Factory Stories: Will you make payments to a pension insurance fund? – State policy and workers’ misgivings

by Wang Xiaolin (Factory Stories #5, September 2012)


In the text “Will you make payments to a pension insurance fund?” in the last edition [Factory Stories #4] we discussed the reasons for many workers not to make such payments.

That article analyzed the issue mostly from the workers’ perspective: low wages, bad treatment, a high turnover rate and the unwillingness to do migrant work for the whole of one’s life. These are the reasons that stand behind the workers’ refusal to make payments to a pension insurance fund. However, with increasing age the problem of how to survive after retirement becomes more pressing. Workers are always “pragmatic” and any “investment” has to be considered carefully to avoid a situation in which the losses exceed the gains. That’s why the workers are “confused” when having to decide whether to make payments to a pension insurance fund or not.

This article discusses another aspect of the workers’ misgivings: the state has been ignoring the workers interests for a long time, and the policies that are allegedly “to the benefit of the people” are capricious and – when implemented – deficient.

The majority of workers working for private companies along the coast come from villages. Since the villages are generally impoverished and workers struggle to find a way out, they come to the cities to earn a living. During the whole process workers are absolutely on their own. In the 1980s and 1990s, and even in the early 21st century, workers arriving in the cities to work need temporary residence permits and many other documents. If they cannot find work for a while, or if their documents are not complete, they are often chased by the public security authorities and have to escape to elsewhere. If they are not careful and get caught, their hard earned money is again be reduced by a few hundred Yuan. During labor-capital conflicts, government authorities often blatantly side with the bosses. Every policy is drawn up considering the stability of state and society. When laws are announced which seem to benefit workers, it is just to appease dissatisfied workers and prevent workers from engaging in unrest. Moreover, every law that on paper seems to benefit workers, is often watered down when implemented. All kinds of issues cause workers’ to have less and less trust in the government.

Pension insurance is not a demand put forward by the workers who moved to the coastal regions, it is rather part of new state policies. From the point of view of these workers, pension insurance is, first of all, a “privilege” of workers and cadres in state-owned enterprises who “eat from the state pot” that appears to have nothing to do with them. However, with industrial development cities needed a steady flow and continuing supply of a large and cheap labor force. The state had to consider the social insurance issue, and allow workers to maintain a basic livelihood in case of illness, work-related injuries, child birth, unemployment or when getting old – if workers can’t make a living who will work for the bosses?

The pension insurance policy directly related to the workers in private companies in coastal provinces is presented by the state to the workers as a kind of “cookie”, and it is, apparently, not that bad: per month they need to pay just a bit more than 100 RMB so that, after their retirement, they will get a fairly high sum as a pension. However, the workers will have to wait and see for a while whether this presented “cookie” will actually satisfy the needs.

In the first place, they do not have faith in state policies, and that causes many people to not have faith in long-term planning (for instance, provisions for the elderly). Brother Li, 38 years old, left home to find work ten years ago. He has already experienced many changes regarding pension insurance. Just after he left home, he never heard anything related to the phrase “social insurance.” Later he joined a large factory where making payments to a pension insurance fund was “voluntary.” Brother Li signed a “voluntary agreement not to make payments to a pension insurance fund.” But before he quit the job at the end of 1999, the company made a mistake and paid for him one month of social insurance. At that time it was just a few dozen Yuan. At the end of the year, Brother Li unexpectedly got some “windfall gain”. As it turned out, at that time the city of Shenzhen subsidized the purchase of social insurance with 300 Yuan. Adding to the amount the company transferred to each workers [personal] bank account, Brother Li got altogether about 500 Yuan. Afterwards he continued to accumulate several years of pension insurance [contributions] working at other companies. In any case, one could withdraw it so it served as a [kind of] fixed deposit. From 2006 on, the part the company payed for was not transferred to each workers [personal] account [anymore] so when terminating the insurance one could only withdraw [what was on] the personal account. After all, one could still take the money into one’s own hands at any time, so some people still wanted to buy it. From January 1, 2010, one could not withdraw any amount from the pension insurance fund anymore, and the temporary deposit turned into one “until the time of death”. At that time, people had to consider carefully whether they should make payments to a pension insurance fund or not.

What has recently quite worried people are the rumors about the “raising of the retirement age.” [延迟退休] The Ministry of Human Resources and Social Security announced “it will propose a timely policy on the flexible raising of the age at which people receive the basic pension” leading to the popular rumor that the retiring age for men will be raised to 65 and for women to 60. It is important to know that in the coastal provinces it is increasingly difficult for ordinary workers to find a job when they reach their 30s and 40s. In the current situation (men retire at 60, women at 50) it is already difficult to hold out until retirement. If the retirement age will be raised further perhaps people really have to “work until death.” Therefore, it is no wonder that people are anxious and worried, and that they voice their anger on the internet. Some issues are really “popular” there: “Thirty years ago, family planning worked well and the state took care of the elderly; twenty years ago, family planning worked well and the government helped taking care of the elderly; ten years ago, it was not possible to rely on the state in terms of taking care of the elderly; until now, no retirement before 65; in ten years, retirement at 85?” Officials from the Ministry of Human Resources and Social Security quickly “refuted the rumors” trying to calm down the situation: “raising the retirement age has not yet entered the test phase.” However, the general direction already points to raising the retirement age, and the official launch of the policy will happen sooner or later.

What are the issues concerning the policy’s implementation? One characteristic of the state is commonly known: good policies are implemented badly, bad policies are implemented well. To ordinary people it looks as if it is “favorable”, once implemented it is always less favorable than anticipated. Although the law clearly stipulates that the employing company (work unit) has to purchase social insurance for the employees – the complete social package includes five insurances (pension, work accidents, health, birth, unemployment) and the housing fund – the governments of all regions along the coast still deal with this in a rather “pragmatic” way, largely taking into account the companies’ and state’s “burden” while ignoring the situation of the workers. They only push companies to pay into pension, work accident and health insurance funds. However, many companies just get work accident and health insurances because those two are the cheapest to buy while also serving as basic “investments” for reducing their risks. In comparison, pension insurance is rather expensive, and many companies simply do not pay for it. Of those companies which do get it hardly any pays according to the actual wage. In collaboration with the related authorities or with their tacit consent the bosses save a large amount of money again.

One phrase is often heard: “The state is playing a big game of chess.” As far as workers from the lower ranks are concerned, it is pointless to guess what will be the state’s next move. But we need to understand one thing: expected improvements might not materialize, and, in addition, it is likely that they will be revoked. Does that mean workers do not demand / fight for pension insurance? No. All the above mentioned policy changes and their deficient implementation depend on one important thing: whether workers actively struggle and build up their own power. After having said all this, more and more workers will think about their pension and the pension insurance. If workers get active and fight the outcome could be different. There is already an example: a short while ago there was a report on a luxury goods factory in Guangzhou that for more than ten years had not paid for the employees’ social insurance. More than one hundred workers got together and demanded that the boss clears the outstanding pension insurance [contributions] and also put pressure on the local authorities. In the end, they won the struggle and the pension insurance contributions were paid for all the years since 1999.

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