Migrant Workers Better Off Contributing to Social Security Fund: Expert

Sun Jie, vice dean of the School of Insurance and Economics at the University of International Business and Economics, claims the long-term benefits of migrant workers contributing to their social security fund far outweigh the short-term gain to their income by not contributing. [cyol.com]

A statement issued by the Central Committee of the Communist Party of China (CPC) on deepening all-round reforms after the Third Plenum of the 18th Central Committee of the CPC held in Beijing in November 2013 declared the government should establish a fairer, more sustainable social security system during its next round of reforms.

The declaration was made based on problems identified with China's current social security system. Although many policies have consolidated the national social security network, there are still some migrant workers who opt not to contribute to their social security fund in order to earn a higher salary. Others have difficulty accessing money in their social security fund, while there have also been media reports about employers not contributing to their employees' social security fund.

In addition, some netizens have declared they will use their personal savings to sustain them in old age rather than rely on their social security fund, because they believe the former is an economically sounder choice.

Vice dean of the School of Insurance and Economics at the Beijing-based University of International Business and Economics (UIBE), Sun Jie, recently said everyone should contribute to their social security fund. "Everyone should be confident with the social security system and care about their relevant benefits. They should take better advantage of this system in this way," she said.

Sun noted that personal savings and investments can serve as good supplements to an individual's elderly pension, but stressed they can't replace the social security fund as a main pillar of financial support in old age. Many points support her idea.

First, the social security system can cover most costs people face after retirement, including health and daily living expenses. Second, it's better for an individual to rely on their social security fund instead of their personal savings, which are vulnerable to inflation. Decreasing interest rates can be ameliorated by the government in the social security system. In addition, the government will adjust future pension amounts by considering the level of consumption and inflationary pressures. A dynamic adjustment mechanism is used by the government in the social security system.

Sun said that as people live longer and the economy continues developing, each worker covered by the social security system will have access to more in their elderly pension than they have actually contributed.

But Sun attributed the rise of people refusing to contribute to their social security fund to problems currently plaguing the system regarding transferring of funds and resumption of contributions. Sun pinpointed two key factors that persuade people to stop contributing to their social security fund.

The first is that base payments of different municipalities, provinces and regions vary depending on average salaries. Discrepancies exist nationwide due to uneven economic development. The second is that the proportion contributed from employees' salaries also differs across the country. Social security contributions for elderly care, for example, require some employers to contribute 20 percent of their employees' salary each month. In other areas, employers are required to pay 14 percent or 18 percent.

Sun noted there are conflicting interests within the transferring and resumption of social security contributions. Currently, local governments manage finances independently of each other. Pensions are paid using local finances meaning that if migrant workers move from developed areas to underdeveloped areas, the latter area's government must bear an extra financial burden when paying pensions.

Since China has three social security systems – the new-type rural social security system, the urban staff social security system and the urban residences' social security system – related to elderly pensions for migrant workers, they potentially face another problem if migrant workers move back to their hometowns from the cities where they have worked. Migrant workers need to resume their social security contributions to sustain their pension fund in a new-type rural social security system on elderly care. But it isn't always easy to combine funds from their urban staff's social security system, which they contribute to when working in cities.

For migrant workers from towns with poorly managed social security systems that lack the option of resuming contributions, they might have to give up their social security contributions.

Sun has two key recommendations to help migrant workers in this situation.

First, the State, employers and workers should embrace their respective responsibilities in social security. It's illegal for enterprises not to pay due contributions to their employees. Employees have the right to file lawsuits against their employers if they fail to contribute the adequate amount.

Second, employees should steadfastly contribute to their social security fund. They should contribute for as long as they have the opportunity under the firm belief that the amount they will have access to upon retirement will be greater than their personal savings compared to funds from the urban and rural residences' social security systems.

(Source：zqb.cyol.com/ Translated and edited by womenofchina.cn)