Statistics recently released by the Social Relief Division of the Ministry of Civil Affairs indicate that unemployment among retrenched workers from state-owned enterprises remains a huge unresolved problem, despite years of rapid economic growth. It will certainly pose a serious threat to the social and economic health of the country if it is not properly addressed.
The ministry reported that the number of recipients of the minimum living allowance, a payment made available to laid-off workers from state-owned enterprises (SOEs), rose to 21.883 million as at the end of June 2005. This is well above the 1998 level of just 1.84 million recipients.
In June 2005, the average minimum living allowance was set at 154 yuan per month, according to the division. This is well below the average monthly income of an urban worker in 2004 of 1,335 yuan. (Those eligible for the minimum living allowance must have no other significant source of income.)
In addition, reforms proposed by the Ministry of Labour and Social Security earlier this year suggest that the situation could get much worse for these former employees of state enterprises.
On 8 April 2005, the Minister of Labour and Social Security publicly announced that the state-owned enterprises (SOEs) had finished a programme of massive lay-offs and the time was now ripe to incorporate the basic living allowance system for ex-SOE workers into an ordinary social-functional unemployment insurance system. (See related article at http://politics.people.com.cn/GB/1027/3305571.html)
This announcement followed the issue of an official notice on 10 March 2005, put out jointly by the Ministry of Labour and Social Security and Ministry of Finance, stating the existing system, which provided a basic living allowance for SOE workers, would be incorporated into the unemployment insurance system within one year. The elimination of the ex-SOE workers' basic living allowance means that the three security lines would be reduced to two and the professional and administrative designation of "laid-off state-owned enterprise worker" (xiagang gongren) would be phased out.
In the 1990s, China's state owned enterprises launched two reform policies: "cutting staff to boost productivity" and "enterprise restructuring". According to government statistics, over the seven-year period from 1998 to the present, China's state enterprises have shrunk their workforce by 60 percent or about 30 million people in all. These are the so-called laid-off workers.
To address the livelihood problems of laid-off workers, the Chinese government set up a social insurance system consisting of "three lines of protection": 1) those laid off from state-owned enterprises can receive a basic living allowance (jiben shenghuo baozhang) from the reemployment service centers for up to three years; 2) if they still have not found a job by then, they can receive unemployment insurance payments (shiye baoxian jin) for a maximum of two years; and 3) if they remain unemployed at the end of this two-year period, they can apply for the minimum living allowance (zuidi shenghuo baozhang fei), to which all impoverished urban residents are entitled.
A newly laid-off SOE worker is supposed to spend the first three years in the "re-employment centres" of his or her original SOE, which the government encourages the SOEs to set up to provide job re-training and employment information. During this period, the worker will receive the ex-SOE worker's basic living allowance. The worker has to leave the "re-employment centre" after three years and by then, if he is still unemployed, the Social Security Department will have to issue him "unemployment insurance" for two years. After a total of five years of unemployment, he will be no longer recognized as an ex-SOE worker, but an ordinary unemployed person, eligible only for the minimum living allowance from the local office of the Social Relief Division.
The future of these 21.833 million laid-off SOE workers does not look bright. Those who left their SOEs in the mid-1990s and have not been able to find employment are no longer eligible for the first two living allowances. The minimum living allowance, 154 yuan a month, is their main source of income to survive. How can the ex-SOE workers make their ends meet on such a pitiful income?
It is interesting to consider a profile of these former SOE workers. According to a survey of 66 Chinese cities conducted by the Ministry of Labour and Social Security in December 2002, 43.8% of laid-off workers were over the age of 40. Before the economic reforms of the 1990s, these men and women were assigned to their SOEs: Under the previous centrally planned economy, they could not choose their job or profession. It was assigned to them, and they spent their youth in these enterprises, trained to do just one job. But in fact they were often not well-trained or well-educated. Their age and lack of skills put many of them at a distinct disadvantage in the labour market in a rapidly modernizing China, with millions of high school, college and university graduates vying for jobs as well.
When the government launched the SOE reform, it brashly broke its promise of lifetime employment, and now states that ex-SOE workers will receive only a small, arbitrary amount of compensation. Given the scale of the retrenchment of SOE workers, it is no surprise that so many of them remain unemployed, and after a certain period of time, they became destitute recipients of social assistance.
Can the system, which relied on the stability and loyalty of these workers and paid them only a minimum monthly wage in return for lifetime employment, now not offer them more than destitution and a subsistence allowance?
The Civil Affairs Bureau of Beijing released the minimum living allowance standard indices in June 2005, which included clothing, foodstuffs, accommodation, water, electricity and gas expenses and education expenditure of child dependents. It is strange that the city government simply cancelled out these ex-SOE workers' contributions to the country and their SOEs when it made the indices. Then, we have to ask, is such a system fair?
7 September 2005