Migrant Labour and the Sustainability of China's Welfare

28 MADE IN CHINA - STEER YOUR WAY Social welfare in China has emerged in Migrant Labour and recent years as a major cause of migrant the Sustainability workers’ discontent and collective action. Reforms of the social welfare system in of China’s Welfare China since 2002 have expanded coverage and protection of vulnerable populations, System but structural problems remain for migrant workers to access and receive the full benefits of the social safety net. How has the social Beatriz Carrillo welfare system evolved, and what are the challenges facing migrant workers? How can Social welfare in China has emerged the system be made more sustainable? as a major cause of migrant workers’ Social welfare—understood broadly discontent. Reforms of the social as encompassing public services, social welfare system in China since 2002 have insurance, and social relief—has long expanded coverage and protection of been primarily the privilege of the urban vulnerable populations, but structural population. From the inception of the People’s problems remain for migrant workers Republic in 1949, urban citizenship—defined to access and receive the full benefits of by people’s household registration (hukou) the social safety net. How has the social status—provided urban residents with access welfare system evolved, and what are the to employment, housing, education, and challenges facing migrant workers? How social insurance not available to rural hukou can the system be made more sustainable? holders. China’s rural-urban divide has, thus, in many ways been defined by this gap in welfare provision. MADE IN CHINA - STEER YOUR WAY 29 Migrant Workers in Shanghai PC: Peijin Chen The traditional ‘iron rice bowl’ (tiefanwan) or no experience of state support, most rural- system, based on work units (danwei), to-urban migrant workers had not had a sense provided urban workers with ‘cradle to of entitlement to urban goods and welfare, grave’ employment, services, and security, not least because in most cases their rural but—perhaps more importantly—it also hukou continues to deny them membership gave these workers an identity and a sense in the cities. And yet, among the second of entitlement. This perception of having a generation of rural migrants—born after 1980 right to state provisions was not developed and with weaker links to the countryside— among China’s vast rural population, since that has begun to change (Pun and Lu 2010). they received very limited or no state funding These workers are demanding better pay and for welfare provision. With the start of the working conditions. Their reaction to, and reform era, workers’ identity and sense of demand for, social insurance entitlements, entitlement had implications for the demands however, has been less enthusiastic. This is in for provision they made on the state, but part due to the shortcomings and limitations also with regard to whose benefits the state of the social insurance system itself. decides to maintain or cut. By the late 1990s, for example, China’s previously privileged old working class was A Fragmented System laid-off in the millions from state-owned enterprises—the majority left without China’s social insurance system is highly welfare benefits (see also the chapter by fragmented. While hukou differentiation Kevin Lin on pp. 20–23 in the present book). may be the more obvious element of that In the meantime, up until 2015, civil servants fragmentation, other factors related to the had largely retained their superior social way in which these insurance programmes insurance benefits, funded in their entirety are funded, managed, and implemented have by the state. In contrast, having had limited perhaps had more serious implications for 30 MADE IN CHINA - STEER YOUR WAY their provision. Like economic policy, social Attempts at Harmonisation policy implementation in China is highly decentralised, and thus dependent upon In order to allow for the transferability local state capacity, particularly financial of funds accumulated in individual workers’ well-being. The more developed and wealthy social insurance accounts, since 2008 the provinces of the east coast have thus been central government has promoted the better able to meet policy mandates from the ‘harmonisation’ of rural and urban social central government around the delivery of insurance programmes, with the aim of public goods, social insurance, and welfare creating a unified national social security benefits, and have often even surpassed the system (Cai 2011; Shi 2012). In practice, level of benefits established by the centre. however, this rural-urban harmonisation In contrast, having no revenue to match has thus far tended to result in local welfare their welfare responsibilities, many local protectionism, whereby the more prosperous governments in the central and western parts provinces are unwilling to share their larger of China offer, at best, very patchy provision. A fund pools with workers from outside longitudinal study on the social determinants their jurisdiction. Chongqing’s municipal of health, for example, found region (where government, for example, has successfully a person lives) to have the strongest effect unified its rural and urban social insurance on an individual’s health status (gender programmes for those with a local hukou, but and age being the other two most important those from outside the municipality remain determinants) (Baeten et al. 2012). left out (Shi 2012). Given that rural migrant This decentralisation, including the fact workers are now more likely to be working that funds for social insurance are pooled outside their home province, in the short to locally, has meant that funds accrued in medium term the rural-urban harmonisation individual worker accounts have not been process is likely to only benefit a minority of transferable between jurisdictions. This migrant workers. lack of transferability is one of the biggest The policy and rhetoric coming from the disincentives for migrant workers to enrol centre, however, has continued to promote into the social security system, even when the inclusion of rural migrant workers into special insurance programmes for migrant the urban social security system, as evidenced workers have been created, as has been the by the latest iteration of the Social Insurance case in Shenzhen and in other cities (Mou et Law, passed in 2011, which made the al. 2009; Watson 2009). Furthermore, these enrolment of migrant workers into the urban social insurance programmes for migrants social insurance programmes compulsory. usually provide lower benefits than those Local governments have nonetheless not covering formal urban employees, and there been too keen to police the implementation of have been various well-publicised cases of this law, for fear of upsetting local businesses employers not paying their contributions and industry. Employers in China have into those schemes (China Labour Bulletin indeed faced some of the highest employee 2016). Rural migrant workers are thus— insurance contribution rates in the world, understandably—reluctant to join a system with rates of up to forty percent of employees’ that will result in less cash-in-hand and wages (KPMG 2016). In some provinces and limited benefits only available in situ. municipalities, contributions into the old age social insurance alone have stood at more than twenty percent of the payroll (CCTV 2016). This serves to explain the prevalence MADE IN CHINA - STEER YOUR WAY 31 of casual and informal employment without conditions and pay, the expansion of social benefits, in which the majority of rural insurance and welfare programmes has migrant workers are involved. largely been a top-down affair. More recent demands by migrant workers over social Economic Slowdown as insurance payments, such as in the case of the the Latest Challenge 2014 strike at Yue Yuen—a shoe manufacturer and Adidas and Nike supplier—have also China’s economic slowdown is likely to served to influence the government’s decision result in yet fewer employers willing to enrol to expand rural migrant workers’ social migrant workers into the social insurance insurance rights (Schmalz et al. 2016). schemes mandated by law. In response to Again, the concern over a reduced worker/ this, earlier this year the central government pensioner ratio and the burden that this reduced employer contribution rates for will place on China’s social security system pension and unemployment insurance, and is likely to maintain the commitment of for the housing provident fund (Ministry the centre to expand coverage to include of Finance 2016). Nevertheless, the central rural migrant workers. Some provincial government is likely to continue to put governments, as stated earlier, are likely to pressure on sub-national governments to continue to delay that process. Apart from enrol rural migrant workers into the social financial considerations, Mark Frazier has insurance system, because it now realises that also argued that it would be unwise for the the financial sustainability of the system will Chinese government to retreat from the depend on bringing in more contributions politics of inclusion and access to social from the working-age population. As a policies introduced as part of Hu Jintao’s cohort, rural migrant workers are, on average, campaign to build a ‘Harmonious Society’ younger than their urban counterparts; (hexie shehui) and continued under Xi these younger worker’s social insurance Jinping’s ‘Chinese Dream’ (zhongguo meng) contributions are hence necessary to sustain (Frazier 2014). Rather, what economic the needs of China’s ageing population and slowdown might bring about is a reduction the sustainability of the pension system in the level of benefits that employees (Frazier and Li 2017). receive, as signalled by the recent cutback to The first generation of rural migrant mandated employer contributions into social workers is also ageing and has begun to insurance programmes (Ministry of Finance demand access to medical insurance and to 2016). Universal coverage may well soon be a pension. More generally, the needs and achieved, but at a very basic level of coverage.

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