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• Interaction between the funded portion of the rural pension system and the basic benefit in the longer term. A key policy decision relates to whether individual accounts and the basic benefit (or social pension) should be combined over time as the contributory system matures.
The two broad options are (a) to retain a basic benefit/social pension for persons over a certain age to provide an income floor that is supplemented by benefits from individual accounts, or (b) to gradually phase out the basic benefit/social pension as the contributory system matures, addressing elderly poverty through the regular social assistance program (perhaps, as is the case in a number of urban areas already, with an elderly supplement on the dibao threshold or benefit level). This book recommends that the basic benefit/social pension should be retained even in the longer run and cites the case of Chile as an instructive model of the interaction of social pensions and individual accounts that strikes a sensible balance between poverty and incentive concerns.
• Future integration between urban and rural pension systems and the issue of portability. Although “integration” is unlikely in the foreseeable future to imply full equalization of benefits between rural and urban areas, a common design framework would be useful to facilitate portability Executive Summary 9 between systems. This can already be seen in several areas, where integrated pension schemes for rural and urban residents are in place (for example, Zhongshan in Guangdong Province).
1. The first section is drawn from the background paper by Cai, Giles, and Wang (2009), which uses a rich variety of data sources to examine various dimensions of rural elderly welfare.
2. This chapter is an adapted and shortened form of the annex on rural pensions in the forthcoming Pensions Framework Paper (World Bank forthcoming).
That paper covers all elements of the Chinese pension system in a more comprehensive manner, and consultations on the draft were carried out in 2010.
References Cai, Fang, John Giles, and DewenWang. 2009. “The Well-Being of China’s Rural Elderly.” Background Paper for East Asia Social Protection Team, World Bank, Washington, DC.
Chaudhuri, Shubham and Gausav Datt. 2009. From Poor Areas to Poor People:
China’s Evolving Poverty Agenda, An Assessment of Poverty and Inequality in China. Washington, DC: World Bank.
World Bank. Forthcoming. China: A Vision for Pension Policy Reform Options.
Washington, DC: World Bank.
Trends in the Aging of China’sRural Population: Past, Present,and Future
China’s rapid demographic transition has led to the shrinking of the working-age share of the population and has raised concerns about population aging. Concerns have arisen over the old-age support and social security system in both rural and urban areas, as have worries about potential labor supply and labor market shortages in the future and the appropriateness of fertility and family-planning policies. This chapter reviews China’s demographic transition, with a particular focus on rural areas and on aging and fertility. Results are based on new estimates from a team comprising the China Academy of Social Sciences (CASS), China’s National Bureau of Statistics (NBS), and the World Bank. These estimates emphasize the importance of understanding the effects of migration on population structure and distribution. Not only will old-age dependency ratios rise rapidly, but this trend is likely to be much more pronounced in rural areas (consistent with anecdotal concerns about the “hollowing out” of villages because of migration). Such changes are likely to put additional strains on informal support networks, which are already unable to provide full support to their elderly members.1
12 The Elderly and Old Age Support in Rural China
Demographic Transition in China In the planned-economy period, fertility was high in most years, except for the period between 1958 and 1961. As shown in figure 1.1, the average birthrate was more than 3.06 percent during the prereform period but witnessed a sharp decline after the mid-1970s with implementation of China’s family planning policy. The death rate had dropped earlier to below 1.00 percent after the introduction of a rural cooperative medical system in the early 1960s and has held at roughly 0.65 percent since the beginning of the reform period. A declining birthrate with a low and stable death rate is a feature of China’s low-fertility era.
From 1978 to 2008, China’s annual population growth rate dropped from 1.20 to 0.51 percent. The tremendous decline can be attributed to two sources: the implementation of family planning policies and the effect of economic reforms (Gu and others 2007; Johnson 1994; Schultz and Yi 1999; Vermeer 2006). One-child policies were first implemented in cities and then extended to the countryside, leading to an abrupt decline in total fertility during the late 1970s. As figure 1.2 shows, the sharp drop contrasts with changes in fertility in other developing countries during the 1970s. Since 1990, China’s total fertility rate (TFR) has approached that of developed countries. Another important factor in recent years has been rural-to-urban migration. Increasing nonagricultural employment opportunities have caused rural migrants to postpone marriage and thus delay fertility.
Over the past 40 years, China has experienced the demographic transition to an “aging society” that typically took more than 100 years in such developed countries as the United Kingdom, the United States, and the Nordic countries (Uhlenberg 2009). Similarly, most of these developed countries had rural pension systems in place long before populations started to age (see box 1.1). By international standards, a society is said to be aging when (a) more than 10 percent of the population is over 60 years of age, and (b) more than 7 percent is over 65. As shown in figure 1.3, China entered the ranks of aging societies in 2000, when the over-60 and over-65 shares of the population reached 10.5 percent and
7.0 percent, respectively.
Population aging has been uneven between rural and urban areas during China’s demographic transition, with rural areas aging more rapidly.
Even though fertility is higher in rural areas than in urban areas, the elderly proportion of the rural population is also higher. As shown in figure 1.4, the gap of aged population between rural and urban areas has
Figure 1.2 International Comparison of TFRs, 1950–2010 total fertility rates –5 –6 –6 –7 –7 –8 –8 –9 –9 –0 –0 –1 Source: UN DESA 2009; see also http://esa.
Note: TFRs for developing countries exclude China.
been widening. In 1982, the proportion of the population 60 and older was 7.8 percent in rural and 7.1 percent in urban areas but rose to 13.7 percent and 12.1 percent, respectively, by 2005. The difference in the proportions of the population 65 and older between rural and urban areas has shown a similar trend over time.
Because rural migrants to urban areas tend to be younger than rural residents remaining behind, the increase in the elderly share of the rural population is driven by rural-to-urban migration. Latest estimates show 225.4 million rural migrants in 2008, with 62.4 percent living outside their home townships (NBS 2009), and the 2006 agricultural census found that 82.1 percent of rural migrants are younger than 40. The increase in rural-to-urban migration, especially the outflow of the rural young population, has caused acute changes in rural population pyramids in the reform era. As shown in figure 1.5, the rural population pyramid in 1982 had a larger population base, but it has narrowed significantly since then, showing a larger proportion of elderly by 2005.
Trends in the Aging of China’s Rural Population: Past, Present, and Future 15
The old-age dependency ratio has also been consistently higher in rural areas because of rapid population aging. Figure 1.6 compares oldage dependency ratios in rural and urban areas. In 1982, rural and urban old-age dependency ratios were 8.4 percent and 6.6 percent, respectively.
In 2005, they were 13.9 percent and 11.8 percent, respectively.
16 The Elderly and Old Age Support in Rural China
Sources: NBS 2008, 2007b, 2001; Yao and Yin 1994.
Figure 1.4 Comparison of Aged Population Proportions in Rural and Urban Areas aged proportions (%) Sources: NBS 2008, 2007b, 2001; Yao and Yin 1994.
Looking Ahead—Projecting Population Trends Although different assumptions lead to variations in the projected rate of change, China’s demographic trends will continue, with an acceleration of population aging in coming years. Figure 1.5 shows the rapid historical transition in the composition of China’s rural elderly population from the early 1980s to the mid-2000s. On the basis of projections completed for this report and shown in figure 1.7, this trend will continue steadily until 2030 and beyond, when the population now in their thirties and forties reaches pensionable age. The overall projected population structure is based on key variables that are discussed in the following paragraphs.
The true TFR in China has been the cause of considerable debate (Guo 2004, 2008; Retherford and others 2005). The annual population survey results show that TFRs have declined from 2.25 in 1990 to
1.45 in 2007 (figure 1.8), but these results are thought to be underestimates caused by unreported children and biased sampling. After using data from the population census and population sample to correct these estimates, the adjusted TFR is higher, at 1.57 in 2007 and close to the assumed low-fertility-rate scenario introduced below (see box 1.2 for details).
Figure 1.7 Changes in Rural Population Pyramids between 2020 and 2030
Sources: TFRs are from various surveyed data from NBS 1991–2006, 2007a, 2008; the adjusted TFRs are calculated with the supplement of census data and population sample data.
Representative Population Projections in China Several representative population projections have been developed to predict trends of China’s total population. The following organizations have made different projections: the United Nations Population Division, China’s Population and Family Planning Commission, Peking University, and a joint team from the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences (CASS-IPLE), NBS, and the World Bank (CASS-IPLE/NBS/WB). Key parameters in population projections made by the CASS-IPLE/NBS/WB team include TFRs, life expectancy, and urbanization. Different assumptions behind these parameters produce different trends for China’s total population, but these assumptions were made to serve different objectives, and the different population projections have their individual strengths and weaknesses.
The United Nations Population Division focuses on global population trends by projecting the trend of each country at the national level. It updates its population projection annually. The latest projection can be obtained from the
Box 1.2 (continued) 2010 revision of its population database. Total fertility rates for China have four variants: 1.31 (low), 1.56 (medium), 1.81 (high), and 1.64 (constant) at the starting point. Its life expectancy assumption of 84.2 years is the same in 2100 across different scenarios. It does not assume differences in TFRs between rural and urban areas or take into account migration and urbanization.
China’s Population and Family Planning Commission has made population projections similar to those of the United Nations. The projection is also based on the national level with different variants of TFRs.
The population projection of Peking University is unique. It adopts “progressive total fertility rates” instead of TFRs to make population projections. This method takes into account the differences in behavior of women who have given birth and those who have not. It also takes account of urbanization trends by using statistics on agricultural and nonagricultural population and assumes that the nonagricultural proportion of the population would be 42.9 percent in 2030 and
55.00 percent in 2050—assumptions that are obviously very low.
The joint CASS/NBS/WB population projection used in this report has the following features:
• It uses the 2000 population census and 2005 1 percent population sample to adjust TFRs in both rural and urban areas.
• It uses the classification of rural and urban areas in the 2000 population census and the 2005 population sample and makes the corresponding population projections.
• It uses two TFR scenarios: low (1.60 overall, based on 1.70 for the rural population and 1.33 for urban population) and high (1.80 overall, with rural of 2.35, urban of 1.36). For the projections presented in this chapter, the low fertility rate is used unless otherwise indicated, because it appears to be closest to what is observed from the census.
• Three levels of urbanization appear by 2030: low (55 percent), medium (60 percent), and high (65 percent). For the projections in this chapter, the medium urbanization rate is used unless otherwise indicated.
• Life expectancy is assumed to be the same as in the United Nations population projection.
Source: Cai, Giles, and Wang 2009.
22 The Elderly and Old Age Support in Rural China If one uses the combination of low fertility rate and medium urbanization level, China’s total population will continue an upward trend, but with a decreasing growth rate, peaking in 2030 at 1.41 billion. The number of working-age people will decline after 2016, earlier than the growth of total population, which will lead to a decreasing working-age to elderly support ratio. Changes in support ratios differ in rural and urban areas. The proportion of working-age people in rural areas will drop from