What determines pension insurance participation in China? Triangulation and the intertwined relationship among employers, employees and the government

Abstract

The current study draws on the Advocacy Coalition Framework to examine what determines employees’ pension participation in China. For the purpose of exploring which employees actually receive pension coverage and why, econometric analysis was conducted with China’s Employer–Employee Matched Survey data (N = 3412). A variety of both individual factors, ranging from age and Hukou status to job characteristics, and macro factors, including interprovincial migration and level of economic development, are all found to predict insurance coverage. Qualitative research results contextualize these findings by discussing the often ambivalent and triangulated relations among employers, employees and government. These three groups primarily use shared core policy beliefs to structure their interactions in the form of advocacy coalitions. Various types of cross-coalition interaction, including negotiation, cooperation and conflict, are examined. These findings carry both theoretical and policy implications.

Keywords:

• employees
• employers
• government
• pension
• triangulation

Notes

1. Including the New Rural Pension Scheme in 2009, Interim Measures for Pension Transfer within Urban Pension System in 2009, Urban Resident Pension Scheme for non-employed urban residents in 2011 and Interim Measures for the Connection between the Urban and Rural Pension Systems in 2014.

2. Strictly speaking, social insurance contributions are not taxes. They are paid into individual and social pooling accounts to which workers may eventually have a claim. Nonetheless, we follow conventions in the international literature in referring to the ratio of the combined contribution to wages paid as the ‘tax wedge’.

3. This survey was conducted by the School of Labor and Human Resources of Renmin University of China. The first author and the third author participated in the process of questionnaire design and revision.

4. Regressions with the former definition have been conducted as robustness check and show no much qualitative difference.

5. Excluding those outlier observations does not substantively change the results but would rule out obvious measurement errors. Due to space limitations, results including those outliers are excluded but are available upon request.

6. By controlling the random effects (Column 3), the coefficient for Urban Hukou becomes insignificant but still positive while working in the same province is still a significant factor for pension participation.

7. Before the 1990s, the majority of companies in China were SOEs, so the urban pension scheme was originally designed for SOEs mainly.

8. The ACF argues that, in any given policy subsystem, there will generally be two to five advocacy coalitions.

9. Many local governments adopt a ‘binding-style’ of social insurance, usually referred to as the ‘Urban Four Insurance’. This includes medicine, pension, work injury and unemployment insurance, or sometimes what is referred to as the ‘Urban Five’ when it also includes maternity insurance. These four or five items together cost employers and employees nearly 40% of employees’ wages.

10. This research finding closely resembles recent arguments made by Mark Frazier (2010). He has observed that: ‘pension benefits now account for the single largest source of spending for local governments, and many of the taxes taken from employers and employees to fund these accounts have been misappropriated by local Social Insurance Agencies for development or other corrupt purposes. These missing funds create the danger of unrest and loss of trust in the government in the event that retiring workers cannot be paid the funds that were taken from their salaries throughout their working lives’ (Frazier, 2010).

11. This may be due to the historical policy restrictions that foreign firms were subjected to; specifically, a much higher cost to participate in the state pension scheme, which resulted in the establishment of supplementary pension funds.

12. One government official shed light on this reality: ‘if a medium-size company with 200 workers is required to pay pension insurance for all employees, this company then has to pay one million CNY per year on this single item without any return. This would be a substantial burden for middle and small sized enterprises’. CITE.