.

The above facts fully demonstrate that the so-called "dependency ratio" has little to do with whether the state can afford to support retirees, whether retirees can receive pensions, or how much pension they receive.

Fiscal revenue growth far exceeds the growth of the elderly population

The elderly care issue will become increasingly optimistic

In recent years, it is not only the number of people over 60 that has been increasing in China. Since the reform and opening up, the number of people over 60 in China has increased from tens of millions to the current 200 million. However, during the same period, fiscal revenue has increased from 110 billion yuan to 26 trillion yuan (calculated according to international standards, the income of all state-owned institutions, including social security contributions, profits of state-owned enterprises, and premium income of state-owned insurance companies, is national fiscal revenue). Calculated on a comparable basis, over the past 30 years, China's fiscal revenue has grown at an average annual rate of about 15%, with the highest year reaching 26%.

From now on, even at a conservative growth rate of 7%, it will double every 10 years. By 2030, China's population over 60 will be about 400 million, roughly doubling; during the same period, fiscal revenue is expected to grow fourfold, from 26 trillion yuan to 104 trillion yuan (calculated at 2013 prices, the same below). It can be seen that 20 years from now, China's fiscal strength will be even stronger, and its ability to support the elderly will be greater. Pensions are simply not a problem, and they will become less of a problem in the future, making the state's burden lighter. China's elderly care problem is not getting more serious; it is getting more optimistic.

In 2013, China spent about 3 trillion yuan on pensions and retirement benefits, accounting for 12% of the national fiscal revenue of 26 trillion yuan. For the 200 million people over 60 nationwide (including rural elderly, the same below), the average is 15,000 yuan per person per year, or 1,200 yuan per month. By 2030, at current prices, if the 12% pension expenditure share remains unchanged, for 400 million people over 60, the average will be 30,000 yuan per person per year, or 2,500 yuan per month.

Delaying retirement has no practical significance

Delaying retirement is actually a self-deceiving approach. Apart from provoking resentment and resistance from hundreds of millions of workers, it has no other meaning.

It is a simple truth: no matter at what age you retire, the total number of people over 60 nationwide has not changed, the growth rate has not changed, and the so-called "dependency ratio" has not changed. More importantly, the growth of wealth in the whole society has not changed, and the growth trend of fiscal revenue has not changed. All these have not changed. In a word, none of the decisive and substantive factors related to supporting people over 60 have changed. Under such circumstances, what is the point of making workers work a few more years and retire a few years later? On the surface, later retirement means paying pension contributions for a few more years, but they also receive full wages and corresponding benefits for a few more years. The overall social cost is not low. What is the point of exchanging socks for gloves?

We should not always focus on delaying retirement and collecting more pension contributions. If you collect a few more years of pension contributions from workers, it actually means their income is reduced by a portion, their consumption is reduced by a portion, their living standards before age 60 are relatively lower, and the state's tax revenue is correspondingly reduced by a portion. Conversely, if you collect a few fewer years of pension contributions from workers, it actually means their income is increased by a portion, their consumption is greater, their living standards before age 60 are higher, and the state's tax revenue is correspondingly increased by a portion. The essence is how to distribute the wealth created by a worker between the near term and the long term. How to distribute it appropriately should respect the worker's own wishes.

The so-called "end of China's demographic dividend" is a misunderstanding

Although China's total working population has begun to show a downward trend each year, this absolutely does not mean the so-called "end of China's demographic dividend," nor does it mean China's labor force is beginning to be in short supply. This is a huge misunderstanding.

China's economic aggregate is about the same as Japan's, but China's total population is exactly 10 times that of Japan. That is to say, China's overall productivity is only one-tenth of Japan's. China's economic aggregate is about half that of the United States, but China's total population is more than four times that of the United States. That is to say, China's overall productivity is less than one-eighth of that of the United States. Under such circumstances, worrying about a labor shortage in China and therefore needing to delay retirement is obviously ridiculous. When China's economic aggregate reaches 10 times that of Japan and 8 times that of the United States, it will not be too late to talk about the "end of China's demographic dividend."

It can be said with certainty that under the increasingly severe employment situation and with a serious surplus of labor, proposing delayed retirement is unwise and inadvisable. The wise and smart approach is to encourage appropriate early retirement. During early retirement, retirees receive 50% or 60% of their pension, and when they reach the statutory retirement age, they receive the full pension. For any family with an early retiree, if there is a child of working age who is unemployed, the government should give priority to arranging a job, especially for children who are college students.

At the very least, we should leave the choice of whether to retire early to the workers themselves, giving them a chance to choose, rather than being so arbitrary and rigid.

It can be said with certainty that as long as there is peaceful development and peaceful construction, whether the number of people over 60 in the future is 300 million or 400 million, China will be fully able to ensure these elderly people have enough food and clothing, and will certainly be able to ensure that they receive a certain amount of pension each month. The key is how much is paid and whether the payment standard is fair.

Considering that rural elderly people over 60 generally have a contracted plot of land, which can be transferred through leasing and other forms to obtain a certain annual income (currently in Northeast China, the annual rent for one mu of farmland is generally about 500 yuan), the state, although it also has to bear the responsibility for their elderly care, will certainly not simply provide pensions at the same level as urban workers. This is also a common practice in countries around the world. Some countries explicitly stipulate that if residents' personal wealth reaches a certain level, the state does not provide a pension or provides half the pension. We can fully learn from the practices of most countries in the world: if a person over 60 or their family has wealth reaching a certain level, the government does not provide a pension or provides half the pension. If the government provided a pension to a billionaire, it would be a joke.

One truth must be made clear: the essence of the matter is not that "the government spends money to support the elderly," but that workers in the whole society, including people over 60, spend money to support the elderly. All wealth in society is created by workers, and every penny of the government's fiscal revenue is created by workers. To be precise, it is not "the government's money" but "the workers' money." The money in the government's hands, that is, fiscal revenue, is essentially money that workers entrust the government to manage and spend. How to spend this money and how much to spend each year on supporting the elderly should fundamentally be decided by the workers of the whole society.

In summary, I believe that the so-called "dependency ratio" issue has no substantive significance, China's labor force will remain in surplus for a long time, and delaying retirement is inadvisable. China's elderly care and pension problems are not as serious as people imagine. As long as policies are right, China's elderly over 60 will receive more pensions in the future and live happier lives.