Inequality in Social Insurance Participation and Generosity: Do Firm Characteristics Matter?

Abstract

Income inequality in China has been much documented and debated. However, one important aspect of income inequality – social insurance inequality – has been largely understudied. We use a large national panel of firm data to examine the possible influence of various firm characteristics on the inequalities in social insurance participation and generosity in the period 2004–07. Our findings reveal substantial ownership sector and regional gaps in social insurance provision by firms, with the private domestic sector and those in the central region lagging behind. Unionized firms, larger firms, and firms with greater market shares also tend to provide better social insurance to their employees. While being an exporting firm is linked with greater social insurance participation and generosity, being a purely exporting firm, however, is associated with reduced social insurance generosity. Lastly, highly educated workers receive substantially better social insurance coverage than their less educated peers. These social insurance inequalities are highly relevant as China pushes forward with establishing a unified social insurance system across urban‐rural boundaries, ownership sectors and industries.

Social Protection for the Informal Sector in Urban China: Institutional Constraints and Self-selection Behaviour

“…Hukou has been discussed as an institutional constraint on social insurance participation in several empirical studies. Moreover, various studies based on city-level surveys and national panel data showed that the members of the informal sector labour force who are employed by private enterprises or who are self-employed, particularly migrant workers without local hukou , are unlikely to be covered by employment-based social insurance programmes in urban China (Gao et al , 2012; Park et al , 2012; Chen and Gallagher, 2013; Giles et al , 2013; Gao and Rickne, 2015). These findings are consistent with those of other similar household surveys in Shanghai (Nyland et al , 2006) and Jiangsu Province (Nielsen et al , 2005).…”

Lessons from China on different approaches to pension coverage extension

“…The less educated are more likely to access informal jobs that have weaker labour protection, leading to their low participation in contributory social security schemes. From the market/employer perspective, “retaining skilled workers has long been considered an important motive for employer provision of non‐wage benefits” (Gao and Rickne, 2017, p. 761). Labour‐intensive enterprises often use a dual strategy to reward highly educated workers with social insurance benefits while capping total labour costs by excluding the rest of their workers from contributory schemes (Nielsen et al, 2005; Nyland, Thomson and Zhu, 2011).…”

“…To be frank, savings in the bank are more secure; who knows how our contribution has been spent!”. Studies based on quantitative data have shown a negative effect of rural hukou on migrant workers’ pension coverage (Gao, Yang and Li, 2012; Gao and Rickne, 2017; Park, Wu and Du, 2012; Jiang, Qian and Wen, 2018).…”

“…The latter includes farmers and urban non‐working residents who are not eligible for the Employees’ Pension. Some studies use data collected prior to 2009, making it impossible to examine whether the Residents’ Pension is better at accommodating disadvantaged workers than the Employees’ Pension (Cheng, Nielsen and Smyth, 2014; Gao, Yang and Li, 2012; Gao and Rickne, 2017; Xu, Guan and Yao 2011). Studies that are more recent contrast those with and those without a pension, without making a finer distinction between the Employees’ Pension and the Residents’ Pension (Jiang, Qian and Wen, 2018).…”

The sustainability of China’s Urban Employees’ Pension Programme: A case of getting old before getting rich?

“…This is exacerbated by the fact that, as discussed below, contribution collection has been the responsibility of different agencies. Studies have indicated that the enforcement of social insurance coverage is very relaxed in many areas (Nyland et al, 2006; Matra et al, 2007; Rickne, 2013; Gao and Rickne, 2014 and 2017). This has led to a situation where many workers are not, in practice, covered and where social insurance contributions are paid on the basis of wages that are lower than those actually being paid.…”