www.scedu.ca/jar Journal of Busness Admnstraton Research Vol. 3, No. 2; 2014 The Impact of Delayng Retrement on Chnese Employment and Economc Growth under the Background of Agng Hayang Zhang 1 1 School of Management, Shangha Unversty of Engneerng Scence, Chna Correspondence: Hayang Zhang, School of Management, Shangha Unversty of Engneerng Scence, Shangha, Chna. E-mal: mke1xwo@163.com Receved: August 15, 2014 Accepted: August 25, 2014 Onlne Pulshed: Septemer 1, 2014 do:10.5430/jar.v3n2p54 UR: http://dx.do.org/10.5430/jar.v3n2p54 Astract In accordance wth nternatonal standards for the agng socety dvson, Chna has entered the agng socety snce 2000, and the agng degree s deepened ceaselessly. To actvely deal wth adverse effects on laor market and economc development whch rought y the agng of the populaton, t s mperatve for Chnese government to reform the retrement system. Ths paper uses employment susttuton effect and the employment elastc coeffcent to analyze the effects on economc growth and employment of delayng retrement, and predct reasonale retrement age. As a result, through theoretcal analyss, delayng retrement won t cause large scale unemployment, as well as new retrement age should not e over the age of 65, to promote the role of economc growth, otherwse t wll stfle economc growth. Keywords: Populaton agng, Retrement age, Employment, Economc growth 1. Introducton Chna has entered the agng socety snce 2000, the agng degree s deepened ceaselessly. It s generally eleved that the agng of the populaton wll cause the reducton of the workforce, ncrease penson pressure, and affect the development of the economy. In order to reduce the adverse effect of agng on Chnese employment and economc development, delayng retrement s generally consdered a countermeasure. It s not only the ojectve laws, ut also meets the necessary means of socal old-age securty. Through an analyss of employment susttuton effect theory, to study the relatonshp etween delayng retrement and the laor supply, employment elastcty coeffcent to predct reasonale retrement age at the same tme, amng to provde Chnese government some recommendatons for reference to reform the retrement system. 2. The Necessty to Delay Retrement 2.1 Delayng Retrement s the Ojectve aw The polcy of retrement should not e fxed. The ojectve trend of the economc, socal, and demographc development all have forced the retrement age adjusted. Both n the developed and developng countres, the statutory retrement age starts to e postponed. It seems to ecome a gloal trend, as the tale 1 shows (Shao Guodong, Zhu Xaoyu & u We, 2007). At present, the retrement polcy arrangement n Chna s that, male workers aged over 60 years old, who have served for 25 years; female workers over 50 (female cadres, 55 years old), who have served for 20 years, then they can retre. Meanwhle, the sxth Chnese census data (2010) shows that: the average lfe expectancy of the Chnese populaton s 78.61 years old; the average male lfe expectancy s 76.16 years, female 81.06 years old. Due to mproved medcal care, health and lvng standards, the average lfe expectancy of the populaton ncreases nearly 20 years compared to t n the 1950s, ut Chnese retrement system stll use the old standards, whch s ovously gnore the ojectve law changes. Pulshed y Scedu Press 54 ISSN 1927-9507 E-ISSN 1927-9515
www.scedu.ca/jar Journal of Busness Admnstraton Research Vol. 3, No. 2; 2014 Tale 1. Some countres postponed or delayed retrement age scheme Country The statutory retrement age n 2002(years old) The ojectve retrement age(years old) The tme to reach the target retrement age(year) Amerca 65 67 2027 Brtan 65(M), 60(F) 68 2024-2046 Germany 65 68 2029 Italy 62(M), 57(F) 65 2018 Japan 60 65 M:2025, F:2030 Data source: Shao Guodong, Zhu Xaoyu & u We (2007). The study on the reasonaleness of delayng retrement ased on the lfe-cycle theory. Socal Scences n Yunnan, No, 5: 53-56, 88. 2.2 Delayng retrement s the need of socal endowment nsurance Durng the transform from the PAYG system to partally funded system, a huge gap of penson emerged n Chnese endowment nsurance system (Zhu Xaotao, 2013). The human resources and socal securty undertakngs development statstcs ulletn (2008) shows that from 2006 to 2008, Chnese penson costs rose to 739 llon RMB from 489.7 llon RMB, an average annual ncrease of 22.84%. Accordng to the predcton of World Bank, from 2001 to 2075, the revenue and expendture gap of the asc old-age nsurance wll reach 915 mllon RMB n Chna, whch wll rng huge pressure to natonal fnance. At the same tme, due to the uran-rural dual economc structure of socety, the coverage of the Chnese socal securty system whch estalshed n the 1980s s stll narrow, and far from coverng all rural areas wth all types of socal securty enefts (Peng Xzhe & Hu Zhan, 2011). In ths context, to delay retrement can allevate socal pressures of penson to some extent. 3. The Impact of Delayng Retrement on Employment and Economc Growth 3.1 The Impact of Delayng Retrement on Employment Under the condton that the numer of jos provded y socety s lmted, especally n severe cases of populaton agng, extendng the retrement age could releve the approachng workforce reducton stuaton. However, the retrement age wll e extended at the cost of decreasng other people s opportuntes n the work feld, whch would rng a susttuton effect of employment (Xu Wenquan, ang Dong & Yue Haoyong, 2006). The susttuton effect of employment sze should e dvded nto two knds of stuatons to dscuss: Frstly, when under the planned economy system, jos would e arranged y the government, and the chance of reappontng the retred would e lttle. Therefore, extendng the retrement age wll reduce the replacement of old and new laor force, squeeze jos for young people, and produce a larger susttuton effect of employment. Secondly, when under the market economy system, there are a lot of retrees would e rehred. Even though some people choose to retre early, there won t e more jos provded. At ths case, the susttuton effect of employment whch rought y extendng the retrement age wll e smaller. Along wth the growth of the age, the retred wll lose some energy n work feld, compared wth young people full of vtalty. But a wealth of experence could make them have more advantages n certan postons than young people, so the rehrng phenomenon appeared. On the contrary, extendng the retrement age promotes employment. For that reason, many countres regard retrees employment as the way to ncrease socal wealth, and they encourage t nstead of excluson. In summary, the results from the theoretcal analyss shows that the susttuton effect of employment caused y extendng retrement s smaller under the market economy system, and delayng retrement could promote employment. Accordng to the net employment effect of delayng retrement (employment promoton effect employment susttuton effect), delayng retrement could not cause a hgh unemployment rate. Pulshed y Scedu Press 55 ISSN 1927-9507 E-ISSN 1927-9515
www.scedu.ca/jar Journal of Busness Admnstraton Research Vol. 3, No. 2; 2014 3.2 The Impact of Delayng Retrement on Economc Growth 3.2.1 Research Method Accordng to the laor economc, employment elastcty coeffcent s a most commonly used ndcator to measure the relatonshp etween economc growth and employment growth (Ch Byun, 2006 & Cheng ansheng, 2007). Therefore, the paper uses t to analyze the mpacts of delayng retrement on Chnese economc growth. The relatonshp etween economc growth rate P and employment growth rate Q can e expressed as: Q P (1) Among them, ndcates the employment elastcty coeffcent,.e. as GDP growth y one percentage pont, t can drve the percentage ponts of employment. The larger s, the stronger the alty to attract laor force, and vce versa.under certan condtons, the larger s, the hgher Q s. Employment growth rate Q s the ratos etween employment ncreased volume and the amount of the ntal employment. 0 ndcates the numer of laor force to partcpate n employment, s the ncreasng amount of employment. Thus the rate of employment growth Q can e expressed as: Q 0 (2) Put (1) nto (2): P o (3) To analyze the mpact of delayng retrement on Chnese economc development, s to study the effect of ncreased employment on the Chnese GDP growth rate due to delayng retrement, so (3) s lmted to the relatonshp etween the workforce and the economc development under the condtons of delayng the retrement age. ' P ' refers to the employment n the case of the retrement age not changed, ' refers to the laor force ncrement as a result of delayng the retrement age, whch equals to the actual numer of employees under delayng retrement age sutractng the actual numer of employees wthout postponng retrement age. It s necessary to explan that there s a huge numer of employment statstcs, wth many uncertanty factors, so the paper uses the statstcs of the numer of people of all ages and the age of the laor force partcpaton rate to reflect changes n employment, refers to the age of employment. When the workers work from a years old to retre at years old, then all the employment numer can e expressed, f delay the retrement age from years old to k as a years old, the numer of socal employment wll k k ecome a after the polcy change, and the ncremental numer of laor wll e a a, whch means the growth rate of GDP. k P a a a Because the laor partcpaton rate etween male and female s dfferent and the dfference s gger, t should e consdered separately. Therefore the paper mproves the model, makng t more realstc. Male people wth years old s expressed y 1, the laor force partcpaton rate s expressed y 1, so the same wth women,. So consderng the case of men and women, the model s: k P 1 1 2 1 a a 3.2.2 Research Content Based on the statstcal data of 2010, the paper fnds out the natonal men and women of all ages populaton and laor force partcpaton rate, as the tale 2 shows. a 1 1 Pulshed y Scedu Press 56 ISSN 1927-9507 E-ISSN 1927-9515
www.scedu.ca/jar Journal of Busness Admnstraton Research Vol. 3, No. 2; 2014 Tale 2. 2010 Natonal men and women of all ages and laor force partcpaton rate Age group Male populaton Male laor force partcpaton rate(%) Female populaton Female laor force partcpaton rate(%) 15-19 51904830 25.5 47984284 30.4 20-24 64008573 81.7 63403945 72.2 25-29 50837038 96.4 50176814 82 30-34 49521822 96.9 47616381 84.1 35-39 60391104 96.7 57634855 85.7 40-40 63608678 95.8 61145286 84.6 45-49 53776418 93.8 51818135 76.4 50-54 40363234 88.6 38389937 63.9 55-59 41082938 75.6 40229536 52.1 60-69 50582897 25.5 49197667 15.2 Data source: 2010 natonal populaton y gender and age. http://www.luqyu.cn/html/4/2012/content-390.html Accordng to the statstcs of the State Statstcal Commttee, the employment elastcty s our asc n the range of 0.01-0.15.The paper selects 0.013 as the employment elastcty coeffcent ased on the changes n the employment elastcty n recent years. Accordng to ths stuaton that the laor force partcpaton rate s lower and the numer of employment n each age after 60 years old tends to declne, t s assumed that the laor force partcpaton rate remans unchanged, and the numer of employment s n the form of descendng arthmetc sequence. The paper chooses 10116578 as the frst seres of male populaton after 60 years old, wth 1124063 as the tolerance of the arthmetc sequence, and 10806510 as the frst seres of female populaton, wth 1204391 as the tolerance, then calculates the rate of ncrement of laor force after delayng k years, and chooses k as the ndependent varales, along wth the ncrement of GDP as the dependent varale. In addton, the paper uses MATAB to get the mage of GDP growth rate wth extendng the retrement age, as the fgure 1 shows. GDP growth rate(%) The year of delayng retrement Fgure 1. The mage of GDP growth rate wth extendng the retrement age Pulshed y Scedu Press 57 ISSN 1927-9507 E-ISSN 1927-9515
www.scedu.ca/jar Journal of Busness Admnstraton Research Vol. 3, No. 2; 2014 3.2.3 Research Result Fgure 1 shows that, the GDP growth rate s on the ncrease wth the extenson of the retrement age. But when k 5, the GDP growth rate ncreases wth extendng the retrement age.whle k>5, the speed of growth slows down, and delayng retrement s lkely to squeeze the poston supply, and then exacerates the tensons of the youth employment stuaton. So the paper draws ths concluson: the tme of extendng the retrement s not more than 5 years, whch means not more than 65 years old. Put 60, k 5, 0.25 nto the model: Then get P 0. 7 rate s 0.7%. 4. Dscusson k P 1 1 2 2 1 2 2 2 1 1 2 a a a %, that s to say, when the government adjusts the retrement age to 65 years old, the GDP growth From the dscusson and analyss, delayng retrement won t cause a hgh unemployment rate and the approprate retrement age s not over 65 years old that can contrute to the economc growth. From those, t s an nevtale trend n Chna.Therefore, the paper suggests Chnese government take the gradual approach to delay t wth the help of dong postve advocacy, n order to elmnate some people s resentment, and make people gradually accept the mplementaton of ths polcy. At the same tme, the government should also make some approprate correspondng measures of reform. For example, accordng to the actual retrement age the penson replacement rate can e dvded nto dfferent grades, that s to say, the later retrement age, the hgher penson level. Q P It should e noted that, the paper ases on and uses the laor partcpaton rate to calculate the laor populaton, then puts t nto MATAB software to make the mage. However, due to the lack of per numer of age 60-69 and ther laor partcpaton rate, the paper assumes that the numer of populaton after 60 years old s decreasng n the form of arthmetc sequence, and the laor force partcpaton rate remans unchanged. There s a devaton from the actual crcumstances whch leads to have a predcton error. The author wll do some further research on the ass of ths paper to fnd out the necessary polces whch are needed to carry on the correspondng reform, and how to reform and other ssues. References Cheng ansheng. (2007). An Attruton Study of the Changng Tendency of Rapd Economc Growth Accompaned y a ow Employment Rate n Chna. Teachng and research, No.3: 35-41. Ch Byun. (2006). The study of Chnese employment growth on the vew of the employment elastcty. Statstcal Educaton, No.4: 50-51. Peng Xzhe & Hu Zhan. (2011). Chnese populaton agng under the perspectve of pulc polcy. Socal Scences n Chna, No.3: 121-138. Shao Guodong, Zhu Xaoyu & u We. (2007). The study on the reasonaleness of delayng retrement ased on the lfe-cycle theory. Socal Scences n Yunnan, No.5: 53-56, 88. Xu Wenquan, ang Dong & Yue Haoyong. (2006). Adopt the reform of flexle retrng age to reduce the penson gap: ased on the human captal theory. MARKET & DEMOGRAPHIC ANAYSIS, V.12No.2: 33-37. Zhu Xaotao. (2013). Dscusson of Chnese penson stealth det prolems. aodong Baozhang Shje, No.4: 16-18. Pulshed y Scedu Press 58 ISSN 1927-9507 E-ISSN 1927-9515