Study On The Redistribution Effect Of Urban Old - Age Insurance In China

By the end of the year 2014, the population who age over 60 years old has reached 0.212 billion in China. People who are over 65 years old have also been approach to 0.138 billion, occupying more than 10% of the total population. With aging population problem being critical, the reformation and establishment of endowment insurance system has attracted more and more attention from the government, the scholars and the public. Together with the change of population structure, another more and more serious economic phenomenon is the enlargement of income gap. China has become one of most severe countries which has to face the income gap problem since the economy transaction. Chinese high Gini coefficient is and will negatively affect the social stabilization and economy development in the future.Endowment insurance has three basic functions of saving, insurance and redistribution. Firstly, through the function of saving, the retirement pension could be regarded as continuing payment of one individual. Even if someone has left the working position, the employers will still provide comparable or slightly lower levels of treatment. Secondly, the function of insurance guarantees the old-age security system, to prevent the senior citizens falling into old-age poverty and ensure that the elderly could share the results of social development. Finally, the function of redistribution reduces the income gap between residents and promotes the healthy development of economy. In global scale, although some of the countries started the reform of privatizing pension in 1990 s, most of the countries still maintained the basic Pay-as-you-go endowment insurance system, which has the strong redistribution function. Tracing the origin of social insurance, we can find out that there is a natural bond between social insurance and income distribution. Under the circumstance of huge income-gap, to avoid middle-income trap, the design of endowment insurance system should take more responsibilities to regulate the income distribution.Since the 1990’s, urban endowment insurance system, which is predominated by endowment insurance system for employees, has guaranteed the reconstruction of Chinese state-owner-ship company and made great irreplaceable contribution to ensuring retired people’s life, releasing the tension of old-age poverty and promoting social harmony and stability. With the development of social economy, this system is also facing the reformation: the gap between dual pension scheme is widening, which has caused reversed redistribution; the endowment insurance system, which combines social mutual assistance programs with personal accounts, is facing the financial crisis brought by aging population and the system transition; continuous decline of replacement ratio of urban employees endowment insurance, the construction of multi-pillar endowment insurance system is not effective; the top-level design of the system is facing two arguments of whether we should use personal accounts or Pay-as-you-go system, etc. Many researchers hold the opinion that endowment insurance system should be transferred from Pay-as-you-go system to funded system. All of the issues decrease the effect of endowment insurance system, and also lose the trust from common people, so to reform the current endowment insurance system is really needed.The context is divided into eight parts. The first part is the introduction part, introducing the background and significance of the writing and providing the definition of related concepts. Firstly, this paper is to study the redistribution of urban endowment insurance system, which mainly contains endowment insurance of government departments, public institutions and urban employee. Under the situation of more and more serious income gap, as a main part of social security system, endowment insurance is definitely supposed to have the function of redistribution, so that to avoid elder poverty to promote the economy development. However, due to Chinese endowment insurance lacks multilevel construction, social collection and personal account system has to be responsible for both fairness and efficiency. On the other hand, facing the problem of transanction cost and invisible cost, and not accurate personal account, this system cannot redistribute effectively anymore. This paper analyze the effect of endowment insurance to offer the effective suggestions.The second part is the literature review of the redistribution of endowment insurance. First of all, foreign study of redistribution of endowment insurance was started by generation overlapping model of Samuelson and Dimond, further studies were based on this model. At the first beginning, the study was focused on how the pay-as-you-go system and full-funded scheme affect redistributions. Lately the studies were mainly focused on how the endowment insurance system affect the citizen consumption, saving and economy development. Domestic scholars pay attention to the empirical study of intergeneration redistributions between transactions and different professions. They also focus on the affection factors of redistributions of endowment insurance.The third part of the essay is about the theoretical basis of redistribution of endowment insurance. First of all, from the political economy perspective, this paper expound redistribution is correspondence with the theory of justice of Rawls, which hypothesis that only do all of us were hidden by the screen of ignorance, then real just society can be come true. Follow the Rawls, Roemer develop the distribution justice theory. Nozick emphasize income and transfer justice. All the theories supply the existence of endowment insurance redistribution. Then it can proves that redistribution can improve whole public welfare. At last to expound that government should pay an important role in the redistribution of endowment insurance.The forth part of the essay is about the objective analysis of factors influencing the redistribution of endowment insurance and the conduct mechanism of redistribution of endowment insurance system. Firstly analyze the conduct mechanism of redistribution of the pension, mainly in two aspects, which are the conduct mechanism of endowment insurance system and transmission mechanism of the financial transfer payment. Secondly, analyze the impact on the design of the parameters of endowment insurance system, including coverage, payment base, payment rate and pension adjustment index. Finally, use the formula to prove the mathematical mechanism, which is influenced by redistribution of endowment insurance.The fifth part analyzes the current endowment insurance system in China based on the inequality effect, which is divided into three parts. By comparing the coverage ratio, replacement rate and final pension benefits, we can find that endowment insurance has expended the gap of income distribution between two categories of people, which is reversed redistribution between the different redistribution systems. Then by comparing people inside and outside the endowment insurance system and subsiding the urban endowment insurance, reversed redistribution still exits regardless of the people whether they can get benefits from the system or not. Finally, by comparing the system maintenance rate in different areas, reverse redistribution also exits due to the mobility of labor.In seventh chapter, this paper uses the specific endowment insurance policy from OECD countries, USA, Germany and Sweden for reference. The design of endowment insurance from OECD countries has strong function of redistribution. In all if these countries, enterprise unity system had been established to make up the weak replacement ratio of first-pillar pension. At the same time, governments play necessary roles to provide financial support and tax support. In Germany, different fee-cutting for low-income class has the function of redistribution. For American OASDI plan, compulsory tax is the financial channel, in which through accurate math formula to realize the distributions. In Sweden, generous endowment insurance with totally universal coverage offers the equal security for all the elders. To ensure all the citizens can be covered, huge financial capital should be supported which lead to the serious financial burden. All of above provide the valuable experiences for the reform of endowment insurance for our country.In last chapter is to give some corresponding suggestions for the development of our country’s endowment insurance. Firstly, to enhance the system equality design of endowment insurance, to improve the universal coverage, to unify the different endowment insurance system. Secondly, establish the enterprise annuity system, complete multilevel endowment insurance system to ensure the function of redistribution. Finally, optimize governmental transfer payment, stipulate the financial responsibility of government. Reduce the contribution rate appropriately and regard the nationwide endowment insurance as a whole.