OpinionTop up China's pension fund for stronger social safety net
Hu Shuli says any social security revamp must begin with the state taking responsibility for an ageing society by honouring its commitments
A proposal to fix China's pension scheme is bringing hopes of a stronger safety net. The government has launched a public consultation on a plan that will allow people to switch between three existing types of pension insurance. If approved, the flexibility will go some way to addressing long-standing criticism of the current system.
China needs a social security system that is commensurate with its development. A good system ensures social changes keep pace with changes in the economy. It safeguards stability, and is a necessary feature in any prosperous society.
The government's efforts over the past decade to improve social security have been commendable. Most recently, at the 18th party congress, it said that all urban and rural residents should be covered by a social security system that is sustainable, fair and mobile. Given the current shortfalls, this is an ambitious goal.
The protections being offered now are far from adequate. Not only is the pension scheme weighed down by inherited debts, it is also fragmented with different non-transferable plans catering to different groups. The difficulty of switching plans deters people from changing jobs and hinders labour mobility.
Any solution must start with the government clearing the pension debts. Then, where possible, it should lower the fees for the basic plan so more people can be covered, and diversify its plans to meet different needs. In addition, personal accounts should also be managed according to market principles for better wealth protection and asset appreciation.
Migrant workers will be the biggest beneficiaries of the new plan, if it is approved. But it won't be enough. For a start, not all migrant workers would be covered by the urban social insurance scheme because it would be too expensive. Employees are expected to contribute up to 45 per cent of their monthly salary to the fund, a burden they would find hard to bear. Some companies do not hire permanent workers; some opt out of the scheme altogether.
On the whole, migrant workers are in no position to press claims when injured, enjoy no unemployment benefit when they lose their job, are hit with high medical bills when they fall ill, and have no pension to fall back on when they grow old. Those who are most in need of social security are excluded from it; this mismatch of resources and need is seriously impairing the fairness and accessibility of the welfare system.