Undermining workers’ security a few percents at a time

In the latest attempt to help business, 12 provincial and municipal governments in China have lowered the percentage of social insurance contribution that companies and employees have to make by a few percents. China’s social insurance scheme – which admittedly made some progress over the last decade (following the dismantling of work-unit based welfare regime from the 1950s to 1980s) although the Social Insurance Law only came into effect in 2011 – includes pension, healthcare, unemployment, injury and maternity plus a separate housing fund. Companies and individuals each contribute a specific percentage. To take one example, for pension funds the employer is required to contribute 20% and individual employees 8%. For years, social insurance has been criticised for being a financial burden for businesses, which accounts for close to 40% of the labor costs. While experts argue that workers will not be worse off as a result of the lower rate (the government is supposed to make up the shortfall) – in fact, they’d be better off for retaining cash in their hands, we are right to be more than a little skeptical. But the bigger issue is that many companies simply do not provide social insurance for their workers, especially for rural migrant workers. For China’s 270 million rural migrant workers, according to official figures by the end of 2014, the injury insurance covers 26.2% of migrant labour force, health insurance 17.6%, pension 16.7%, unemployment 10.5%, maternity insurance  7.8% and housing fund 5.5%. To be sure, sometimes migrant workers prefer having cash incomes over paying for social insurance because 1) wages are often too low and making more cash incomes (by not paying their individual contribution) becomes a pragmatic decision, 2) there are complex procedures and obstacles when migrant workers relocate and need to transfer their pensions, and 3) workers are worried about uncertainty over future social insurance reform. But this is not an argument against social insurance, but for higher wages, a better-designed and more accessible social insurance system, and enforcement. An aging labour force with a growing number near retirement and more awareness of legally-entitled labour rights have precipitated some large strikes in last several years to demand social insurance payment. This is more difficult in time of economic slowdown, but it is also precisely the time when social insurance is most important in protecting workers.

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