How Can China’s Recent Pension Reform Reduce Pension Inequality?

Abstract

Pension inequality resulting from fragmented arrangements among different population groups - such as public sector employees, enterprise workers, rural residents, and urban informal workers - has become an essential obstacle to China's socioeconomic development. This commentary analyzes the impacts of the 2015 pension reform on the inequality within China's pension system. We claim that the unification of pension rules should be considered the greatest achievement in mitigating pension inequality. However, the integrated pension rules do not necessarily reduce gaps in pension opportunity and benefits among groups because of differentiation in their labor incomes as well as pension attributes. In addition, although the pension structures were flattened at the basic level, structural disparities exist at the supplementary level, strengthening unequal pension benefit outcomes. We argue that the 2015 pension reform enables public sector employees' privileged status to continue while enterprise employees and rural residents and urban informal workers remain at the pension system's margins.