In recent years, more and more young people in China have stopped paying social security funds due to unemployment and lack of confidence in the future. Experts analyze that the mainland’s social security system is facing the risk of collapse, and there seems to be little hope of rescuing this crisis.
In cities like Shenzhen, healthcare reimbursement, children’s education, buying a house, retirement… are all highly tied to social security, affecting various aspects of life. There have been recent reports that the Chinese authorities are trying to link cellphone numbers to the payment of social security.
According to reports from mainland media, on July 15, a mobile user posted a video on social media revealing that their cellphone number, used for 14 years, was suddenly blocked for no reason. On the 23rd, a staff member from Shenzhen Mobile responded to the media, stating that to unblock the number, one would need to provide information showing continuous social security contributions for six months in Shenzhen. Under public pressure, Shenzhen Mobile’s official WeChat account issued a statement on the 25th, claiming that social security information will no longer be used as verification criteria.
Despite authorities using various means to force people to pay social security funds, more and more people have chosen to stop paying. Mr. Wang, a freelancer, mentioned that a significant reason for stopping social security payments is the economic downturn leading to unemployment. People find it burdensome to pay a few hundred or a thousand yuan when struggling financially.
Another reason is that young people feel that the socio-economic situation, poor judicial environment, political turmoil, and lack of prospects for the future make it doubtful whether there will be anything left for them to claim when they retire.
Numerous workers, delivery drivers, freelancers, and other flexible employees have stopped paying social security funds. This group of flexible workers now exceeds 200 million people, and under the Chinese social security system, they are required to pay the full amount of social security, becoming a significant financial burden for them.
The standard for participating and paying social security fees for flexible workers is linked to the average social wage of their workplace, with payment bases ranging from 60% to 300% of the average wage. For example, in Guangzhou, the minimum monthly social security payment before March 2024 is 1559.4 yuan, while in Shanghai, it is 1618.8 yuan per month.
Mr. Li, working in Guangdong, expressed that young people pay social security funds for the current elderly population, which they may not even benefit from in the future. With a retirement age of 65 and the difficulty of finding employment after turning 35 due to age discrimination, many question the investments made in social security.
Many are losing faith in the country’s current state of security and social welfare systems, leading to widespread doubts among the populace. With the lack of a reliable safety net, people are hesitant to continue with social security payments, as they feel resources may not be available when needed.
Social security payments are meant to provide a sense of security, but with the system’s inefficiencies and the economic challenges faced by ordinary citizens, many are choosing to opt-out. People are uncertain about the future and find it difficult to trust the authorities to secure their well-being in later years.
For some like Mr. Li, the economic situation has drastically worsened, making it essential to prioritize survival above all else. He predicts that without substantial reforms, the current system’s flaws could lead to a rapid collapse, leaving the populace with limited options for financial support.
The trend of young people in China refusing to pay or opting out of social security funds has seen a significant increase in recent years. Discussion on platforms like Weibo about “how young people who stop paying social security think” has sparked intense debate and even trended as the top discussion topic.
Pension is a significant component of social security. Wang He, a specialist in Chinese issues, points out that China’s pension system faces three major issues: insufficient total reserves, distorted internal structure, and significant disparities in distribution.
He highlights that the U.S. has around 400,000 billion in pension reserves, which is 1.7 times its GDP. In contrast, China’s pension fund only accounts for about 10% of its GDP, showing how the system lacks substantial reserves. Moreover, China is experiencing rapid aging demographics, putting further strain on the system.
Exploring the three pillars of the pension system – government-backed, enterprise-funded, and personal contributions – Wang He notes that China heavily relies on the first pillar, which includes social security payments, leading to a neglect of the private and enterprise-funded pillars. This imbalance in the system diminishes its potential for sustainable growth.
He further elaborates that within the system’s first pillar, there exists a significant disparity in benefit levels among different groups, with officials receiving much higher pensions than rural residents. This inequality undermines broader public trust in the system, ultimately leading to reluctance in participating.
As an increasing number of individuals refrain from paying social security, a substantial deficit is looming, which will heavily rely on government subsidies to fill the gap. According to estimates from certain institutions within China’s structure, by 2035, all pension reserves may be depleted. The situation is likely even more severe than anticipated.
Wang He concludes that China’s social security problem is critical, and the entire pension system faces the looming danger of collapse due to the economic uncertainties and the increasing financial pressure on the Chinese government. Finding a way out of this predicament and restoring confidence in the system seems challenging and almost hopeless.