Improving the Social Safety Net to Cover All Citizens

From: English Edition of Qiushi Journal Updated: 2011-09-20 10:34
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 I. Correctly understanding the basic principles and goals for development of the social safety net

 The basic framework of China’s social safety net was set up during the Eleventh Five-Year Plan period when breakthrough progress was made in development of the urban and rural old-age insurance and medical insurance systems. During this period, the number of people covered increased rapidly, fund was increased, the level of benefits was gradually raised and constant improvement was made in the management and service network. This not only played an important role in maintaining a good balance among reform, development and stability, but also laid a solid foundation for development of the social safety net during the next five-year period.

 The Twelfth Five-Year Plan period will be a key period for efforts to build a moderately prosperous society in all respects. It was pointed out at the Fifth Plenary Session of the Seventeenth CPC Central Committee that we need to develop a combined urban and rural social safety net that provides broad coverage, guarantees people’s basic needs, is multi-level and is sustainable. By providing broad coverage we mean we need to rapidly improve the social safety net to better cover both urban and rural areas, with the primary objective of providing basic benefits to all citizens. In guaranteeing people’s basic needs and determining the level of those guarantees, we must first of all take into consideration the basic conditions of the country in this primary stage of socialism, fully consider the capacity of all sectors of society to support the system and ensure that programs are in line with economic and social development. By developing a multi-level system, we mean we need to develop a system that is based on government subsidized insurance programs, social assistance programs and social welfare programs at the central and local government levels. The main part of the combined urban and rural system should consist of basic old-age insurance, basic medical insurance and cost of living allowance, supplemented by the work of charities and commercial insurance so that the system meets the diverse needs of all people in society. To ensure that the social safety net is sustainable means that while concentrating efforts on addressing major practical issues of the hour and longstanding issues, we also need to take a long view, take into consideration and balance all factors, and develop a permanent mechanism to ensure long-term, stable and sustainable development of the social safety net. 

    A medical worker sorting medicines to be sold to patients without a markup at a medical service center in Luowang Community, Yueyanglou District, Yueyang City, unan Province. The 17th Session of the Standing Committee of the Eleventh National People’s Congress (NPC) passed the Social Insurance Law on October 28, 2010. The draft of the Social Insurance Law was submitted to the Standing Committee of the NPC for initial review at the end of 2007, and subsequently underwent further deliberation by the Standing Committee on four occasions during the three years that followed. The passage of the law represents a solid step towards China’s goal of ensuring care for the elderly, medical treatment for the ill, compensation for injured employees, and care for the families of severely injured workers. / Photo by Xinhua reporter Zhao Zhongzhi

  To meet the objectives for development of the social safety net for the period of the Twelfth Five-Year Plan, we need to focus on making the social safety net more equitable, more available to the floating population and more sustainable. Plans call for working for five years to make the social safety net basically comprehensive and finding overall solutions for longstanding problems during this period. We will expand coverage so that more people share in the fruits of social and economic development. We will gradually raise the level of benefits and gradually narrow the gap between the level of benefits provided to similar target groups. We will work to make the multi-level system sounder and increase funding support to make the system more sustainable. We also need to make management and services more efficient and convenient to provide stronger support for efforts to develop a moderately prosperous society in all respects.

 II. Accelerating efforts to improve systems in the social safety net

 It was decided at the Fifth Plenary Session of the Seventeenth CPC Central Committee that we need to accelerate efforts to improve systems in the social safety net, focusing on four areas.

 One, we need to extend coverage of the new rural old-age insurance system to all rural residents. The resolution of the Third Plenary Session of the Seventeenth CPC Central Committee called for developing a new type of rural old-age insurance system financed by premium payments from individuals, allowances from the collective and subsidies from the government. In September 2009 the State Council printed and issued guidelines for carrying out trials of the new rural old-age insurance system, officially marking the start of trials. The first trials covered 11.8% of rural residents, which was expanded to about 23% in 2010. The new rural old-age insurance system provides general benefits to participants and encourages broad participation. All rural residents aged 60 and above are eligible for basic old-age pensions from the government. Premiums paid by rural residents are saved in individual accounts supplemented by government subsidies. Establishing the new rural old-age insurance system is another major central government policy designed to benefit the rural population following on the heels of the decisions to rescind the agricultural tax, give direct subsidies to rural residents and set up a new type of rural cooperative medical care system. It also represents a major breakthrough in development of a social safety net that covers all urban and rural areas. We will expand the trials to more areas to eventually implement the system throughout the country by the end of the Twelfth Five-Year Plan period and gradually combine the urban and rural old-age pension systems.

 Two, we need to promote reform of old-age insurance system in Party and government bodies and public institutions. It was decided at the Seventeenth National Party Congress that the old-age insurance system for employees of state enterprises, Party and government bodies and public institutions should be reformed. The State Council formulated the Plan for the Trial Reform of the Old-Age Insurance System for Employees of Public Institutions in 2008, to be implemented in three provinces and two municipalities directly under the central government and carried out in conjunction with the trial reform to reclassify some public institutions. While continuing to improve the old-age insurance system for employees of state enterprises during the Twelfth Five-Year Plan period, we also need to carry out reform of the old-age insurance system for employees in Party and government bodies and public institutions, focusing on setting up a basic system that combines social pooling with individual accounts and allows people to transfer their accounts when they move to a different location. We need to provide supplementary old-age insurance to meet the special needs of employees of Party and government bodies and public institutions so that they have retirement security on several levels.      

 Three, we need to unify planning for basic old-age insurance across the country. This will be a major breakthrough for the old-age insurance system and the larger number of participants in the insurance system will allow the risk to be spread over a larger group of people, thereby improving efficiency in the use of funds. At the same time, unifying and standardizing the old-age insurance system gives us the opportunity to clearly define the division of responsibilities between the central government and local governments. It will also make it possible to smoothly transfer personal old-age insurance accounts from one part of the country to another, thus eliminating an institutional barrier impeding the normal flow of labor between different areas of the country. We basically completed implementation of unified planning at the provincial level for basic old-age insurance at the end of 2009, laying a solid foundation for implementing nationwide unified planning for basic old-age insurance. 

 Four, we need to ensure the personal old-age insurance accounts are better funded and actively and carefully promote investment and operation of pension funds. This is a major strategic decision designed to address the issue of the aging population and ensure sustainable development of the old-age insurance system. During the Twelfth Five-Year Plan period, the proportion of the population over 60 will increase from less than 13% to around 15%. The peak of the aging trend will come in the late 2020s and will put more pressure on the system and the budget. We must take advantage of the positive factors of steady and rapid economic development in order to increase the government subsidies for personal old-age insurance accounts and actively and carefully promote investment and operation of pension funds to ensure their value is preserved and increased, while ensuring that current system expenditures are met.

 III. Gradually expanding coverage of the social safety net

 The proportion of the population covered by the system is the most important index for gauging the reach and efficiency of the social safety net. We are focusing on four areas in expanding coverage of the social safety net during the Twelfth Five-Year Plan period. One, the system needs to cover more urban workers, particularly rural migrant workers in the cities, people employed in the non-public sector of the economy and people without fixed employment. Two, we need to continue to address the problems left over from shift from a planned to a market economic system by fully implementing the policy of including workers from closed and bankrupt enterprises in the basic medical insurance system for urban workers and including workers retired from collectively owned enterprises who are not already covered by the basic old-age insurance system and a few special types of workers not otherwise covered. In addition, people who have sustained a work-related injury prior to the implementation of the Regulations on Workers’ Compensation will receive compensation through the national unified planning and management of workers’ compensation funds. Three, we need to adopt policies to encourage people to participate on a long-term basis and of their own free will in the new rural old-age insurance system, the new type of rural cooperative medical care system and the basic medical insurance system for urban residents. At the same time, we need to provide more support to persons otherwise unable to participate in these systems such as disabled persons and people in other target groups. Four, we need to improve the social security policies for farmers whose land has been expropriated by ensuring they are covered by the system before their land is expropriated to effectively safeguard their legitimate rights and interests.

 IV. Gradually raising social security benefits 

 China’s economy has continued to develop rapidly since the convening of the Sixteenth National Party Congress, and the level of entitlement benefits of the social safety net has been raised in line with economic growth. During the Twelfth Five-Year Plan period, we need to continue to raise the level of benefits to ensure that more people share in the fruits of economic and social development. We must take into consideration China’s large population, weak foundation and large differences between regions and do all we can without taking on more than we are able to handle in working to ensure that people’s basic needs are met by strengthening the social safety net. In increasing government spending, we must address issues according to the order of their importance and urgency and work to narrow the gap between benefits received by different regions, urban and rural areas, and different target groups. One, we need to continue increasing the level of basic pensions for workers retired from enterprises and work out a mechanism for regularly adjusting pensions in line with economic growth, increase in wages and inflation. Two, expenditures for treating frequently-occurring and common ailments should be covered by basic medical insurance by unifying planning for all local medical clinics to increase the number of beneficiaries of the system. We need to steadily increase the amounts that can be reimbursed for different medical services and the maximum total amount that can be reimbursed for medical expenses in the medical insurance for workers in enterprises, the medical insurance for non-employed people and the new type of rural cooperative medical care system. Three, we need to greatly increase the amount of compensation for work-related deaths and injuries. Four, we need to expand the scope of workers eligible to receive benefits from unemployment insurance to give play to its role in preventing unemployment and promoting employment and develop a workers’ compensation system that helps prevent work-related injuries, provides compensation for work-related injuries and finances recovery from injuries so that workers covered by the program can benefit from active prevention measures rather than having to wait for an injury to benefit.

 V. Developing the multi-level social safety net 

 China’s social safety net now mainly consists of three levels. The first level is the basic level. This level provides social welfare to poor urban and rural families and individuals, mainly in the form of cost of living allowances and medical assistance for urban and rural residents, and food, clothing, medical care, housing and burial expenses for childless and infirm rural residents and helps people who have no living relatives and cannot support themselves through the social welfare system. All of these programs are funded by the government. The second level is the main level. This level is a subsidized insurance system that links rights with obligations and provides benefits in the form of pensions, medical care, unemployment assistance, work-related injury compensation and maternity expenses. The government directs or guides the operation of this insurance system and is responsible for ensuring it is adequately funded. The third level is the supplementary level. The state encourages and guides employers, both enterprises and non-profit institutions that are able to do so to set up enterprise annuities and occupational pensions for their employees and provide supplemental medical insurance and other commercial insurance so that the security requirements of all members of society can be met.

 During the Twelfth Five-Year Plan period we need to focus on three areas in developing the multi-level social safety net. One, we need to take strong measures to develop and standardize enterprise annuities and occupational pensions and adopt effective preferential tax policies to encourage employers to provide supplemental insurance for workers. Two, we need to develop commercial life insurance and health insurance. We need to guide and standardize the operation of supplemental subsidized insurance programs by all types of non-government organizations and market participants to meet people’s higher or more specialized requirement for security. Three, we need to improve the urban and rural social welfare system by gradually expanding the entitlement group for the cost of living allowance system and medical assistance system and gradually increasing the cost of living allowance for urban and rural residents, the welfare payments for food, clothing, medical care, housing and burial expenses for childless and infirm rural residents, and medical assistance payments to effectively guarantee that the poor in society, including poor students attending college, can meet their basic expenses.

 VI. Gradually improving the management and services of the social safety net

 The management and service system for the social safety net now covers most of the country. The increase in the number of people covered by the social safety net and the increase in the amount required to fund it means that the system must provide efficient and convenient services and be managed in a strict and careful manner. Therefore, we need to improve the management and services of the social safety net during the Twelfth Five-Year Plan period. One, we need to step up efforts to develop community-based service platforms to mainly serve local communities. We need to standardize and improve management and service procedures of the social safety net to better serve the people. Two, we need to improve the information network for the social safety net by accelerating efforts to include information on all programs and cover all areas of the country, ensuring that information on payments to and from the system and the rights and interests of entitlement groups is timely and accurate and ensuring that entitlement groups receive their due benefits. Three, we need to increase the use of social security cards that follow a unified set of standards and are fully functional. We are striving to meet a goal of “one card in every person’s hand and one card does all” as soon as possible to make it convenient for people to view their records anywhere and anytime and a goal of “keeping people’s records for life, serving them for life and giving them security for life.”

(Originally appeared in Qiushi Journal, Chinese edition, No.24, 2010)


Note:  Author: Minister of Human Resources and Social Security of the People’s Republic of China

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 Ministry of Human Resources and Social Security of the People’s Republic of China

 The Ministry of Human Resources and Social Security is a component department of the State Council of the People’s Republic of China. Its main functions are:

 Formulate development programs and policies of human resources and social security undertakings; draft laws and regulations on human resources and social security; formulate rules and regulations of the ministry; organize the implementation, supervision and inspection thereof.

 Formulate development programs of human resources markets and policies on human resources mobility, so as to establish integrated and standard human resources markets.

 Take charge of employment promotion; formulate coordinated development programs and policies on employment in urban and rural areas, improve public employment service system; formulate employment assistance system; improve vocational qualification system; establish vocational training system for workers in both urban and rural areas; take the lead in formulating policies on college graduates employment; formulate polices concerning the training and awarding of high-skill personnel and practical rural talents in collaboration with relevant departments.

 Establish the social security system covering both urban and rural residents; coordinate and formulate policies and standards concerning social insurances and supplementary insurances for residents in urban and rural areas; organize the formulation of integrated methods for transferring social security accounts nationwide and integrated methods of basic old-age pension; work out polices on basic old-age pension in state organs, enterprises and public institutions and gradually upgrade management of social security funds pooling to a higher level; draft management and supervision system concerning social insurances funds and supplementary insurances funds; compile and formulate the draft concerning budget and final accounts of social insurances funds; participate in the formulation of social insurances funds investment policies.

 Be responsible for the forecasting, early warning and information guide concerning employment, unemployment and social insurance funds; work out coping strategies thereof; implement prevention, adjustment and control, so as to maintain stable employment and overall balance of payments of social insurances funds.

 Formulate salary distribution policies concerning the personnel of state organs and public institutions in collaboration with relevant departments; establish regularly-increasing salary mechanism and salary payment guarantee mechanism concerning the personnel of state organs, enterprises and public institutions; formulate policies on benefits and retirement of the personnel in state organs, enterprises and public institutions.

 Guide public institutions to reform personnel systems; formulate management policies concerning the personnel in public institutions and manual workers in state organs; formulate policies on management and continuing education of professional and technical personnel; take charge of deepening reform in professional title system; improve post-doctorate administration system; be responsible for the selection and training of high-level professional and technical personnel; formulate policies on introducing foreign experts and returned overseas Chinese intellectuals as well as policies concerning their work and settlement in China.

 Work out placement policies and programs concerning demobilized military officers; take charge of the education and training of demobilized military officers; be responsible for managing and delivering services to demobilized military officers with self-choice of employment.

 Be responsible for comprehensive management of civil servants in administrative organs.

 Formulate comprehensive policies and programs concerning rural migrant workers; protect the legitimate rights and interests of rural migrant workers.

 Formulate labor and personnel dispute mediation and arbitration system as well as policies on labor relation; improve labor relations coordination mechanism; draft policies to eliminate abusive child labor and formulate special labor protection policies for female workers and under-aged workers; organize the implementation of labor inspection; coordinate labor rights protection activities of the workers; investigate and correct major cases in accordance with the law.

 Take charge of the international exchange and cooperation for the Ministry and the State Administration of Civil Service; formulate management system concerning international staff dispatched to international organizations.

 Reform and Development Course of China’s Social Safety Net

 The reform and development course of China’s social safety net can be roughly divided into three stages. The first stage, from the early days of New China to the early days of the reform and opening up drive, was the formative stage and mainly consisted of worker’s compensation. The second stage, from the early days of the reform and opening up drive up to the Sixteenth National Party Congress, was focused on trial reforms of the social insurances system. The third stage, from the Sixteenth National Party Congress to the present has been a stage of institutional innovation aimed at balancing urban and rural development. Reform of the social safety net made particularly important progress during the Eleventh Five-Year Plan period when the basic principles, general objectives and main tasks were set for improving the system.

 China has now put into operation the framework for a social safety net that mainly consists of social insurances supplemented by social assistance, social welfare, resettlement, housing subsidies and social charity programs. During the Twelfth Five-Year Plan period the social safety net will be improved to fully cover both urban and rural areas as a system that covers most of the population, guarantees a basic standard of living, is multi-level and is sustainable.

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