Delayed retirement will not simply boost labor participation rates but is also likely to accelerate the transformation of demographic and labor supply structures.

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As China’s population ages and demographic changes accelerate, the country has initiated adjustments to its retirement policy, planning to gradually raise the statutory retirement age over a 15-year period beginning in 2025.

While delaying retirement can immediately increase labor participation rates and promote the development and utilization of human resources, the move will also profoundly affect the division of labor and resource allocation within families, exerting long-term, far-reaching impacts on population trends and labor supply. 

The gradualist approach to retirement delay aligns with China’s family culture and reflects the systematic and synergistic nature of Chinese reforms. This strategy can mitigate the potential impact of public policy on families at the micro level while expediting the shift from a demographic dividend to a talent dividend, thereby facilitating high-quality population development. 

Chinese family culture

Under the influence of traditional culture, Chinese families have been characterized by mutual support between generations. To be more specific, parents raise their children, while the “implicit pacts” of skip-generation upbringing and raising children to provide care in old age are deeply ingrained. These traditions have an important bearing on childbearing intentions and risk prevention in families. 

In skip-generation upbringing, elderly family members help their children raise grandchildren, investing time and money, which directly reduces childrearing costs. With respect to raising children to provide for old age, children and grandchildren care for the older generation, immediately increasing the benefit of having children. Both practices are conducive to stabilizing fertility rates. 

Delayed retirement will directly impact the internal intergenerational support mechanism within families by extending the careers of elderly workers. This reduces the time they can spend caring for grandchildren while increasing their income, thereby lessening their dependence on their children. Therefore, the policy may lead to a decline in birth rates among younger families. 

The quantity and quality of births are to some degree negatively correlated. By having fewer children, families are able to increase their educational investments in each child, helping future workers develop stronger foundational knowledge and enhanced overall skills.

Given the trade-off between time spent on childrearing and working, a decrease in births will reduce the time laborers spend on childcare while increasing their available hours for work. This shift will help laborers accumulate work experience and enhance their professional skills.

Overall, the impact of delayed retirement on China’s labor supply extends beyond simply enhancing labor participation rates and altering the quality of the workforce. It will undermine family mechanisms related to skip-generation upbringing and raising children to provide for old age. In the long run, this will influence fertility rates and enhance workers’ human capital, thereby more effectively transforming the structure of the labor supply.

Income, gender disparities

Due to significant differences in childrearing costs and benefits across different income groups and genders, it is necessary to examine the income gap and gender disparities when evaluating the long-term effects of delayed retirement on demographic shifts and labor supply.

First, middle- and low-income groups feature relatively low time costs, high educational costs, and low preventive saving rates, which motivates these families to have and raise children as a means of ensuring care in old age. Consequently, the impact of delayed retirement on weakening the mechanism of raising children for this purpose is more pronounced among middle- and low-income workers. 

Second, a notable income gap exists between genders in the labor market. Within families, women assume a greater share of the time costs associated with childrearing and are primarily responsible for skip-generation upbringing. Thus, an increase in the retirement age will more profoundly affect the skip-generation childrearing mechanism for female workers.

Overall, the long-term impact of delayed retirement on demographic changes and labor supply, through the mechanisms of skip-generation upbringing and raising children to provide for old age, varies from family to family, leading to certain redistribution effects. 

In summary, when assessing the economic impact of the delayed retirement policy, attention should be paid to its potential impact on the mechanisms of skip-generation upbringing and raising children for old age within the context of traditional Chinese family culture. Delayed retirement will not simply boost labor participation rates but is also likely to accelerate the transformation of demographic and labor supply structures, affecting laborers differently based on income levels and gender. A gradual approach to raising the retirement age will help ensure a smooth adjustment for families at the micro level while reinforcing the rights of affected groups. In addition, the policy will allow time to adjust and optimize related policies in accordance with changes in demographic and economic structures, making reform more systematic and synergistic.

Guo Kaiming is a professor from the Lingnan College at Sun Yat-sen University. Wang Yubing is a research fellow from the Institute of Guangdong, Hong Kong and Macao Development Studies at Sun Yat-sen University.

Edited by CHEN MIRONG