Hukou is an important definition to know the difference between the two systems. It is a record in the system of household registration required by law in China. Often, people who are born in rural areas have rural hukou.
The percentage of the population that works not surprisingly declines with age, but the sharpest declines occur for those with urban hukou in their 50s and early 60s, but not until after age 65 for those with rural hukou.
For those with urban hukou, the employment rate declines from nearly 80% at ages 45-49, to about 40% at ages 55-59 and 20% at ages 60-64. In sharp contrast, for those with rural hukou, the most people still work at ages 65-69, with rates not declining to below 20% until after age 80. These large disparities suggest that there are significantly different institutions affecting retirement for urban and rural citizens. With respect to retirement behavior, urban China looks like many European countries, while rural China looks like many developing countries.
Gender differences in employment rates are much larger for urban hukou holders than for rural hukou holders. For those with urban hukou, a large gender gap within the labor force participation appears at ages 50-54. More than 75% of men work and less than 45% of women work. At older ages, urban women continue to leave the labor force; by ages 60-64 less than 10% are working. Urban female rates of labor force participation at older ages are extremely low by international standards. For those with rural hukou, there is a consistent (approximately) 10% gender gap in labor force participation rates, with fewer women working than men. However, a majority of women are still working at ages 65-69.
These years, Chines government has made great progress in increasing the population coverage of public pension programs to reach previously un-pensioned elderly urban residents and rural residents. The pension benefits of new programs are very modest, while those provided by the government or firms are very generous. The table bellow reveals the great disparity in benefit levels across programs as well as the share of the population participating in different pension programs. The pension insurance (generic term for pension and insurance for the elderly in China) of median annual pension benefits of the new rural pension program residents is just 111 to 186 dollars, while those from government or public agencies (3,713 dollars) and firm pensions (2,785 dollars) are much greater. The median share of expenditures financed by pensions is 20% or less for the new programs while it is 244% and 192% for the government/public agency and firm basic pensions.
Click the table below: RESET
|Pension Scheme||Population||(%)||Median Annual
(1 square equals to 30 people in the survey.)
Among all the elderly who receive any pension benefits, 21.6% receive benefits from one of the two main public pension programs for urban workers, 10.7% from the firm basic pension program and 10.9% from the government or public agency worker pensions program. Thus, just as for medical insurance programs, pension programs provide very different benefit levels and thus remain highly segmented. So it is difficult to integrate programs or pool program finances. That’s also why it is hard for the elderly to change a job between different kind of pension programs.
Different kinds of money transfers are playing quite different roles between the rural elderly and the urban elderly. For the rural people, financial support from other household members and private transfers (mainly from children) is important to reduce consumption poverty (Poverty rate based on consumption, instead of income). The poverty rate based only on the income of respondents and spouses (including pensions) is 65.1%, which falls to 46.1% using pre-transfer household income per capita (after pooling income with other household members), and further to 40.3% with private transfers. Public transfers reduce poverty by 3.3%, and savings reduces poverty from 37.0% to 28.9%.
Expansion of the rural pension program could play an important role in reducing elderly poverty. 25.6% of the rural people are receiving pensions under the new rural social pension program. These people with a poverty rate of 29.6% would have reported a poverty rate of more than 37.0% if they had not received the pensions. However, if children reduce the money transferred to their parents when pension becomes available, it could offset the beneficial impact of the program.
For those with urban hukou, consumption poverty rates are lower, and only living together with other family members has a marked impact on reducing poverty. However, private transfers actually increase the poverty rate, which means that the urban elderly are more often givers than receivers of financial assistance. Public transfers and personal savings each contribute a small amount to reducing poverty rates.
Health insurance coverage rates are lower among the poor elderly, especially those with urban hukou, and among those living alone. Although health insurance coverage (medical relief included) rates are high for all groups, for those with urban hukou, the coverage rate for the poor elderly is 6.0% less than for the nonpoor elderly.
For those living alone, the coverage is 5.3% lower than those not living alone. For the rural-hukou people, health insurance coverage rates are 2.6% less for the poor elderly than the nonpoor and 6.1% less for those living alone than for those not living alone. Thus, economically and socially deprived groups also face greater vulnerability to health crisis.