Life Expectancy, Pension Replacement Rates, and Consumption Among Chinese Enterprise Employees

How do individuals adjust their savings and consumption behaviors in response to the combined effects of increased life expectancy and declining pension replacement rates? This study constructs a life-cycle model, using changes in conditional survival probabilities as a proxy for shifts in individual life expectancy, to examine consumption behavior under the dual backdrop of prolonged longevity and a gradual decline in pension replacement rates. The results suggest that changes in life expectancy and pension replacement rates together explain 8.9% to 10.2% of the observed decline in consumption in recent years, with both variables playing equally significant explanatory roles. Furthermore, we find that, to fully offset the negative impact of increased life expectancy on consumption, the pension replacement rate must reach at least 82%. These findings offer theoretical and policy implications for improving the quality of life in later years among enterprise employees in the context of population aging.