Dec 13, 2013 04:18 PM

In Need of an Elder Care Revamp

For thousands of years in China, elderly care was always "privatized," invisibly regulated as it were by the traditional ethics of filial piety. But starting in the 1950s, along with other basic life events such as marriages and having children, retirement began to be "collectivized" and "publicly owned," decided by the state.

And now, over the last few years, China has started market reforms that may bring in another sweeping change that could leave elderly care caught in a dilemma of privatization or public duty. The best solution may in fact be a combination of the two systems. But just how can this be achieved?

Humans lack an innate ability of self-reliance. In comparison with other species, a human being requires very long periods of nurturing, growth and development. Thus, parenting implies naturally assuming a long responsibility until offspring are able to survive independently.

Yet there is no real obligation the opposite way around. Every individual's arrival in this world is a passive result, not a free choice. From a biological point of view, children bear no responsibility for supporting their parents. In an ideal world children feel and appreciate their parents' love so they will return the love by supporting and taking care of them late in life.

Guilt as a retirement plan

Reality, however, can differ from the ideal. Not all parents and children develop positive and mutually caring relations. Various reasons can lead to grown-up children's reluctance to take care of their aging parents.

Still humans have an innate desire for emotional ties, and parents can manipulate the fear of losing them to ensure that one's "investment" will be "returned," as we might say from an economic point of view. In China, this typical expression of safeguarding one's own interests is expressed with the concept called "filial piety."

Basically filial piety is using feelings of guilt and fear of the judgment of others to guarantee that adult children return care to their parents. Non-fulfillment of this norm will lead to moral pressure and criticism. In the past, non-filial offspring would be reviled by neighbors. Today they may face public trial by social media.

From the perspective of economics, filial piety is very cost effective. It has largely managed to maintain a privatized and stable operation to handle Chinese society's long-term elderly care. Public pressure helps to guarantee each child support their parents, leaving society exempt from bearing the costs and responsibility.

Nevertheless, the changing social context has gradually weakened the functioning of this traditional moral mechanism.

Under China's Communist system, since the 1950s' ordinary Chinese people relied on their work units to provide them with a basic pension and benefits when they retire. This unwound the entrenched private elderly care model and put the expense of retirement into the state's hands. Subsequently the Cultural Revolution also challenged the emotional bond between parents and children and broke the basis of a spontaneous return from children. Were the Chinese government really capable of taking over entirely the care of the elderly, both the expense and the personal attention required, these social changes wouldn't have posed a problem.

But with China's economic reforms of the 1990s, certain state-owned enterprises could no longer fulfill their commitments to their workers' cradle to grave care. Even though some basic retirement benefits are provided in cities, they don't compare with those of advanced countries. While the old benefit system has been dismantled, a new pension system is not yet in place, leaving people to suffer.

Only child distortions

So now the question is "Should China restore its original privatized elderly care model? And is this model going to work?"

It certainly isn't going to be easy for China to go back to the old tradition of counting on filial piety for taking care of the nation's elderly. Even if filial piety is still common in the Chinese mindset, it is no longer really the same concept. In particular, the one-child family planning has created so many egocentric little emperors. As China continues its free market reforms, full labor mobility becomes a necessity. Despite of the constraint of the hukou, the household registration system, rural labor has largely migrated to the urban areas.

Millions of people work far from their hometowns, meaning a diminishing numbers of parents are still able to live with their children, as China follows in the footsteps of developed countries in the West. Even for those who haven't migrated, the soaring living costs oblige people to work overtime. In spite of their guilty feelings towards their families, people feel obliged to make work and income their central priority.

Since going back to the old elderly care system is not possible, China should instead focus on improving its public pension system. Whether one worked for the collective or the private sector, after a certain age all people should be entitled to equal amounts of public support that is sufficient to live on, and adjusted for inflation.

This is similar to the United States' social security system, though in the U.S., social security payments are adjusted in accordance with each individual's personal income, with a ceiling. The U.S. method unfortunately punishes housewives who don't have income, and to a certain extent also makes the poor even poorer and the rich even richer.

Since living costs vary in different places in the long term, and free flow will allow retired people to move to cheaper and healthier environments and this can effectively make room for the urban workforce.

Another advantage of a public pension is to reduce the parent-child economic dependence. Many Chinese have always had the idea of "raising children for old age." They regard their offspring as an investment in their retirement so they push them, control their studies, career and lives. This can lead to conflict. Decoupling the economic dependence will help parents to put their interests outside of the relation, and make them focus their relation on affectionate grounds instead. This will encourage more spontaneous support of children to their parents.

Economic development requires a more fluid movement of the workforce, and in the long run establishing elderly communities and facilities will be necessary.

It may seem ironic that in a free market such as the United States, pension costs are essentially a public duty. As China continues to move towards free-market reforms it might have to follow suit for its elderly care. This may leave the traditional and low-cost moral mechanism of filial piety a quaint vestige.

The author is the communication director for Fidelity Investments

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