Reducing the burden from the unemployment insurance

The new edition of Guangdong Unemployment Insurance Regulation will come to effect on July 1. Comparing with the old regulations, the new edition applies many positive changes, such as providing the same unemployment security for migrant workers and urban workers; some unemployed persons can refuse specified employment training or occupation introduction and draw unemployment insurance benefits directly without complicated paper-procedures.

With unemployment insurance as a stated insurance by Social Insurance Law, companies and employees are all bonded to pay the insurance. The base and rate of the insurance vary according to different places. In general, revenues of unemployment insurance are over the expenditure, leaving the funding idle. Taking a national perspective, in 2013, unemployment insurance funding spend 53.2 billion yuan, covering 41% of the revenue. The situation is even severer in Guangdong Province. According to statistics of Guangdong social insurance department, in 2012, funding expenditure was 2.07 billion yuan, taking only 22.7% of the revenue (9.117 billion yuan).

Let’s have a further analysis on the statistics. By the end of 2012, 95.8 thousand people claimed for unemployment insurance, covering only 0.48% of the insured (20.1525 million). And the expenditure of unemployment insurance was 1.086 billion yuan, just exceeding half of the total funding; and the other half was spend on non-unemployment insurance such as medical aid and employment training and other programs.

Let’s take a look at the statistics revealed by Shanghai social insurance department in 2012. Total expenditure reached 6.9 billion yuan, covering 76% of total revenue. However it covered quite small a population. Only 108.8 thousand people drew unemployment insurance, covering only 1.76% of those insured. And the registered unemployment rate of Shanghai urban labor reached 4.2% in the same year. In 2012, average monthly unemployment insurance compensation for each person who drew unemployment insurance in Shanghai received 725 yuan. Counting that they drew in a full year or 12 month, the unemployment insurance funding drew by 108.8 thousand people was 0.95 billion yuan, covering only 13.6% of the total expenditure. This means that over 84% of the funding expenditure is not used for releasing unemployment insurance compensation. According to early media reports, one major part of the expenditure goes to employment training institutions that work to enhance the re-employment capacity of the unemployed.

Why are there so few people who draw their unemployment insurance? Some thinks it due to low unemployment rate, for the registered unemployment rate all around the country just exceeds 4%. However, the registered unemployment rate is far from demonstrating the situation of employment market, particularly for the nothing-but-low unemployment rate of the middle aged urban employers. It is due to the cumbersome procedures of unemployment registration that many people don’t register themselves in relative institutions.

Then how cumbersome can it be to register unemployment and draw unemployment insurance? It can be sensed from the Unemployment Registration Rules and Unemployment Insurance Rules of Shanghai. Apart from some technical factors, the registration first is restricted to local residents. However, a rather large part of those who paid unemployment insurance are without local household registration; second, those who are paying the insurance must pay the insurance continuously. Once stopped, even later making up through agencies, they cannot get insurance compensation after unemployed.

Thirdly, three denials of the employment opportunities provided by employment service institution without proper reason will lose your insurance compensation. This is the major cause for most of those who cannot get insurance benefits. Suppose that an office employer got unemployed due to the bankrupt of the company and could not find a proper job in a short time. Then the person must accept the job opportunity provided by employment service institution which may include various low-end positions that cannot be accepted by office workers.

It is reasonable in some sense for the Unemployment Insurance Regulation to make such rules. In this way it can effectively prevent unemployment insurance fraud acts. However, as China undergoes great differences between salaries of various industries and skills. A laborer with complete compulsory education surely can find a position with salaries if make some compromise. And this allows the restriction of unemployment insurance obtaining to block most of insurance drawing requests. It also forms the major reason for low proportion of unemployment insurance expenditure. This forms the current dilemma of unemployment insurance: the insurance is aggravating the burden of enterprises and individuals without improving the situation of the unemployed.

Guangdong, Shanghai and some other places have lowered the base or rate of unemployment insurance to solve the idle unemployment insurance funding. It is indeed a good measure to lower the actual paying amount of the insurance and receives immediate effects in easing the idle funding issue. Yet why not just cancel the insurance as it does no good for the majority? It may solve the idle funding issue once and for all, and definitely declined those who intend to take advantage of the insurance. As for the weak group of people who cannot find proper job in a long period, the government can make direct fiscal subsidies. The amount won’t be large. It will cost at most 1 billion yuan in Shanghai and Guangdong (the current unemployment insurance expenditure scale).

Published on Southern Metropolis Daily   | 2014-6-5