A Chinese peculiarity opening a reflexion.

Retired but still worker

Retired but still worker

Since years, we are all checking there is no child working in factories. But since years also, we meet in China many elderly working in factories. These people, retired, are nonetheless working full time with some consequences.

In western countries, there are many reasons leading some officially retired to pursue their work. On the contrary, in China, there is only the economic cause involved. Retired pay is very low and is not always enough even for basic needs. Many workers are then still working after being officially retired. However, they have a special status. Officially retired, they get their retired pay and their social security is related to their retired status. But they still have to sign a new working contract with the factory. There lay the subtle situation leading to this newsletter. The Chinese labor ministry states clearly this contract between the worker and the factory is a civil contract and not a labor contract under the labor laws. The applicable laws depend then of the status and not of the position. Thus, the retired-workers are not paying for social security, but with the same analysis some states the legal minimum wage doesn’t apply as the retired workers are not covered by the labor law.

What are the consequences, actual on potential, of such situation. The fist obvious one is the retired-workers are actually cheaper than other workers. There are less “taxes” and wages are potentially lower. As these workers are simultaneously earning retired pay, their wage expectations are usually lower too, strengthening even more the trend for lowering the wages. That brings more to lower global wages in China, or at least help to limit the increase trend. Thus, these retired-workers are easing the push on the government for higher retired-pay and also limit the wages increase to the industry benefit.

However, we must stress the actual situation is more balanced than one might think. Most of the time, the factories don’t try to reduce the wages of the retired-workers. Workers are usually paid on piece rate, and the piece rate is the same for every workers. There is no discrimination on that matter. However, as the productivity of manual jobs tend to decrease with the age, it happens the wage earned by piece rate is lower than the legal minimum wage applicable to other workers. The factory could compensate these cases, but then the other workers would be paid less for a similar job. It would then be discriminatory. Or the factory could refuse these workers for a too low productivity…

Individual decisions from the retired and their employers have indeed consequences on the country balance as there are millions of them. It seems obvious there is no easy answer to this complex situation.

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