Using a simple framework, this paper discusses the underlying reason of the variation of threshold level in developed countries, from the least generous 20 percent to around 60 percent of median wage, with an average of 35 percent.
... See More + The generosity of minimum guarantee social assistance programs is deeply rooted in social values and principles that further underpin the policy objectives. Many Organizations for Economic Cooperation and Development (OECD) countries set their policy targets for minimum living standard programs beyond basic needs and aim to guarantee a minimum socially acceptable level for a decent living. Thresholds are also refined to reflect the differences in family size and demographic structure, difference in regional cost of living and changes in prices and local wages. In some countries the thresholds show some regional variation due to local discretionary powers of sub-national authorities to set the threshold depending on the co-financing mechanisms. These lessons are valuable for China as the Chinese government has made efforts to standardize the implementation and management of its own minimum income guarantee (Di Bao) programs. The policy recommendations for China include accelerating the convergence of localized approaches, raising the administrative level for setting thresholds to higher level, defining the roles of central and local governments in financing and management, and establishing a transparent budgetary management system to transfer and allocate social assistance funds.
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Working Paper (Numbered Series) 83118 NOV 01, 2013
This paper first reviews the history of social insurance policy and coverage in urban China, documenting the evolution in the coverage of pensions and medical and unemployment insurance for both local residents and migrants, and highlighting obstacles to expanding coverage.
... See More + The paper then uses two waves of the China Urban Labor Survey, conducted in 2005 and 2010, to examine the correlates of social insurance participation before and after implementation of the 2008 Labor Contract Law. A higher labor tax wedge is associated with a lower probability that local employed residents participate in social insurance programs, but is not associated with participation of wage-earning migrants, who are more likely to be dissuaded by fragmentation of the social insurance system. The existing gender gap in social insurance coverage is explained by differences in coverage across industrial sectors and firm ownership classes in which men and women work.
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Policy Research Working Paper WPS6497 JUN 01, 2013
China is at a critical juncture in its economic transition. A comprehensive reform of its pension and social security systems is an essential element of a strategy aimed toward achieving a harmonious society and sustainable development.
... See More + Among policy makers, a widely held view is that the approach to pension provision and reform efforts piloted over the last 10-15 years is insufficient to enable China's economy and population to realize its development objectives in the years ahead. This volume suggests a national pension system that no longer distinguishes along urban and rural locational or hukou lines yet takes account of the diverse nature of employment relations and capacity of individuals to make contributions. This volume is organized as follows: the main text outlines this vision, focusing on summarizing the key features of a proposed long-term pension system. It first examines key trends motivating the need for reform then outlines the proposed three-pillar design and the rationale behind the design choices. It then moves on to examine financing options. The text continues by discussing institutional reform issues, and the final section concludes. The six appendixes provide additional analytical detail supporting the findings in the main text. The pension system design can play an important role in supporting or constraining such economic and demographic transitions: 1) fragmentation and lack of portability of rights hinder labor market efficiency and contribute to coverage gaps; 2) multiple schemes for salaried workers, civil servants, and, in some areas, migrants similarly impact labor markets; 3) legacy costs that are largely financed through current pension contributions weaken incentives for compliance and accurate wage reporting; 4) very limited risk pooling and interurban resource transfers limit the insurance function of the urban pension system and create spatial disparities in old-age income protection; 5) low retirement ages affect incentives and benefits and undermine fiscal sustainability; and 6) relatively low returns on individual accounts result in replacement rates significantly less than anticipated while at the macro level, are likely to inhibit wider efforts to stimulate higher domestic consumption.
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Publication 75730 JAN 01, 2013
Dorfman, Mark C.; Holzmann, Robert; O'Keefe, Philip; Wang, Dewen; Sin, Yvonne; Hinz, Richard
This paper outlines the history of social insurance policies and coverage in urban China, and uses administrative data to document evolution in the coverage of pensions, medical and unemployment insurance for both local urban residents and migrants.
... See More + Two general features of social insurance policy and institutions may discourage participation of both workers and their employers. First, in urban China the combined contributions of workers and employers, often referred to as the tax wedge, are among the highest in the world, and given social insurance program design, this wedge is higher for low income workers. Second, institutional fragmentation of the system implies that migrant workers, who are more mobile, may lose the social pooling contributions and thus have less benefit from participating in social insurance programs. The paper then uses two waves of a household-based survey of urban workers, the China urban labor survey, to examine the correlates of social insurance participation before and after implementation of the 2008 labor contract law. The higher tax wedge at lower incomes is associated with lower probability that local employed residents participate in social insurance programs, but is not associated with participation of wage-earning migrants, who are more likely to be dissuaded by fragmentation of the social insurance system. Finally, the paper examines whether a gender gap in earnings is replicated in social insurance coverage. It finds that any existing gap is explained by differences in coverage across industry sectors and firm ownership classes in which men and women work. After controlling for age, education, city of residence, industry and firm ownership, there are no gender differences across gender in social insurance participation.
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Although average incomes in China have risen dramatically since the 1980s, concerns are increasing that the rural elderly have not benefited from growth to the same extent as younger people and the urban elderly.
... See More + Concerns about welfare of the rural elderly combine spatial and demographic issues. Large gaps exist between conditions in coastal and interior regions and between conditions in urban and rural areas of the country. In addition to differences in income by geography, considerable differences exist across demographic groups in the level of coverage by safety nets, in the benefits received through the social welfare system, and in the risks of falling into poverty. This book aims to do two things: first, it provides detailed empirical analysis of the welfare and living conditions of the rural elderly since the early 1990s in the context of large-scale rural-to-urban migration, and second, it explores the evolution of the rural pension system in China over the past two decades and raises a number of issues on its current implementation and future directions. Although the two sections of the book are distinct in analytical terms, they are closely linked in policy terms: the first section demonstrates in several ways a rationale for greater public intervention in the welfare of the rural elderly, and the second documents the response of policy to date and options to consider for deepening the coverage and effects of the rural pension system over the longer term.
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Although average incomes in China have risen dramatically since the 1980s, concerns are increasing that the rural elderly have not benefited from growth to the same extent as younger people and the urban elderly.
... See More + Concerns about welfare of the rural elderly combine spatial and demographic issues. Large gaps exist between conditions in coastal and interior regions and between conditions in urban and rural areas of the country. In addition to differences in income by geography, considerable differences exist across demographic groups in the level of coverage by safety nets, in the benefits received through the social welfare system, and in the risks of falling into poverty. This book aims to do two things: first, it provides detailed empirical analysis of the welfare and living conditions of the rural elderly since the early 1990s in the context of large-scale rural-to-urban migration, and second, it explores the evolution of the rural pension system in China over the past two decades and raises a number of issues on its current implementation and future directions. Although the two sections of the book are distinct in analytical terms, they are closely linked in policy terms: the first section demonstrates in several ways a rationale for greater public intervention in the welfare of the rural elderly, and the second documents the response of policy to date and options to consider for deepening the coverage and effects of the rural pension system over the longer term.
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This paper highlights the employment patterns of China's over-45 population and, for perspective, places them in the context of work and retirement patterns in Indonesia, Korea, the United States, and the United Kingdom.
... See More + As is common in many developing countries, China can be characterized as having two retirement systems: a formal system, under which urban employees receive generous pensions and face mandatory retirement by age 60, and an informal system, under which rural residents and individuals in the informal sector rely on family support in old age and have much longer working lives. Gender differences in age of exit from work are shown to be much greater in urban China than in rural areas, and also greater than observed in Korea and Indonesia. Descriptive evidence is presented suggesting that pension eligible workers are far more likely to cease productive activity at a relatively young age. A strong relationship between health status and labor supply in rural areas is observed, indicating the potential role that improvements in access to health care may play in extending working lives and also providing some basis for a common perception that older rural residents tend to work as long as they are physically capable. The paper concludes with a discussion of measures that may facilitate longer working lives as China's population ages.
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Policy Research Working Paper WPS5853 OCT 01, 2011
This paper shows that support from the family continues to be an important source of support for the rural elderly, particularly the rural elderly over 70 years of age.
... See More + Decline in likelihood of co-residence with, or in close proximity to, adult children raises the possibility that China's rural elderly will receive less support in the forms of both income and in-kind instrumental care. Although descriptive evidence on net financial transfers suggests that the elderly with migrant children will receive similar levels of financial transfers as those without migrant children, the predicted variance associated with these transfers implies a higher risk that elderly with migrant children may fall into poverty. Reducing the risk of low incomes among the elderly is one important motive for new rural pension initiatives supported by China's government, which are scheduled to be expanded to cover all rural counties by the end of the 12th Five Year Plan in 2016.
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Policy Research Working Paper WPS5510 DEC 01, 2010