According to the statistics provided by the Worldometer (2020), more than two million people have been infected worldwide with the COVID-19 up to mid-April. China adopted stringent quarantine/social distancing policies to prevent the spread of the COVID-19, which have been followed by other states, and, consequently, many workers have lost their jobs. The International Labour Organization (2020) estimates are that as many as 25 million people could become unemployed, with a loss of workers' income of as much as USD 3.4 trillion. Even though some states have provided these unemployed workers with financial assistance, it will be hard to fundamentally solve this problem. This blog mainly examines the unemployment crisis in China, introduces the country's regulations concerning unemployment insurances, and the challenges China's social insurance system is currently facing.
The unemployment crisis in China caused by the COVID-19
Wuhan, the breakout city of COVID-19, ended its lockdown after 76 days on 8th April 2020. "Flights resume, families reunite, and traffic jams return to the streets where 11m people had been shut in" (Lily & Lillian, 2020). Currently, many statisticians are working on the number of jobless people due to the policies implemented to prevent the spread of coronavirus. South China Morning Post cited the statistics estimated by Liu Chenjie that the pandemic may have pushed 205 million workers into "frictional unemployment," where they want to work but cannot or are unable to go back to work (Tang, 2020). Liu emphasized that the data only covered the urban workforce of 442 million people but excluded the 290 million migrant workers often more vulnerable to economic fluctuations (Tang, 2020; Leng, 2020). It has been estimated that Chinese migrant workers could lose a combined $115 billion in wages as factories struggle to resume output, and many businesses remain closed (Leng, 2020). No matter what the detailed statistic is, the Chinese government must deal with the following unemployment crisis. Unemployment insurance could be an effective instrument to relieve the financial burden of those affected workers to some extent.
China's unemployment insurance regulations
China's unemployment insurance system experienced significant reforms over the past decades. Unlike the widely accepted system that both employers and employees contribute to the unemployment insurance pool, workers in the 1990s were not required to pay contributions. "At that time, the Chinese system provided income and other support to redundant workers through the state-owned enterprises, and welfare of workers was considered to be the responsibility of the state-owned enterprises" (Vodopivec & Tong, 2008). China's economic reform put such a system to an end, and "the Chinese government sought to create a new social security system based on individual employment contracts that would make employers, rather than the state, primarily responsible for contributions" (China Labor Bulletin).
China has passed a series of regulations concerning labour rights, such as the 1994 Labour Law, 2008 Labour Contract Law, etc. The 1999 Unemployment Insurance Regulations (No. 2410) regulates matters related to unemployment benefits, administration of funds, and sanctions in cases of fraud. These fragmented rules were codified into a separate Social Insurance Law (adopted in 2010 and amended in 2018). Both workers and employers pay into the unemployment insurance system, normally at rates of 1%-3% of the wage. "Even though the rate is small, the administrative process of getting a refund is cumbersome, and the benefit paid out is very low; therefore both employer and employees do not have the incentive to pay this kind of insurance unless it is required by law" (Zhou, 2019).
To be eligible for the benefits, unemployed workers should meet three requirements: 1) before he/she becomes unemployed, his/her employer and he/she have paid the unemployment insurance premiums for one year or more; 2) his/her employment is discontinued against his/her will; 3) he/she has performed unemployment registration and filed a job application (Art. 45 of the Social Insurance Law). Besides, Art. 47 establishes the standards of unemployment insurance money shall be determined by local governments but shall not be lower than the standards for minimum living safeguard for urban residents. The duration of receiving unemployment insurance money relies on the duration workers have paid premiums (Art. 46). For example, if a worker has worked for more than ten years, he or she could receive unemployment insurance money for no more than 24 months. However, unemployment insurance money is not enough for unemployed workers to survive in big cities.
Challenges of China's unemployment insurance system and measures
Vodopivec & Tong (2008) identified several key challenges China's unemployment insurance system is facing. Firstly, the unemployment insurance in China mainly covers urban workers, and there exist huge coverage gaps among different provinces and different industries. "workers who are formally employed in larger enterprises, local workers and workers with more education are more likely to be covered by employer-based insurance than informal sector workers in smaller scale or private sector firms" (Giles & Wang et al.).
Further, women are more vulnerable, because most of them work in industries, such as services or commerce, in which employers are less likely to comply with mandates to provide social insurance. Besides, as mentioned above, benefit levels are set by local authorities between the minimum living standards level and the minimum wage (Giles & Wang et al.). The benefits unemployed workers receive will not be enough. The eligibility enforcement is very weak, especially in municipalities with high levels of unemployment and low administrative capacity. Reemployment and program administration are still obstacles that need to be overcome.
The COVID-19 has worsened the unemployment situation in China, and labour stability might become the top policy priority (He, 2020). China has adopted a series of measures to improve the unemployment insurance system. For example, China expands the length of receiving unemployment insurance money for old unemployed workers, provides six-month financial assistance for people who do not meet the requirements listed in Art. 45 of the Social Insurance Law, and grants double unemployment insurance money from March 2020 to June 2020.
According to the statistics provided by the Ministry of Human Resources and Social Security of the PRC (2020), China has granted unemployment insurance money amounting to CNY 9.3 billion to 2.3 million unemployed workers. The government also promoted some measures to ensure unemployed workers are easily receiving the money. It aims to accelerate and simplify the process of online application for the unemployment insurance, e.g., all applications could be made through the national social insurance service platform; the platform should be user-friendly and easily operated; any information receiving from the unemployed labours should be confirmed and accept corrections; staffs should promptly accept applications, make decisions and provide feedback within a limited period (Ministry of Human Resources and Social Security of the PRC, 2020).
However, more negative consequences the COVID-19 have on employment will manifest, and the government will have to tackle the difficult task of providing for its people while trying to make sure businesses are not overburdened.In that sense, affordability and implementation of social protection programmes are likely to be in the centre of debates during the following months.
Coronavirus Update (Live): 2,252,596 Cases and 154,330 Deaths from COVID-19 Virus Pandemic - Worldometer. (2020). Retrieved 13 April 2020, from https://www.worldometers.info/coronavirus/
Ryder, G. (2020). COVID-19 has exposed the fragility of our economies. International Labor Organisation. Retrieved from https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_739961/lang-...
Kuo, L., & Yang, L. (2020). Liberation' as Wuhan's coronavirus lockdown ends after 76 days. The Guardian. Retrieved from https://www.theguardian.com/world/2020/apr/07/liberation-as-wuhans-coron...
South China Morning Post. (2020). Coronavirus: China's unemployment crisis mounts, but nobody knows true number of jobless. Retrieved from https://www.scmp.com/economy/china-economy/article/3078251/coronavirus-chinas-unemployment-crisis-mounts-nobody-knows
South China Morning Post. (2020). Coronavirus: China's huge migrant worker population bearing the brunt of economic shutdown. Retrieved from https://www.scmp.com/economy/china-economy/article/3065239/coronavirus-c...
Vodopivec, M., & Tong, M. (2008). China: Improving Unemployment Insurance. Social Protection & Labor. Retrieved from https://pdfs.semanticscholar.org/c168/f80fdfff1bfbb852bbf6caff6d49f09459...
China's social security system. (2012). Retrieved 18 April 2020, from https://clb.org.hk/content/china%E2%80%99s-social-security-system
International Labour Organisation, Database of national labour, social security and related human rights legislation, China, https://www.ilo.org/dyn/natlex/natlex4.detail?p_isn=52620&p_lang=
He, L. (2020). China's economy just shrank for the first time in decades. It could still eke out growth this year. CNN. Retrieved from https://edition.cnn.com/2020/04/16/economy/china-economy-gdp/index.html
Ministry of Human Resources and Social Security of the PRC (2020), Notice of the General Office of the Ministry of Human Resources and Social Security on further advancing the "unblocked and safe" unemployment insurance benefits (Translated from Chinese), http://www.mohrss.gov.cn/gkml/zcfg/gfxwj/202003/t20200306_361582.html
Ministry of Human Resources and Social Security of the PRC (2020) How to ensure people's basic living during the COVID-19, http://www.mohrss.gov.cn/SYrlzyhshbzb/dongtaixinwen/buneiyaowen/202004/t20200415_365407.html
Tang, F. (2020). Coronavirus: China's unemployment crisis mounts, but nobody knows true number of jobless. South China Morning Post. Retrieved from https://www.scmp.com/economy/china-economy/article/3078251/coronavirus-chinas-unemployment-crisis-mounts-nobody-knows
National People's Congress. Social Insurance Law of the People's Republic of China (2010).
Zhou, Q. (2019). China's Social Security System: An Explainer [Blog]. Retrieved from https://www.china-briefing.com/news/chinas-social-security-system-explai...