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The “Gender Pension-Gap” in the Aging Societies of East Asia: A Policy Note from the East Asia and Pacific Umbrella Facility for Gender Equality

World Bank

2016

Other Countries Asia Pacific Vietnam The Philippines Indonesia

Report/Paper

Influencing Gender Norms

Gender equality Gender gap Influencing gender norms Women in society Pension

The “Gender Pension-Gap” in the Aging Societies of East Asia: A Policy Note from the East Asia and Pacific Umbrella Facility for Gender Equality

The “Gender Pension-Gap” in the Aging Societies of East Asia: A Policy Note from the East Asia and Pacific Umbrella Facility for Gender Equality

The ‘“Gender Pension-Gap” in the Aging Societies of East Asia’ report from the World Bank presents findings from a review of pension policies and their gender dimensions in eight countries of the East Asia region where the aging of the population is already advanced or expected to accelerate in coming years.

Over the years pension systems have been an essential policy tool for the economic protection of older adults across countries and regions. But in a context of widespread inequality, not everyone enjoys the same level of protection. Because women’s life courses are different from men’s, pension systems often have different outcomes for women and men. With populations aging in East Asia, the gender pension gap is affecting more and more women.

Gender equality is a challenge confronting pension systems around the world as growing numbers of women enter, participate in, and exit the labour market, challenging contributory pension systems to guarantee universal and adequate pension benefits for women. The issue has received insufficient attention in the developing world, including in East Asia, often for lack of gender-disaggregated data.

The review supplements empirical and policy analysis with qualitative insights from focus groups and individual interviews with women in the focus countries who are nearing retirement age or have already withdrawn from the workforce. The results fill important and policy-relevant knowledge gaps on pensions and retirement and on gender differentials in endowments, economic opportunities, and well-being at older ages.

The review examined the labour force behaviour of women aged 45 years and over in China, Vietnam, Thailand, Indonesia, Mongolia, Republic of Korea, Malaysia, and the Philippines, investigating the key policy and behavioural drivers of their observed labour force participation and withdrawal.

Highlights

  • East Asia and the Pacific is aging faster than any other region in history. The region is already home to 36 percent of the world’s population over 65 years old and, by 2040, the working-age population of countries such as China, Japan and Thailand will shrink by 10 percent. To address the challenges to development posed by these changes, more women will have to join the labour force, and labour, health, and pensions systems must be reformed to protect popular welfare and ensure economic growth.
  • The period between 2006 and 2010 was notable for the spread of noncontributory (social) pensions in East Asia and the Pacific countries. This major element in the 2007 reform in Korea expanded coverage significantly in that country. China and Thailand have followed a policy of extending social pension coverage to the vast majority of those not eligible for contributory pensions.
  • Vietnam’s social pension, by contrast, was designed for a narrow population and still covers only a very small proportion of the elderly. Coverage is high in Mongolia among the elderly but shrinking for those of working age. In Indonesia the coverage of the defined-contribution system is very low, and no social pension or other broad form of social assistance addresses this challenge.
  • In the analysed countries, the clear divide in coverage by gender is paralleled by an urban– rural divide. Pension coverage for elderly women is lower than for men in China, Indonesia, Korea, and Vietnam. In absolute terms, older women’s access to pension benefits is best in Thailand and urban areas of China. Their coverage is lowest in Indonesia, Korea, Vietnam, and rural China.
  • Women receive lower pensions owing to shorter working careers and lower wages. These differences can be accentuated if retirement ages for women are lower and benefits are linked to lifetime contributions. On the other hand, they can be mitigated by universal social pensions or by redistribution in the pension formula (as often found in defined-benefit plans). Finally, because women tend to live longer (and spend more years in retirement), pension indexing can affect the gender pension gap. Ad hoc indexing and indexing to prices can put older women at risk of falling into poverty.
  • Only two of the analysed countries offer systematic and regular adjustment of pension benefits. Korea and Vietnam are the two exceptions, and the first is only partial: Vietnam indexes benefits to prices in principle, but in practice indexing is subject to available budget and further adjusted each year by the legislature. In other countries indexing is based on governmental discretion or done only infrequently. In these countries, women are exposed to the risk of inflation or declines in benefit levels (relative to prices). These practices can exacerbate the pension gap between men and women, putting elderly women at risk.

Contents

  • Pension systems
  • Coverage
  • Benefit level
  • Survivor benefits
  • Pulling it all together: Ranking the pension systems
  • Policy recommendations
  • Acknowledgements
  • References
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