Economy

Markets

Industries

Insights

Reports

Events

Fix pension scheme

(China Daily)
Updated: 2009-02-07 07:57

As the aging of China's population accelerates, any effort to improve the social security net should be needed now more than ever.

Related readings:  Pension fund to draw in more workers  China raises pensions for veterans, bereaved families  China may launch new social pension system for farmers  Social security fund pursues value-oriented investment

The two drafts the Ministry of Human Resources and Social Security published to solicit public opinion on pension insurance for migrant workers and the cross-region transfer of pension funds for urban workers are long overdue.

By making it more convenient to transfer and renew pension fund accounts anywhere in the country, these new measures will attract more participants and boost the development of social insurance.

Latest statistics show the number of Chinese citizens aged 60 and above reached about 160 million by the end of last year, accounting for 12 percent of the total population. And the country is expected to see its first surge in the aging population this year since it has become an aging society.

In addition to the increasing burden on pension insurance, the global financial crisis punctuated another sense of urgency over the country's underdeveloped social security net.

It is reported that only 17 percent of the 130 million migrant workers who have sought jobs in cities have joined the pension scheme.

Being left out of such basic pension insurance, most of the migrant workers will only find themselves more vulnerable than others to the impact of the global recession. And in the long run, they will also suffer more than their urban cousins from the lack of pension funds when they retire.

A key reason why migrant workers are reluctant to join the existing pension scheme is its discrimination against labor mobility.

Though a flexible labor market is essential to the robust growth of the Chinese economy, the current pension insurance discourages the cross-region flow of workers. It stipulates that a person's contribution to the pension fund, which increases with the number of working years, will stop and revert to the starting level when he or she leaves a job to work in another province or region.

Usually, migrant workers change jobs more frequently than urban workers. The ongoing global economic downturn which hit China's export bases in coastal areas hardest will now force a huge number of migrant workers to seek new jobs in other areas.

Under such circumstance, a quick fix to the pension scheme is badly needed. Otherwise, many migrant workers have to withdraw pension contributions at their own peril before switching to another place for work.

The new drafts mark only a good start to optimize the country's pension insurance scheme. Much more effort is needed to build a workable social security net for our aging society.