Editor’s Note: A recent report shows that China’s rates for employer contribution to pensions are on par with rates in European countries. China is also having trouble with Southeast Asian countries in the global labor market. To solve this, the government plans to reduce pension rates for Chinese workers in order to make the nation’s manufacturing sector more competitive.
Chinese companies contribute an average of 39.75 percent of their employee’s pension funds. China is ranked 13th out of 173 countries for pension contributions by employers. This higher than the rate in the United States of 23.2%. China’s levels are closer to the levels of a European welfare state.
A Chinese Welfare State?
Data on retirement pensions in China was recently released by the National Development and Reform Commission. The research committee published an article saying that Chinese rates are approaching those of France, Germany, Italy, and other European welfare states. Employer contribution rates in China are higher than those in the United States, Japan and South Korea. Rates in China are more than three times higher than in the Philippines, 3.84 times higher than in Thailand and 4.79 times higher than in Mexico. 60 percent of Chinese workers are covered by China’s five insurances program.
The Five Insurances
Under the five insurances program, Chinese employers must give their workers protection through various forms of insurance. These include a basic pension, medical insurance, insurance for work-related injuries, unemployment insurance, and maternity insurance.
Analyst Guan Bo pointed out that the high, long-term rates of China’s pension and insurance policies have affected the nation’s labor market. Labor costs in China are on the rise, and having high cost pensions has reduced the competitive advantage once held by Chinese manufacturers.
Reducing Pensions
Hiring a worker in China costs 1.5 times more than hiring a worker in Thailand, 2.5 times more than hiring a worker in the Philippines, and 3.5 times more than hiring a worker in Indonesia. South Asian countries are replacing Chinese labor. The United States has also launched initiatives to revitalized manufacturing within its borders, which may also hurt China’s manufacturing sector. In short, China’s manufacturing sector currently faces enormous challenges.
Guan Bo said that China plans to reduce the rates of its five insurance program in order to reduce labor costs. He said that the reduction will play a positive role in stabilizing the Chinese economy and helping it turn around.
Source: QQ News
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Keywords: China manufacturing China pension rates
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It is nice to see hard hats on the construction workers, sometimes this does not happen, now if they would actually wear some steel toe shoes they make and send to the west, perhaps construction worker accidents will finally go down. After all the labor pool is shrinking now, better to keep them alive.
Sep 03, 2016 09:04 Report Abuse
Labor cost and inflation is making China a non factory economy and the factories will go to cheaper labor. Pension costs are a small costs in the overall cost of labor unless you have a huge senior age imbalance like some western countries, but this affects government plans, not the private sector. Trimming pension costs will not bring the jobs back, there already gone or soon will be, and cutting pensions would only bring the "middle class trap" theory faster and bring China to a Japan or Brazil economy. The untold facts of China's pension system are that if you immigrate, you lose everything, you have to be in China to get your pension, many people have to travel to an office to pick up cash, regardless of your health. Most pensions do not provide a cost of living adjustment. My x-mother in law has gotten 1100 rmb, the same amount for 12 years since retiring as a teacher in Shandong and of course could not move another province, let alone another country and still receive the funds. This article has shown that you can make anything look accurate. I do remember reading china daily articles of some workers in rural areas picking up pensions at government offices of 20 rmb a month in the last four years. Sadly it will always be 20 rmb with cost of living considered.
Sep 03, 2016 08:27 Report Abuse
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