Transcript Unemployment benefit

Social Security and Health Insurance System in China, IMCS
Reforming China’s Social Security
System: Facts and Perspectives
Written by: Aidi Hu
International Social Security Review Vol.50, No.3, P45-65 1997
Presented by:
Naiting Fu傅迺婷 (94925030);
Anita Mingching Lee李敏菁(96925008);
Tomas Hsihsien Chang 張希賢(95925026)
Professor: Jack Wu吳文傑
Abstract
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This article overviews the social security reform started shortly after the
commencement of the general economic system restructuring in China
in 1978.
The reform is remarkable not only for its scale in terms of population
covered, territory affected and comprehensiveness sought, but also for
the difficulties confronted, progress made and confidence achieved.
Although there is still a long way to go to fulfill its ambitious ultimate
objectives, 14 years of reforming exercises have built up a solid basis
for a sound social protection system to be gradually extended to the
non-covered population.
China now can share its experience with other nations in a similar
situation.
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Outline
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Introduction
Specific Reform Exercises
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Current reform difficulties confronted, and the next move
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Old-age benefit
Unemployment benefit
Healthcare benefit
Maternity benefit
Employment injury benefit
Old-age pension
Health insurance
Unemployment
Related general issues
Conclusion
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Introduction (1/3)
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The significant stage of the social security system reform
in China officially commenced in 1984 after a number of
years of careful contemplation, study, debate and
planning to meet requirements arising form the
economic reform, which has switched the economy from
central planning to market orientation.
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Introduction (2/3)
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Four political aims of the social security reform :
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To support the general economic reform and, particularly,
to facilitate and reinforce State-Owned Enterprise (SOE)
reform, which constitutes a key aspect of the general
economic reform.
To provide the population with sufficient social protection
provisions.
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Introduction (3/3)
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To facilitate the mobility of the labour force to formulate
and develop a dynamic labour market, as it is regarded as
essential and vital for sound and sustainable growth of the
market-oriented economy.
To make a contribution to the stability, perennity and sound
development of the national economy, which in turn will
promote the current political system and secure the
affordability and continuation of the new social security
system in the nation, by injecting some accumulated social
security funds into the national and regional economies to
speed up development.
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Specific Reform Exercises (1/18)
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The social security reform in China has experienced
several stages over past two decades of
development.
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The preparatory phase (1978-1983)
The preliminary phase (1984-1993)
The phase of comprehensive advancement (1994-)
Specific Reform Exercises (2/18)
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Old-age benefit
Unemployment benefit
Healthcare benefit
Maternity benefit
Employment injury benefit
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Old-age benefit
(3/18)
Objectives and principles.
 Universal coverage by the basic public pension provision, which is to be
available to the whole economic population in urban areas, including
workers employed in all types of enterprises and also self-employed
persons;
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Financial costs shared between the State, employers and workers;
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A multiple-tier pension system which comprises a compulsory basic
pension component to meet the basic subsistence needs of retirees, a
top-up supplementary component stemming from a complementary
component stemming employer-sponsored pension scheme, and/or
additional personal savings; the last two components should be
voluntary;
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The compulsory basic pension to combine a social insurance element
with a funded individual account.
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Old-age benefit (4/18)
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Progress achieved.
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Promotion of the pooling level.
Provision of socialized services.
Expansion of coverage.
Establishment of an indexation adjustment mechanism
Pension formulas/models.
Experimental pension schemes for civil servants
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Old-age benefit (5/18)
Pension formulas/models
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The 1978 formula
The 1986 formula
The 1991 formula
The 1993 formula
The 1995 formula
Pension formulas
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(5/18a)
The 1978 formula was based on State Council
Decree No. 104 issued in 1978, which prescribed
that the due pension benefit payable depended on
the duration of employment and was calculated on
the basis of the last standard wage of the insured
person prior to retirement.
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Pension formulas
The 1986 formula was consistent with State council
Decree No. 77 of 1986, which set out a new role for
contracted workers:
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(5/18b)
The overall contribution was fixed at around 18 per cent of the
payroll while up to 3 per cent should be paid by the insured
persons.
The above contribution income constituted a cumulated
individual account for contracted workers; upon retirement, their
pension would depend on both the number of contribution years
and the paid-in amount of total contributions prior to termination
of employment.
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Pension formulas
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The 1991 formula was in line with State Council Decree No.
33 of 1991, which stipulated some very important rules:
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(5/18c)
Developing a multiple-tier pension system,
Sharing the costs among the State,
Employers and employees;
Regularly adjusting pensions in line with wage/price
inflation;
Gradually unifying the two different contribution rates
applied to the established employees and contracted
workers and integrating them into one fund; and being a
partially funded scheme.
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Pension formulas
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(5/18d)
The 1993 formula was based on the instruction on
the calculation of basic pension payments issued
by MOL, which spelled out that the basic pension
comprises two parts, namely a social pension
component with a scale of flat rates, and an
income-related pension component.
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Pension formulas
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(5/18e)
The 1995 formula
Option 1
Option 2
Option 3=Option 1+Option2+ two remarkable
characteristics:
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Pension formulas
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Option 3--two remarkable characteristics:
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(5/18e)
(a) contribution of around 10-12 % of employees’ final
wages is allocated into their individual accounts;
(b) the benefit consists of a flat basic pension equal to
20-25% of the regional average salary plus a top-up
calculated on the famous formula “A/120”.
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Unemployment benefit
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(6/18)
After a long interval of 30 years,
unemployment insurance was introduced for
the second time by the Temporary
Regulation on Unemployment Insurance for
SOE Workers issued by the State Council in
July 1986.
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Unemployment benefit
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(7/18)
In fact, the Chinese government had set up a
temporary unemployment protection scheme
in 1950 to provide some income security to
unemployed workers—then amounting to 4
million, equivalent to half of all workers at
that time in the urban area.
Unemployment benefit
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(8/18)
The program ended in 1956, when full employment
had been realized and it was widely believed it
would last forever nationwide.
The second-generation unemployment scheme
actually forms an inherent part of a set of
regulations on SOE reform entering into force in
July 1986.
Unemployment benefit (9/18)
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The other related laws are
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(a) Temporary Regulation on the Application of
the Labor Contract Measure in SOEs;
(b) Temporary Regulation on Recruiting New
Employees by SOEs;
(c) Temporary Regulation on Dismissing BadConduct Workers by SOEs;
(d) Bankruptcy Law
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Unemployment benefit
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(10/18)
The main objective of the newly born
unemployment insurance scheme, prescribed by
the Temporary Regulation of Unemployment
Insurance for SOE Workers, which was later
amended by the Regulation on Unemployment
Insurance Covering SOE Employees issued by the
State Council on 12 April 1993, is subsequently
defined as being to protect those unemployed
workers from unemployment contingencies with an
appropriate income support.
Unemployment benefit (11/18)
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Under the newly amended unemployment
legislation, personal coverage is extended from the
initial four categories of workers to seven groups,
comprising
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(a) employees of bankrupted SOEs;
(b) redundant employees of quasi-bankrupted SOEs;
(c) employees of SOEs closed down by the State for one
reason or another;
(d) redundant employees of SOEs which are in the idling
and adjustment period in line with related state
regulations;
Unemployment benefit (12/18)
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(e) employees with an expired labor contract;
(f) employees dismissed by SOEs;
(g) other employees as appropriate.
Unemployment benefit (13/18)
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As regards contributions, it is stipulated that
all SOEs have to contribute 0.6 per cent of
their overall employee payroll to the
unemployment fund.
This contribution rate could be reduced
somewhat or increased up to 1 per cent if
surplus or deficits are excessive.
Unemployment benefit (14/18)
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The unemployment social insurance funds, which can be
used more widely than the corresponding ones in many
industrialized countries, comprise
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(a) the unemployment benefit paid monthly to the unemployed person;
(b) medical insurance benefits paid to the unemployed person when
medical expenditure occurs;
(c) funeral allowance, survivors’ allowance and relief allowance paid to the
survivors of deceased unemployed persons;
(d) training allowance;
(e) productive loans aiming to help in the creation of employment
opportunities for the unemployed person;
(f) administrative costs of operational agencies;
(g) other necessary allowances approved by governments at the provincial
level.
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Healthcare benefit
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(15/18)
Since the late 1980s, financial difficulties in
supporting the healthcare system have
drawn more and more attention from the
government.
Statistics show that the average annual
increase in medical expenditures under the
old system was about 20 per cent in the late
1980s and 30 per cent in the early 1990s.
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Maternity benefit
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(16/18)
Maternity insurance provisions for female workers
and female civil servants and other public workers
are fairly similar and their substance has not been
significantly changed since the 1950s: provisions
for maternity leave, maternity pay during that leave,
costs of related medical care and hospitalization,
special working and employment protection, etc.
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Employment injury benefit
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(17/18)
Various efforts have been made:
In 1989, the State Science and Technology Commission assigned a first
scientific research project on compensation for work-related injury and the
mode of raising funds, which was complete in October 1991.
While the final report is not at present available, its findings are believed to
have influenced subsequent reforms.
In 1989, the State science and Technology commission assigned a scientific
research project on the standard for appraising the degree of disability of
employees resulting from a work-related accident or an occupational disease.
This study was completed in 1992 and the standard (in trial form) was
subsequently issued during the same year. It recognized ten progressive grades
of disability.
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Employment injury benefit (18/18)
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Experimental employment injury insurance schemes existed
by the end of 1994 in nearly 900 cities and counties of 22
provinces, autonomous regions and municipalities, covering
18 million employees.
A resolution on the scope of work-related diseases and the
corresponding compensation for the employees in question
was jointly issued by MOPH, MOL, MOF and ACFTU in 1987,
with a standard listing of the occupational diseases
including all diseases enumerated in schedule 1 annexed to
ILO Convention No. 121 on Employment Injury Benefits.
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Current reform difficulties
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Old-age pension
Health insurance
Unemployment
Related general issues
Strategy
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MOL has deployed a new strategy to ensure that
the unification of the pension system can be
attained in three years. Precisely four levels of
unification are expected:
_ covering all workers
_ the standardized criteria
_ the agency-run schemes
_ the integration of the pension funds
Three types of problems
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The lack of qualified human resources for
the operational agencies.
The transfer of administrative
responsibilities.
Some uncertainty associated with the new
pension model
Solutions
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Extending personal coverage:
_ all types of urban enterprises
_ all workers of the above enterprises
_ the self-employed and assistants
_ owners of private companies and
members of the professions
Current reform difficulties
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Old-age pension
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Health insurance
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Unemployment
Related general issues
Three aspects
Efficiency and social equity
 Design: contribution revenues are to be allocated
into two accounts (social pooling funds and the
individual accounts)
 Purpose: To control the rapid and continuing
increase in medical care expenditure
 Concerns:
_ protect the insured persons effectively
_ cost down as expected
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Three aspects : continued
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Reforms in the healthcare provider and
medication supply sectors
Old:
global public health program and functioned
as service supports.
New:
medical service and medication pricedetermining mechanisms
Three aspects : continued
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Healthcare insurance for the rural
population
Old:
Semi-insurance scheme called “ Barefoot
Doctor Programs”
New:
Set up voluntary medical insurance
schemes
Current reform difficulties
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Old-age pension
Health insurance
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Unemployment
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Related general issues
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Impacts
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A large proportion of SOEs are allowed to be
closed down and the imbalance between the
income and outlay of the scheme.
Should the rural migrant workers be
covered? If yes, how? With what resources?
To use part of the funds for the promotion of
employment opportunity?
Current reform difficulties
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Old-age pension
Health insurance
Unemployment
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Related general issues
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Investment of SSF
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Scale: 28 billion yuan (approximately US$3.5
billion) by the end of 1994
Measures:
_ invest in special government bonds
_ freely to choose trusted agencies
_ set up a supervisory mechanism to
monitor
Problems:
Suggestions
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Clear regulatory provisions on the
investment portfolio.
Safeguard the minimum pension level of the
basic public scheme.
Prepare a sound environment for SSF
investment.
Strengthen the investment capacity of
responsible agencies.
Related general issues : continued
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Overdue contributions arising from SOEs’ financial
difficulties.
Governance and management
Formulation and establishment of the regulatory
framework
Author’s Conclusion (1)
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In the Past:
Established a social security system for its urban
population quite similar to industrialised countries.
The system following the International Labour
Convention can just cover the minimum
requirements for labours and residents in China.
However, the minimum coverage can no longer
meet the people’s needs in the modern, marketdriven economy.
Author’s Conclusion (2)
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Present
Old-Age Pension：From Individual employer based
schemes to social insurance based.
Unemployment Insurance:：From SOEs to all
industries is under way.
Health Insurance：Nationwide experiments is
going ahead.
Maternity Insurance, work related injury, etc. has
some achievements.
Author’s Conclusion (3)
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In the Future
Competent authorities have done some things,
there are only administrative and operational
issues rather than systems, programme designs or
planning.
International and assistance will still be essential.
Chinese people are confident in their own public
insurance compared with those emerging countries
in South East Asia or East Europe.
Real Problems (1)
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The Budget Deficits: the old age pension fund has
a 30 billion RMB deficits in 2002 compared to 5
billions in 1998.
Uncollected Charge: More than 2,000 billion RMB
Old Pension Fees are default in year 2002.
Unemployment Insurance:
4.4 Million unemployed accounting for 57% had obtained the payment.
Others are not paid due the strict measurements.
Many are still unemployed after subsidized more 24 months due the
structure unemployment.
Real Problems (2)
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Health Insurance:
Only 70 million labours join the scheme.
Furthermore,
Only 25 million join the retirement health insurance
scheme.
Totally 95 million people joint the heath insurance
scheme accounting no more than 25% in the
population. No doubt China’s health is one of the
worst in the world.
The Personal Account in health insurance stops the
insured people going the hospital.
Critiques
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Due to the wrong planning, totally the Social Insurance
costs the Chinese government 50 billion annually.
However, not all people can join those insurance schemes
due to the corruptive government’s unfair policy. (The
government does not provide a healthy regulatory
environment to protect labours.)
The Chinese government is unwilling to face the real
problem, in stead, it just uses some scholars to boast its
insurance policies to other countries.
Tactually the article is just a propaganda though it provides
some information to us.
Thank you for your
kind attention!
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