Who is responsible for the enormous underpayment of pension insurance premiums?

Experts' views


Who is responsible for the enormous underpayment of pension insurance premiums?

Chu Kong-wai

Labour Education and Service Network

In April 2014, tens of thousands of workers in Yue Yuen Shoe Factory launched a strike, which was closely followed by both domestic media and the international community. The conflict broke out due to Yue Yuen's underpayment of the social insurance premium, as workers realized that after enduring a dozen years of hardship in the workplace, they would not be entitled to a decent pension. With the grim prospect of only getting a pension of a few hundred Yuan, anger was provoked among the workers.

The Chinese social security scheme consists of five types of insurance and one type of fund. Pension insurance is a very important component. There are two types of pension insurance, namely employees' pension insurance and residents' pension insurance. The amount of these two varies a great deal, sometimes more than ten times, depending on which type of insurance one is entitled to. For migrant workers, receiving the employees' pension insurance is particularly important. The Social Insurance Law aims to provide the long missing protection for migrant workers and urban workers; however, it is a toothless tiger in reality. The Yue Yuen strike centered around the enterprise's underpayment of the pension insurance premium that it is obligated to pay for. This case exposes just the tip of the iceberg. It is common practice for enterprises to underpay social security benefits, and migrant workers, despite their significant contribution to the economic reform, are usually the victims of the enterprises' foul play.

The root of underpayment comes from the employers' greed in their cutting costs and avoiding their responsibility to guarantee workers a decent retirement. Yet, enterprises and local governments often point their fingers at workers, accusing the workers of being short-sighted and refusing to pay their share of the premium contribution. Yet, in today's China, workers and migrant workers are definitely the most vulnerable group and with this background, they have been fighting for their rights to pension bitterly, yet determinedly. This means that workers treasure their pension rights, especially the first generation of migrant workers, who are approaching their retirement age.

In a conference in China, some legal experts from Guangdong Province's Social Security Bureau openly commented that as economic growth is the core goal of the state, enterprises would only need to pay for 60% of their employees' pension insurance premium, to pass the benchmark. This shows that the underpayment of social security funds is indeed supported and covered up by local governments and the so-called legal experts. On 1 January 2013, the Shenzhen City Government launched Measures to Repay Pension Insurance Premium, with the aim of making unlawful enterprises pay back the missing premium. However, the eagerness of senior migrant workers to know more about these Measures was met with detours and excuses, when they approached the relevant authorities. In other words, the Measures exist only on paper. The two examples quoted above tell us that local governments are accountable for the problem of missing pension insurance premiums.

In China, the three core labour rights (the rights to strike, to organize and to collectively negotiate) are not well protected and workers are still counting on protection from the government. However, for the sake of economic growth, local governments often sacrifice workers' basic rights and intentionally “fail” to implement the social insurance law. Together with corruption, business-officials collusion and high inflation rates which grassroots workers cannot cope with, workers are gradually losing faith in the official system and this is the real reason that they are reluctant to contribute into the pension insurance scheme.