Rui Zhao and Yaohui Zhao
The China Health and Longitudinal Study (CHARLS) data reveal a significant gender difference in poverty rates among Chinese people ages 60 and older. Traditionally, family rather than a social pension has been the safeguard against poverty in China. However, with rapidly declining fertility and the out-migration of children, social pensions are expected to play a larger role in determining the livelihood of the elderly. Unfortunately, the CHARLS data also reveal a significant gender gap in pension benefits, with women receiving less than half of men’s pensions, which leads to a significant gender difference in the standard of living of the elderly. Zhao and Zhao make an effort to understand the source of this difference. They show that women’s disadvantages in the labor market are the primary driver of the gender pension gap.
Methodology. In China, there is a large informal sector that was not covered by social insurance until recently. Participation in formal sector employment has been a defining characteristic of labor market experience and is likely to be a key factor determining the amount of pension a person receives. Therefore, to explain the gender pension gap, Zhao and Zhao use data from the 2013 wave of CHARLS to focus on gender difference in terms of enrollment in the generous occupational pension programs. They then use Oaxaca styled decomposition to explain the coverage and benefit gaps in these programs with reference to the length of labor force participation and earnings during employment.
Main findings. Zhao and Zhao’s results reveal that nearly three quarters of the gender pension gap can be explained by women’s lower likelihood of receiving the occupational pension that is offered to employees in government, government-funded institutions, and urban firms, and the remaining quarter can be explained by the smaller amount of occupational benefits women receive when they do have such a pension. Next, the disadvantage of all women in receiving the occupational pension can be explained by their lower educational level and their sectors of employment. Finally, among recipients of an occupational pension, nearly a third of the gender benefit gap can be explained by the fewer years that women are in employment and the lower salary they receive before retirement. Zhao and Zhao’s results indicate that the large gender gap observed in the labor market translates into an even larger income gap in old age.
Policy implications. Zhao and Zhao’s findings have important implications for policies to reduce women’s poverty in old age. They suggest that encouraging women to take part in nonfarming sector jobs would improve their access to occupational pensions. However, the lack of childcare facilities is a major barrier to women taking up nonfarming sector formal employment. Thus, improving access to childcare services could raise women’s pension prospects. Zhao and Zhao also suggest lengthening women’s careers to narrow the gender benefit gap. The current retirement age policy forces women to retire earlier than men by five years or more. The current deficit in women’s years of employment in sectors that offer an occupational pension is exactly five years; thus, women’s deficit in the length of employment could be immediately eliminated by equalizing their retirement age with that of men. Zhao and Zhao also suggest allowing women to share their husband’s social pension. This policy recognizes that women often sacrifice labor market earnings for the sake of their families and are thus more vulnerable in old age if their pension amount is solely determined by their contributions while in the labor market. They expect such a policy to reduce the gender gap in retirement incomes relative to the gender earnings gap in the labor market.