Extending Welfare for the Elderly
The delay of the retirement age will directly affect those urban employees who are paying their pension contributions. According to statistics of the MHRSS, 284 million urban employees participated in the pension plan by the end of 2011. The proposal drew strong oppositions from the public. A survey launched by major Chinese websites show that over 95 percent of netizens are against the delay of the retirement age.
Currently private enterprises are required to pay contributions towards their employees’ pensions and medical care insurance. However, under the pressure of the high cost of recruitment, some small enterprises refuse to pay. Mrs. Cheng says that the company she serves is an example. “I can understand their difficulties. The company hasn’t started to make a profit and the expenditure would be 40 percent higher if the company paid their contribution for all of its employees to various insurers,” says Cheng.
The situation is same when it comes to migrant workers, whose number is enormous. The government stipulates that migrant workers and their employers should both pay part of the pension. However, both parties lack the motivation to pay the money. According to statistics of the MHRSS, among the 284 million urban residents who have joined the urban employee pension plan, only 41.4 million of them are migrant workers, less than one sixth of migrant workers in urban areas. Jin Weigang, deputy director of the Social Security Research Institute under the MHRSS, said that it is difficult to raise the pension plan participation rate of migrant workers under the current system due to inconsistent policies for different pension plans. They prefer cash to depositing the money into an account.
To fulfill the government’s goal of universal coverage of the pension plan the current system must be improved to encourage people to join voluntarily.
One major feature of the current pension system is that workers of government institutions and enterprise employees have been treated differently under the dual system that has been implemented since the 1990s. Government employees receive a much higher pension than employees of enterprises, an inequality that has been an object of public condemnation.
Mrs. Cheng’s husband works for a government institution, where he receives a monthly salary of RMB 6,000. Under the current system, an enterprise employee with the same salary would have to pay eight percent of their salary to their personal account to receive a pension of RMB 3,000 every month. Mrs. Cheng’s husband, however, is not required to pay any contributions out of his salary, and will receive RMB 5,000 after retirement.
In order to narrow the gap between workers of government institutions and enterprise employees, the Chinese government has raised the per capita monthly pension for retired enterprise employees for eight consecutive years at an annual increase of 10 percent. The Outline of the 12th Five-year Plan for Social Security released in June included reform of the pension plan for government institution employees. One director of the Human Resources Department of a government institution told China Today that several public institutions under the conglomerate she serves have been transformed into enterprises and they and their staff have both started to pay pension contributions.
Professor Chu Fuling of the School of Insurance under the Central University of Finance and Economics says that the basic framework for China’s pension system has been established, but that it needs to be improved step by step.
The ultimate goal of the reform is to make the system fair for everyone. Now almost every rural and urban resident has access to pension plans, though pensions are still low. However, with China’s continual economic development and accumulation of wealth, it is inevitable that people will see the benefits filter through to their golden years.
