Research On The Promotion Mechanism Of Social Security To Economic Growth

On the basis of existing literatures, we can divide two schools that study the relativity between social security and economic growth from different angles of view and through different analyzing tools. The first is the school of political economics which stands on the angle of social equity to study how to provide a steady social condition to growth through the mutual help and reallocation of social security. The second is the neoclassic school which studies how social security to promote growth from the angle of economic efficiency. The neoclassical basic theory says that the physical capital accumulation is the only engine of growth. So, the neoclassical economists analyze how the pay-as-you-go and funded social security to influence the physical capital accumulation and economic growth. They found: the pay-as-you-go social security discourages individuals from saving and therefore stunts economic growth; funded social security force public savings and promote growth because of higher physical capital accumulation. Theoretically, there must be two conditions that savings leads to higher output growth: saving-capital transforming rate and investment-growth elasticity. In China, these two indexes are so low that the role of physical capital accumulation leading higher growth rate cannot be well played. The new growth theory boosting after 1980s takes the effects of human capital into account and the relation between social security and growth can appear in a completely different light.In this paper social security is divided into flat-rate system and earning-related system. Flat-rate system provides uniform pension to every retiree and pension is related one's income when he working in earning-related system. It is shown that earning-related social security leads higher human capital accumulation.Firstly, earning-related social security produces a positive effect to quantity accumulation of human capital in China. On the one hand, earning-related social security discourages the demand of household to children, which results into a lower fertility. Lowering fertility is according with China's demographic policy. On the other hand, earning-related social security encourages worker postponing retirementand increases female labor supply.Secondly, social security boosts quality accumulation of human capital because of earning related to pension. More earning (determined by the level of one's human capital) leads more pensions. This positive effect encourages household and enterprise to increase human capital investment. Additionally, earning-related plan provides higher back-loading pension, which stimulates the employee to accept skill training and postpone retirement. Moreover, earning-related social security can improve allocation efficiency of human capital.As a whole, earning-relation social security can promote human capital accumulation and sustain long-time growth by human capital "spilling over" and scale revenue increasing effect. On the above analysis, a new social security system including incentive mechanism is built up in this paper in order to solve the following problem: the discrimination of social security, the chipping and incomplete system, and inefficiency of social security funds management. This new system must play important role in three aspects: in the first place, the new system must unify the social security paying radices, lowering the upper limit and heightening the lower limit, as well as bringing land capital revenue and finance assets revenue into paying radices. In the second place, the new system is made up of three floors: flat-rate basic security, earning-related different security and policy-incentive voluntary security. In the third place, the new system must lead social security funds investment from finance field to produce field.