Social Security Contributions Urgently Need Incentives to Balance Growth (AI Translation)
Listen to the full version
文｜财新周刊 汤涵钰 周信达
By Caixin Weekly's Tang Hanyu, Zhou Xinda
2024年初，一名东部省份地市人社部门人士接到通知，省财政对城乡居民养老和医保的补助比例从70%降至40%。这次基本公共服务领域共同财政事权省级分担比例的调整着眼省内统筹，不同地区有升有降。
At the beginning of 2024, an official from a city-level human resources and social security department in an eastern province received a notification indicating that the province's financial contribution to urban and rural residents' pensions and medical insurance would decrease from 70% to 40%. This adjustment to the provincial share of common financial responsibilities in the basic public services sector aims to implement province-wide coordination, resulting in rising contributions in some areas and reductions in others.
他算了一笔账：自己所在市一个下辖区每月需发放城乡居民基础养老金约7000万元，即一年8亿多元，中央财政固定补助后，这一支出由省与市县财政共同承担，如今省级财政补助缩水，意味着区财政一年需要多掏出约3亿元。“如果几年前应该还好一点，现在这种形势下，几个亿对区里已经算很大压力。但民生是地方首先要保障的，想尽许多办法，去年还是把这笔钱补上。”
He did some calculations: the district under his city's jurisdiction needs to distribute basic pensions for urban and rural residents amounting to around 70 million yuan monthly, which totals over 800 million yuan annually. After receiving fixed subsidies from the central government, the remaining expenditure is shared by provincial and municipal finances. Now, with the reduction in provincial subsidies, the district's finances will need to cover an additional 300 million yuan annually. "It might have been slightly easier a few years ago, but under the current circumstances, several hundred million yuan already poses a significant burden on the district. However, ensuring people's livelihoods is a priority for local governments, and through various efforts, we managed to make up for this shortfall last year."
相距1000公里外的一西部省份，该省人社部门曾提议将居民养老个人缴费最低档次由200元提高至500元、最高档次由3000元提高到6000元，这意味着补贴要相应提升，但财政部门直言“跟不上”。
A western province located 1,000 kilometers away had previously suggested increasing the minimum individual contribution for residents' pension plans from 200 yuan to 500 yuan and the maximum tier from 3,000 yuan to 6,000 yuan. This would require corresponding increases in subsidies, but the finance department bluntly stated they couldn't keep up.
- DIGEST HUB
Digest Hub
Back
- An eastern province's financial contribution to urban and rural residents' pensions and medical insurance will drop from 70% to 40%, increasing financial pressure on districts.
- Urban and rural residents' insurance relies heavily on fiscal subsidies, but a decline in individual contributions is causing deficits, sparking discussions on reforming subsidy reliance.
- By 2023, fiscal subsidy income accounted for 21.48% of social insurance fund income, with disparities pointing to a need for balanced intergovernmental financial responsibilities and sustainable reforms.
At the start of 2024, officials in an eastern province were informed that financial contributions to urban and rural residents' pensions and medical insurance would drop from 70% to 40%. This change is part of a broad effort to improve the coordination of basic public services across the province. The restructuring means that some areas may see increased financial burdens, such as a district which has to secure an additional 300 million yuan for their pension fund since provincial subsidies have decreased.[para. 1]
A western province proposed raising the minimum individual contributions to resident pension plans, which would require increased subsidies. However, financial authorities in the province indicated they couldn't support this change. These discussions underscore the pressure on local governments to maintain fiscal prudence, balancing the entrance (funding for insurance) and exit (benefit distribution) sides of social security operations. The Ministry of Finance has suggested proactive fiscal policies to enhance social insurance and increase the retirees’ basic pension and subsidies for urban and rural medical insurance.[para. 2][para. 4]
Over the past decade, government fiscal subsidies for social insurance funds consistently exceeded 20% of fund income, with the fiscal share decreasing slightly over time. Recently, local governments have faced increased fiscal pressure, particularly as the number of subscriptions to residents' medical insurance has decreased while fund deficits have risen.[para. 5][para. 7]
There is recognition that fiscal subsidies for social security must be capped, and reliance on government support poses sustainability risks. Scholars advocate for limiting fiscal dependency by increasing personal contributions as part of future reforms. The challenge is balancing fiscal responsibilities fairly between central and local governments, recognizing the limited capacity for unlimited government transfer payments to maintain system sustainability.[para. 11][para. 13]
Fiscal subsidies reached approximately 21.48% of social insurance fund income in 2023, with basic pension and medical insurance absorbing the largest shares. Detailed 2024 budget reports from various provinces indicate a significant focus on resident medical insurance and pensions. In regions like Beijing and Shanghai, government pensions dominate fiscal expenditures. Fiscal subsidy reliance reflects disparities in regional economic levels, leading to varied financial burden distributions across different provinces.[para. 16][para. 18]
The fiscal burden relating to pension insurance, especially for enterprise employees, doubled from 2015 to 2023. These increases did not equate to proportional revenue growth. The central adjustment system and later national pool system helped redistribute financial responsibilities across regions, reducing pressures on government funds.[para. 21][para. 23]
Resident pensions for urban and rural areas have seen their fiscal dependency decrease as personal contributions and local subsidies increased. The system, combining a government-funded basic pension and a personal account-funded pension, aims to motivate higher personal contributions by providing higher government subsidies upon higher contribution levels.[para. 25][para. 27]
The resident medical insurance system, operating with a 62.6% fiscal-to-personal funding ratio, has seen fund income decrease amidst declining participant numbers. However, while the system currently shadows with possible deficits, the existing surplus provides a buffer. System reforms could include mechanisms to enhance personal payment responsibility and adjust fiscal subsidy allocations based on demographic and economic factors.[para. 31][para. 33]
These shifts indicate a broader intention to reduce fiscal dependence and improve the role of personal contributions within social insurance funding. On a systemic level, establishing balance with incremental changes and coordinating national and local fiscal responsibilities is seen as crucial for the sustained health of social security systems.
- From 2015 to 2023：
- The national fiscal subsidy to social security funds increased from 5.82% of total expenditure to 8.84%.
- From 2015 to 2023：
- The proportion of government fiscal subsidies to social insurance funds remained above 20% of total fund income, with a slight decrease overall, falling from 22.1% to 21.48%.
- From 2015 to 2023：
- The annual average growth rate of fiscal subsidies within the national social insurance fund income reached 11.39%, increasing its share relative to the national general public budget expenditure from 5.82% to 8.84%.
- On June 13, 2018：
- The State Council issued the 'Notice on Establishing a Central Adjustment System for the Basic Pension Insurance Fund for Enterprise Employees.'
- From 2018 to 2021：
- The central adjustment system collectively raised over 2.5 trillion yuan, with inter-provincial adjustment funds amounting to more than 600 billion yuan.
- Last November：
- The National People's Congress Standing Committee's law enforcement inspection team noted that social security funds have become increasingly dependent on financial support.
- In 2023：
- Fiscal subsidy income for all insurance types nationwide totaled 2.427131 trillion yuan, marking a 137% increase from 2015.
- In 2023：
- Financial subsidies for enterprise employee pension insurance reached 773.142 billion yuan, residents' medical insurance 661.298 billion yuan, government-organized pension insurance 599.093 billion yuan, and rural and urban residents' pension insurance 378.907 billion yuan.
- By 2023：
- The central government allocated approximately 1 trillion yuan for basic pension insurance subsidies.
- At the beginning of 2024：
- Official notification indicating that provincial financial contribution to urban and rural residents' pensions and medical insurance would decrease from 70% to 40%.
- Between the end of 2024 and the beginning of 2025：
- The Ministry of Finance repeatedly emphasizes adopting proactive fiscal policies to optimize expenditure structures with a focus on improving people's livelihoods, boosting consumption, and enhancing growth potential.
- By 2025：
- Jiangsu aims to increase the provincial standard for basic pensions for urban and rural residents by no less than 8%, raising it to 247 yuan per person per month. Additionally, the fiscal subsidy standard for residents' medical insurance is set to increase from 700 yuan per person per year in 2024 to 730 yuan.
- PODCAST
- MOST POPULAR
Sign in with Google
Sign in with Facebook
Sign in with 财新