Gov't should increase spending and better distribute benefits: experts
While Chinese businesses urgently need a cut in their contributions to employees' social security and housing fund, this burden shouldn't be transferred to employees and the government should explore new ways to better balance the social welfare system, experts said on Wednesday.
Social welfare contributions paid by Chinese companies currently account for 39.25 percent of total wage bills. China ranks 13 out of 173 countries and regions in terms of corporate contribution ratio, just below France, Germany, Italy and some other European countries, but much higher than the US, Japan and South Korea, according to a report from the Social Development Research Institute published on the official website of the National Development and Reform Commission (NDRC) on Monday.
Company contributions to China's social security system, also known as the "five insurances," include mandatory pension, medical insurance, industrial injury insurance, unemployment insurance and maternity insurance.
Companies' burden
At present, enterprises, employees and the government jointly contribute to the welfare system, with businesses paying 40 to 50 percent of the total, employees paying 10 to 20 percent and the government covering the rest, said Yang Jianhua, director of the Center for Public Policy at the Zhejiang Academy of Social Sciences.
Chinese employers also need to make housing fund contributions that range from 10 to 24 percent of the staff salary, bringing their nominal welfare rate to about 60 percent, the NDRC report said.
"A few years ago, when the domestic economy was relatively robust, social security spending was already a big cost for many private companies. Nowadays, with a sluggish global and domestic economy, the problem has become more grim," Yang told the Global Times on Wednesday.
The relatively heavy burdens of social security and the housing fund have already become an important factor behind the rising labor costs for enterprises, impairing competitiveness in China's manufacturing industry, according to the NDRC report.
At the cost of hiring one worker in China, firms could hire 1.5, 2.5 and 3.5 workers in Thailand, the Philippines and Indonesia, respectively. China's labor cost advantage has been replaced by Southeast Asian countries, the report said, adding that with plans to reindustrialization and revitalizing manufacturing in some developed countries, like the U.S., China's manufacturing sector is facing huge challenges.
It is against such a backdrop that the State Council, China's cabinet, issued a circular on August 22 to urge cost reduction for enterprises.
If enterprises are allowed to pay less for employees' social security and housing funds under new rules, they may save around 150 billion yuan ($22.45 billion), the research report said.
But easing the burden on businesses doesn't mean sacrificing the employees' interests, experts said.
Changes to government spending
"If the current social security scheme is to be adjusted, the government shouldn't transfer the burden from enterprises to employees. Instead, the government should think of ways to enrich the social security funds itself," Zhong Hongwu, an associate research fellow at the Chinese Academy of Social Sciences, told the Global Times on Wednesday.
"Generally speaking, the Chinese government's fiscal expenditure on social security is at a relatively low level. Additionally, the government's welfare spending is uneven, with those within the administrative system enjoying better social security welfare, and others, like rural workers and employees in private companies having a lower level of social security," Yang noted.
According to Zhong, the heavy social security burden has caused many companies to take measures to dodge or reduce social security spending.
"We can not utterly blame the enterprises for such deeds as a businessman's primary mission is to help his company survive," Zhong noted.
"The government should re-evaluate the distribution system of social security input and formulate a better scheme," Yang said, adding that not only should the government contribute more to social security spending, but it should make sure that the domestic social security distribution is more balanced in the future.
