Ge Yanfeng

There were great numbers of redundant workers in the state-owned enterprises (SOE) under the traditional system of the planned economy. This kind of concealed unemployment helped avoid the possible social instability that evident unemployment might have created, but contorted the enterprise business system and undercut its efficiency. Redundant employees must be redirected to other channels for employment to allow the restructured enterprises to continue its existence and develop in the market economy. Moreover, the strategic rearrangement of the national economy, as required by the 15th national congress of the party, will also produce large numbers of employees to be redirected to other trades.

The redirection is a must and inevitable in the SOE reform and the restructuring of the national economy, and must proceed in a prudent manner as it affects the direct interests of the employees. SOE employees form a special social group. Under the planned economy, the government under took to provide them with life-long jobs and social security measures like pensions and healthcare. But on the other hand, the government practiced the "low-pay system", that is, to deduct in advance the expenses to be used to honor the above-mentioned commitments and to accumulate part of the state assets. In view of the particularities, proper arrangement must be made for quite a number of the employees to be redirected to other jobs when abolishing the life-long job system. First of all, we must try to help them realize reemployment. For those who can hardly find a new job, the basic needs of their daily life must be guaranteed. Otherwise, large numbers of the employees will find no means for their subsistence and such a situation will inevitably affect China’s social stability and impede the smooth progress of the reform.

I. Achievements and shortcomings in the redirection efforts of the past few years

In the past few years, laying-off was adopted as a particular way to redirect the flow of SOE redundant employees. The enterprises which the employees used to belong to would continue to retain its "work relations" with them in a certain period (for instance, three years) and undertake to ensure them a basic living standard. At the same time, governments at all levels and the enterprises actively helped the laid-off workers to be re-employed. The party central committee and the State Council have called two national conferences to discuss how to guarantee the basic living standard and reemploy laid-off SOE workers. Departments concerned of the central government and the local governments of various levels have also worked out a series of policy measures which have basically ensured stability among the laid-off workers.

Despite the achievements, some prominent problems still call for solution:

1. Only a limited number of the laid-off workers has been re-employed. By the end of 1998, the accumulated number of employees laid off from SOEs, urban collectively owned enterprises and some government undertakings totaled 16 million. Comprehensive studies indicate that among the 16 million, about 40 percent has been re-employed in various ways (including covert jobs). Excluding those who willingly chose to remain idle, half of the laid off employees still find it hard to get new jobs. One of the reasons for the difficulty in finding them new jobs lies in the oversupply of the labor force. Job opportunities fall far short of the need of the new urban work force, the rural work force that has shifted to non-agricultural sectors and the massive army of redundant employees laid off within a comparatively short period of time. The poor market competitiveness of the redundant employees, who have been driven out of the market through market selection, represents another reason for their difficulty to be re-employed. Many re-employment centers have been set up in various localities, but some of them failed to provide effective job training, guidance and service to the employees. What has happened to those employees who have found new jobs show that most of them have become self-employers or have been assigned jobs by the enterprise they used to work in, with the majority of them working as individuals or doing unstable temporary jobs.

2. The financial resources are not enough to guarantee them a basic living standard. At present, the fund comes equally from the government, the enterprises and the society and its availability is often not secured. Generally speaking, over half of the laid off employees concentrated in enterprises and areas with poor economic efficiency. In these enterprises or areas, the one-third share undertaken by the enterprises or the share undertaken by the local unified unemployment fund can hardly be obliged to contribute their full amount. Some financially constrained local governments cannot appropriate the fund either. Quite a number of the employees cannot receive their full share of basic living allowance, in some eases they received nothing at all. Such a situation remains even after the powerful political mobilization of 1998, and the problem will become more outstanding for a period in the future. In addition, there are still some "blind spots" in the basic living security system, for instance many of the collectively-owned township enterprises have not been involved in the existing re-employment and basic living security system for the laid off employees.

3. There are serious obstacles to abolishing the "labor relations". The "labor relations" denote the commitments of the state to the employment and welfare security of SOE employees under the planned economy system. In accordance with the arrangement of re-employment and basic living security of the laid off employees, only some old employees will be treated as retirees who continue to maintain the "labor relations" with their former enterprises. The rest shall rescind their "labor relations" with their enterprises in about three years. But now, most of the laid off employees feel strongly against this practice. The low pay under the old system was given to the employees after advance deduction from their contributions and many enterprises have accumulated a large amount of arrears in wages, medical expenses and investment fund collected among the employees. How to compensate for the arrears constitute a problem which cannot be skirted. However, no definite solutions have been devised in most localities, leaving a major obstacle to abolishing the "labor relations". To many employees who are unable to find a new stable job, they would lose all their support for life once the "labor relations" are rescinded. Other prominent obstacles include pensions and healthcare. Even for the re-employed employees, they find it difficult to be included into the systemized security system as most of them are engaged in low-pay and temporary work. Our survey indicates that on the one hand many of the laid off employees are reluctant to seek help from re-employment centers and, on the other hand, many enterprises are unwilling or dare not let their laid off employees into the centers or rescind the "labor relations" with their employees within the stipulated period because of the above-mentioned factors. The enterprises fear to do so even with those people who have actually found new jobs through their own efforts. As a result, some of these people earn a sum of income from re-employment, sometimes quite high, and at the same time receive the basic living allowance all the same. This has caused a greater shortage in the limited amount of fund for basic living allowance of the laid-off employees, so the effectiveness of the allowance to ensure the basic life of those in real difficulties is compromised.