Shanghai insurance scheme adds insult to
injury Michelle Chen
SHANGHAI
- Inside a cramped, filthy storefront in Shanghai, a
young man working for a construction contractor awoke
one morning unable to stand. The crippling pains in his
abdomen, afflictive by any standards, were particularly
unwelcome for this man, a migrant worker from an
impoverished village in Anhui province, one of China's
largest labor-exporting provinces. Though his boss
allowed him time off from work to get treatment, the
pain was aggravated by worry over how much a day without
wages and a trip to the hospital would set him back.
But the pain left him with little choice. From
the storefront, he took a taxi to the nearest clinic
(taxis tend to be faster than ambulances) and was
diagnosed with a kidney stone. The cost to remove the
stone will probably amount to a few months' salary.
Uncertain where he will get the money to cover the
procedure, he said he hoped to borrow it from his boss
or from relatives.
For a poor migrant worker, an
illness or work-related injury can often spell doom. And
despite an insurance scheme for migrant workers issued
by the Shanghai government in 2002, the government is
seldom viewed as a source of help. Indeed, for the past
several years, the migrant population's main interaction
with the bureaucracy has been through the payment of
nebulous "management fees" that until recently would
vanish into local coffers.
According to the
latest data from China's State Statistical Bureau, China
had 113.9 million migrant rural workers in 2003, a
result of surplus labor in rural China. These workers
are often subject to treatment that is unequal to that
of local workers, and in an effort to alleviate some of
the inequalities, in September 2002, Shanghai introduced
the Interim Regulations on Out-of-Town Employees'
Comprehensive Insurance, which stipulates that all
employees and their employers who meet requirements must
take part in a comprehensive insurance system.
The experimental program, managed in a
public-corporate partnership, is the first of its kind
in China, which has a population of 1.3 billion, and is
a tiny step toward filling a yawning gap in the urban
social safety net: the exclusion of workers from the
countryside. On paper at least, about 40% of Shanghai's
migrant population - estimated at more than 3 million -
should be insured under the plan, including all limited
liability companies like the construction worker's
employer. However, most of the supposed beneficiaries of
the policy have yet to feel its impact, and when
questioned, neither the worker nor his boss was aware of
the policy.
Under Comprehensive Insurance, an
employer pays a monthly premium of about 158 yuan
(US$19) per migrant worker - a set percentage of the
citywide average wage of the previous year plus
administrative fees. Sixty percent of the premium goes
toward medical insurance, while the remainder
accumulates in a retirement fund, to be paid in a lump
sum when the migrant returns to his officially
registered residence. The government recently boasted
that 770,000 migrants currently participate in the plan,
and the enrollment goal for this year is 2 million -
equivalent to the segment of the migrant population
employed in commercial enterprises, according to
official records. Not included are informal sector
workers such as street vendors, though households that
employ domestic workers can voluntarily purchase a
special medical insurance plan.
Despite the
progress, however, for Shanghai migrants, people for
whom paying utilities bills is a struggle, any type of
insurance, aside from occupational injury insurance for
some manual laborers, is about as luxurious a notion as
a BMW. Since migrants tend to focus on more immediate
financial issues and have a high job-turnover rate,
employers are under little pressure to provide long-term
insurance coverage.
The discrepancy between the
government's good intentions and the reality migrants
must confront is also widened by the parameters of the
policy. Comprehensive Insurance does not cover the
estimated 60% of the migrant population working in
informal businesses or the underground economy. Besides,
bosses tend to under-report the number of migrants they
employ in order to reduce premium costs.
Though
the employer is supposed to shoulder the cost, insurance
expenses are shouldered by both sides, with increased
labor costs for employers and reductions in pay for
workers. Some employers may illegally force their
workers to pay the premium from their own wages. This
often leads to worker exploitation and violations on the
part of migrant bosses. According to Luo Renyong, an
official at the Labor Bureau, bosses "definitely deduct
from the salaries, or they make [employees] work
overtime", forbidding them from leaving until they have
made up the difference.
Despite efforts to crack
down on such violations, few complaints reach the
authorities because migrants prefer exploitative work to
no work at all. And though the insurance scheme's main
purpose is to help close the wealth gap between local
and non-local workers, it is also a way for the
government to control the migrant population.
A
different schedule for the payment of premiums - every
three months instead of monthly - enables the government
to stabilize the migrant workforce. "Migrants are more
mobile" than locals, said Wang Guang Yao, another
official at the Labor Bureau. "They move around faster."
Thus a longer timetable for payment pressures workers to
stick with one employer.
Moreover, the
retirement insurance plan requires that a migrant return
to his place of origin to redeem the pension, which is
basically the sum of all the monthly premiums
accumulated while working in Shanghai. This conveniently
helps alleviate the strain of massive population
movement on the city's resources. Tying insurance funds
to the countryside ensures that the so-called "floating
population" returns home when they are no longer
economically useful for the city.
Migrant
management Public funds for the "management" of
the migrant-worker population are nothing new in
Shanghai. But in the past, management fees amounting to
50 yuan per month per migrant mainly served, in the
words of Luo Renyong, "to make money for the local
administration". Wang conceded that before 2002, the
migrant fees were in essence a parasitic way of funding
welfare programs for the growing number of laid-off
employees of state-owned enterprises. "Non-local workers
were used - forced to pay this money," said Wang. "The
funds were used to subsidize laid-off workers." It was
only when the government realized that the funds were
simply making people dependent on welfare and not
stimulating the economy that it decided to reroute the
funds.
Shanghai has now replaced the makeshift
welfare system for laid-off workers with an organized
unemployment-insurance scheme, freeing up the funds from
migrant management fees actually to benefit the migrants
themselves. Now, although the system is far from
perfect, money extracted from the non-local labor force
has at least evolved into something more than a slush
fund for the unemployed.
The Comprehensive
Insurance system is separate from Shanghai's main
insurance system, which itself is divided into separate
schemes for local urban and agricultural workers.
Migrants cannot be integrated into pre-existing social
insurance schemes for Shanghai residents because
insurance policies in China are highly localized. The
Shanghai government has therefore employed an
unprecedented method of using non-state insurance
companies to cut across provincial boundaries,
transplanting insurance funds earned in the city back to
the local insurance accounts of individuals in their
home provinces. China's two largest private insurance
companies, Ping An and Pacific, have been commissioned
by the Labor Bureau to administer the insurance plan.
Wang explained that "because the rural-urban gap is
relatively large", and public funds cannot be easily
moved between rural and urban economies, "we must employ
the commercial sector and let [the companies] administer
the program".
This marketization is to the
bureaucracy what privatization has been to aging
state-owned enterprises. By relying on commercial
operations to get around the kinks in its own system,
the government is using the market to overcome the
challenges of economic transition. Yet critics warn that
Comprehensive Insurance is just adding another layer to
an over-complicated, segregated insurance system. In
Luo's view, "There are too many different levels of
coverage right now."
Because China's economy is
still in transition, it may be years before the labor
force is stable enough to implement an efficient, fully
integrated, citywide insurance system for migrants and
locals alike. "The labor market right now is not good,"
said Luo. "It's too messy." Furthermore, the entire
social insurance system of Shanghai is in flux. The city
plans on cutting insurance premiums for locals, which
hover around 50% of the average urban wage, to make the
cost of labor more competitive. So while Shanghai's
poorest may be getting insurance for the first time,
local workers may soon find their insurance premiums
slashed to help the city promote capital investment.
In the end, it is not the design of the city's
social insurance regime that matters but how policies
affect people's everyday lives. Many migrants still
place precautions for health near the bottom of a long
list of struggles - treatment of illness is often
avoided until it is too late. But with the insurance
plan, the Shanghai government seems to have initiated a
bumpy transition toward a less stratified society. And
eventually, both migrants and the government may begin
prioritizing people's health over the drive for economic
modernization.
Perhaps the worker from Anhui put
it best as he hobbled to bed after working all day
despite the pain in his abdomen: "When you're sick, you
just think, 'I don't care if I'm poor, I just want to be
healthy.'"
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