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Government Jobs Remain a Sweet Retirement Deal in China Despite Clamor to Reform Pensions

Categories: East Asia, China, Citizen Media, Development, Governance, Human Rights, Politics
Retired seniors play cards in a park in China. [1]

Retired seniors play cards in a park in China. Photo by Flickr user Cathy and Dan. CC BY-NC-ND 2.0

“Iron rice bowl” is Chinese slang for stable government-related employment that comes with attractive benefits and practically zero risks of job cuts. So tempting was the label, popularised during Mao Zedong’s rule in China before economic reforms kicked in, that it was even seen as a boastful attribute during blind dates in the 1960s.

Such jobs promise free pensions with which jobholders can rest easy after retirement, effectively creating a cradle-to-grave welfare scheme inspired by the Soviet model. During the heyday of China’s planned economy, iron rice bowl were the definition of golden jobs.

But what many people once perceived as dream jobs have become a liability for the Chinese government in recent years, as the country struggles with a looming pension deficit amid changing demographics.

Realising the invention of iron rice bowl has landed them in hot water, authorities in China hinted at a willingness to do away with the free pension privilege in late May this year. Chinese media reported [2] at the time that workers at government and affiliated organisations are required to contribute individually to their social security starting in July, when a new regulation would take effect. 

But in a drastic twist, the Chinese Ministry of Human Resources and Social Security, which oversees social welfare and employment, dismissed media reports as misinterpretations. The department told [3] the Communist Party mouthpiece newspaper People's Daily last week that the new regulation was simply some “general principles” — a Chinese euphemism to allow for flexibility — and “additional studies” need to be done regarding government workers’ salary mechanism and pension. 

For now, China's 21-million-strong [4] workers in government and its affiliated organisations might bask in the assurance that their status quo will not be challenged anytime soon, but this sudden turn of events appear to have dented hope for more equality in pension, adding another layer of tension in China's pledge to reform its troubled pension system.

Pension system inequality

China introduced its national pension system in 1997, at a time when living conditions had markedly improved after nearly two decades of economic reforms. While the Chinese government deserves credit for having expanded its pension coverage rate ever since, it's been often times faulted for creating a class-defined scheme. Workers are divided into three groups — urban white-collar workers, government workers (including those employed at government-affiliated groups) and farmers — that have their own distinctive pension packages.

Under the current pension system, urban white-collar workers are generally required to contribute 28 percent of their salary to collective pension pools, while iron rice bowl job holders — mostly government employees — have their pension entirely covered by the state. Pension received by an iron bowl rice retiree can be 33 times higher than what a peasant will get after retirement, a Chinese media outlet reported [5] in 2013, citing figures from National School of Development of the prestigious Beijing University. 

Danqing Shuoshi, a Shanghai-based user, lamented [6] this set-up as unfair:


The essence of China's pension: It's like there are five migrants workers, and each contributes 20 yuan [about 3 US dollars] to pay for a big meal. The food is ready and the supervisor of the migrant workers comes. The supervisor doesn't pay for the meal but ends up having three people's food. Normal employees have to contribute 28 percent of their income to pensions whereas a government worker gets three times the pension of what a normal employee gets — robbing the poor to help the rich. That's what pensions look like in China.

The stark contrast in pensions between urban white-collar professionals and government employees has fueled social discontent, prompting calls to scrap the so-called dual-track system that has come under close scrutiny.

But some have pointed out that there is a reason why so-called iron rice bowl workers receive such a cushy pension deal — low pay. They complain efforts to bring their pensions in line with those of other professionals don't seem to address that government workers generally don't make much. 

Telunsu Wow, a citizen of northeastern city of Dalian, wrote [7] on on popular Twitter-like Sina Weibo: 


The pay in the government sector is not high, so why do a lot of university graduates still want to apply for such jobs? Fundamentally it's because everyone wants a stable life. There are constant efforts to break the iron rice bowl system, but [the government] fails to offer its people a sense of security and ensure people get a pension. A government like this is disappointing. The country is developing fast, but that does not necessarily make people happy…. In fact, the demand of the Chinese people isn't much.

An ageing population 

Despite public frustration over the differences between pension packages, a bigger worry is looming — will China be able to pay for its retired seniors in 2050 when [8] more than a quarter of its population will be over 65?

There are good reasons for concern. 

With a growing life expectancy and more than three decades of the one-child policy, the number of seniors is on the rise. In 2013, people over 60 years old stood at  [9]200 million, and a report by a government-financed research institute estimated [10] that China would become the world's most aged society by 2030. 

In a country where caring for the elderly is a cultural norm, a failure to deliver on filial piety undoubtedly draws censure and at times court cases [11]. However, what might leave seniors financially crippled after retirement is more likely to be a systematic problem, triggered by a fast ageing population and a flawed pension design.

One prominent characteristic of the Chinese pension system is the pay-as-you-go model, in which contributions of the current workforce are used to pay for the pension benefits of the retired. But China's workforce [12] has already shown signs of shrinking, a trend that is set to continue in the years to come, thrusting the sustainability of such model into question despite the fact that China loosened [13]its one-child policy last year. 

As one outspoken Taiwanese economist has put it [14], “The Chinese economy is bound to crash in 2015 [if we need to] support all the seniors.” By some estimates [15], only one worker on average will contribute to a senior's pension benefit, compared to a 5-1 ratio in 2010.

China's latest response to the looming crisis is house-for-pension scheme [16], in which elderly Chinese would promise their homes to a bank or insurance company and receive monthly payments on the value. The government has also deliberated on delaying the retirement age — 50 or 55 for women and 60 for men at the moment — and attempted to diversify investment of national pension funds. 

This has left many wondering what they can expect at retirement. Xuri Sanxing Wusheng, from the northern Hebei province, wrote [17] on Weibo: 


I heard there is a possibility of delaying the retirement age. For someone my age, I suspect I could be retiring at 65, but there are three questions that are unanswered: 1) What's the average age of Chinese in China? 2) I am paying for my pension until retirement, but when can I get back all the money I have paid after retirement? 3) It's said that there is a huge pension deficit. Is it true or not? If it's true, how much deficit is there? If it's false, could the authorities air the evidence on the 7 o'clock Xinwen Lianbo news?

In the eyes of Wang Zhi'an, an influential investigative journalist, it's only a matter of time before at least the iron rice bowl privilege is dismantled. “The reform of government workers’ pension is like an arrow on the bowstring,” he wrote [18] on Weibo. But will reform of the system go further than that? It remains to be seen.