Research On The Sustainability Of Basic Endowment Insurance System With SP&IRA For Urban Employees In China

SP&IRA (Social Pooling & Individual Retirement Account) is the system innovation during the reform of basic endowment insurance for urban employees in China, which attracts worldwide attention in the global social security field. In the early 1990s, under the international background of economic globalization, all the countries carried out the endowment insurance reform successively to answer the aging of population. China has set up the SP&IRA based on the previous pay-as-you-go system to meet the demands of market economy system reform for the reform of state-owned enterprises on the basis of considering the specific situations such as the degree of aging and the development trend of future population, learning from the welfare states and fully benefiting from the experiences of endowment insurance reform mode with funded pooling system in Chile and the central provident fund in Singapore, which results from both public choice and social economic development. After running for over ten years, the greatest achievement this system gained is that, based on the basic endowment insurance system, it has completed the transition from"the state taking on the insurance cost"to"the state, enterprise and individual taking on the endowment insurance cost together", formed the reasonable cost sharing mechanism and new fund raising mechanism, implemented the social relief in a large range, realized the conversion from the distributing concept of"equalitarianism"to that of"balance between fairness and efficiency"and established the concept that individual should be responsible for his/her own endowment insurance.Theoretically, SP&IRA adopts the form of"social pooling plus individual account"on the fund running management—the SP fund adopts the pay-as-you-go system and the individual account adopts the funded pooling system, which has the merits of both the pay-as-you-go system and the funded pooling system. It considers the government liability and social relief as well as the individual responsibility and inspiring mechanism and its concepts of combining with the right and obligation and giving attention to both fairness and efficiency are transcendent and the thought is correct.However, SP&IRA in China is accompanied by deficit all the time with severe short of fairness and efficiency, which brings serious negative influence for the economic society. The system is still not settled although adjusted for several times so that people begin to query the sustainability of it. What the deviation reason between the theory and practice is, how the sustainability of the existing system is and what course the basic endowment insurance reform for urban employees in China could follow, these are the backgrounds as well as the logic start for this paper.According to the development theory of sustainability and taking the system theory as the researching angle, this paper reviews and analyzes the sustainability of the existing basic endowment insurance system with SP&IRA from the prospective of politics, economy, society and culture. Finally it arrives at the conclusion that the existing basic endowment insurance system with SP&IRA for urban employees in China is not sustainable.First of all, the finance is not sustainable. The huge amount of implicit debt resulted from shunting to the new system could not be assimilated, so that it is bound to the new SP&IRA system, which carries the double burdens accordingly. Under the condition that the contribution rate of enterprise has reached to the limit (the contribution of endowment insurance in Chinese enterprises accounts for 20% of the total wage), the income of system itself could not prop up the expense. Since 1998, under the situation that embezzling the individual account fund could not make up the financial gap in that year as well, it requires huge amount of financial imbursement every year, and the finance is running in deficit originally so that the pressure is great to continue the imbursement. In 2008, the empty account size of individual account has reached to 900 billion and is expected to increase by degrees of 100 billion every year.Second, the system itself is not sustainable. First, SP&IRA exists in name only and the long term"empty account"running makes the original intention of increasing the profit via the fund investment operation in the individual account difficult to realize. Second, the system is difficult to extend for the high contribution rate, most of other enterprises or employment units are away from the system except the state-owned, collective-owned enterprises and some large and medium-sized private enterprises with economic strength. Third, covering rate is low, up to the end of 2008, employees participating in the insurance only account for 54.9% of the urban employees and 21.4% of the national employing population. Fourth, system has not been settled over ten years and is difficult to become the assumed one and become the depending route for the endowment insurance reform in the government departments and institutions and countries.Third, the running management of system is not efficient. The existing management mechanism of system has serious disadvantages, the irregular phenomena in the social insurance department occur frequently and the risk of administrative converse selection is beyond control; the leaks in the management make the phenomena of appropriation, diversion and fraudulent application and claim are serious; the bypass management has become the financial security threat; the pooling in low level not only makes the fund difficult to relieve, but also increases the management cost and risk; the fund investment limitation results in the low yield and the fund is difficult to preserve and increase the value.Fourth, the objective of system is difficult to implement. The purpose of implementing SP&IRA is to realize the value preserving and increasing of fund, realize the individual contribution encouragement and answer the aging of population through the fund accumulation of individual account and investment operation. However, there is no fund accumulation due to the long term"empty account"running of the individual account, let alone the increment of investment; the treatment self-regulation mechanism of the system itself fails and it is difficult to realize the substitution rate of the annuity objective; the state has raised the annuity level in enterprises for several years since 2005, but the actual substitution rate still decreases year by year and does not form the contribution encouragement; the system does not lighten the burden of enterprises, on the contrary, overburdens it. Fifth, the social negative effect of the existing system is great. First, new gap between the rich and the poor is created in the system itself and the treatment difference among various zones and groups within the system is obvious due to the low pooling level; second, the endowment treatment difference with the public institution out of the system is even more obvious and people begin to query the fairness of the endowment insurance system itself. Third, the portability of the system is poor, which is to the disadvantage of endowment rights shifting, restricts the reasonable flow of labor force and results in that the migrant workers cancel the insurance collectively on a large scale. Fourth, the high contribution rate makes the enterprises cast about to escape from the contribution obligation, so that the relationship between labor and capital is tense with ceaseless friction, influencing the social stabilization. Fifth, the high contribution rate crowds out the space of other pillar industries in the"three pillar industries"and makes the three pillar industries develop distortedly. Sixth, the reduced endowment insurance level results in the endowment panic, stimulates the saving desire of residents, disables the various struggles for stimulating the domestic demand and the economic development and influences the macroeconomic development.Sixth, the existing improvement measures are weak or have not the maneuverability. For instance, the stock debt service of state stock reduction results in the serious loss of state assets and this method has been stopped after trying out for only one year; absorbing the migrant workers to participate in the insurance encounters the group cancellation of insurance; issuing the endowment insurance bond has huge risk; extending the retirement age is not feasible temporarily according to the austere employment situation currently and in the future; there is no mature capital market environment in China to broaden the fund investment policy; the development of extending the coverage and improving the covering rate is slow due to the high contribution rate and low substitution rate. Whether the pilot of"Filling up and Cutting down"individual account in the Northeast by the central and local governments with the financial contribution percentage of 3 to 1 could promote effectively in the whole nation without financial imbursement and whether"Cutting down"individual account has the existing value are doubtful.To sum up, no matter from the prospective of finance, system design, management operation, objective implementing degree or influence on the external environment, the existing system is not sustainable. SP&IRA is unworthy of the name and the various assumed measures could not operate as well; all these problems occur simultaneously and finally determine that the existing system is not sustainable.The root for the unsustainability of the existing basic endowment insurance system with SP&IRA consists in that the system design is not in line with the situation of China, resulting in the system operation to deviate from the preset running way and depart from the original intention of reform. On the one hand, the endowment insurance system with pay-as-you-go system could not cope with the aging of population and it is inevitable to shunt to the fund system; however, the developed country such as OECD would flinch and not complete fully in the face of the huge amount of shunting cost, only adopting the transition measures. The shunting cost scale in China is bound in the new system for"one-step-to-reach"to implement the SP&IRA of full account accumulation when it is not clear. In China where the economic society is shunting simultaneously, the system design is difficult to adapt all the complex situations and more variables created, the SP&IRA could not be fulfilled all the time and settled and the system is still running along with the mode of the original pay-as-you-go system. On the other hand, as for"Filling up"individual account fund, the macroeconomics in China has been in the dynamic inefficient state for a long time since the system reform, the capital market is not mature, the resident saving is remaining obstinately high, the bank flow is seriously surplus, effective investment channels are short and it is difficult to preserve and increase the value of fund; this constraint restricting the dynamic and effective running of macroeconomics in China will exist for a considerably long period of time. The real situation in China has determined that SP&IRA of full account accumulation has no reasonable existent foundation in China.In case that many problems and conflicts in the existing basic endowment insurance system with SP&IRA for urban employees in China could not be solved, we are surrounded by dangers and the existence of sustainability is queried seriously, the endowment insurance reform in the public departments is put on the agenda at the end of 2008 and is planed to incorporate with the existing basic endowment insurance system with SP&IRA for urban employees. This is a kind of adventure. The shunting cost scale is larger and it is likely to accelerate the breakdown of SP&IRA system once put into practice. Continuously promoting an unsustainable system not only is in face of the economic risk as well as in face of severe social risk and political risk. Thus it can be seen that nearly all the problems restricting the further deepen reform of endowment insurance in China and being widely denounced by all social classes are related with the system structure of SP&IRA. What course for the endowment insurance reform in China could follow, insisting on the SP&IRA system, mending and revising constantly without day and looking for the breach? Or giving up this system and going back to the original pay-as-you-go system? Or looking for other way out? Now it is walking to the crossroad of reform.The success or failure of reform for the existing basic endowment insurance system with SP&IRA for urban employees determines that of reform for the social security in China, and if the endowment insurance system could put in practice smoothly, it could benefits the current and future generations; in case of misoperation, it will get into the political, economic and social crisis which is difficult to get over. Based on this understanding, research on"the sustainability of the existing basic endowment insurance system with SP&IRA for urban employees in China"is of practical significance. First, systematically reviewing the running practice status of the existing system for over ten years in order to make objective evaluation to the sustainable development problems in the existing system and avoid the endowment insurance reform in the public departments and institutions being carried out following the same old disastrous road. Second, clarifying the dense fog puzzled the endowment insurance reform and making it out of the current jam as soon as possible through reflecting the unsustainable root of the existing system. Third, it aims at thinking about from the prospective, persists in the concept of sustainable development and makes a complete thinking and design for the current and future tendency of endowment insurance in China.This paper arrives at the conclusion that: the existing basic endowment insurance system with SP&IRA for urban employees in China is not sustainable. The root for the unsustainability consists in that the"SP&IRA of full account accumulation"is not in line with the situation of China, resulting in the system operation to deviate from the preset running way and depart from the original intention of reform; the mode of"SP&IRA of nominal accumulation"should be the realistic and rational choice for China, which is a kind of necessary compromise based on the restriction of actual situation of China and is the necessary transitional system arrangement in order to finally implement the partial accumulation system."Social pooling plus individual assets account"is the ideal choice for China to implement the partial accumulation system of full account accumulation.The innovation in this paper lies in that: first, there are quite a lot of research literatures on endowment insurance system with SP&IRA home and abroad; however, most of the foreign researches are limited to the debate and discussion whether the system mode should be the pay-as-you-go system or the fund system and the domestic researches mainly analyze certain problems occurred in the existing system running so as to propose corresponding policy suggestions, of which the research angle is relatively simple and could not make correct judgment for the sustainability of the existing system on the whole. As for this point, according to the sustainable development theory, this paper analyzes the sustainability of existing basic endowment insurance system with SP&IRA in China systematically and completely, which is a pioneering research and has a breakthrough on the research angle. Second, this paper reveals the development track of endowment insurance system mode in the human society through reviewing and combing the historical evolvement of endowment insurance system: social relief mode—social insurance mode—individual assets development mode, and finally developing to the social collective endowment mode (Communist society). Third, this paper proposes the concepts of core mode and technical route mode through straightening out the relationships among various endowment insurance modes, accordingly finds out the key sticking point why SP&IRA as the system innovation is unsustainable in China and reveals the dense fog puzzled the endowment insurance reform in China. Fourth, from the prospective of sustainable development, this paper makes the necessary design for the current and future endowment insurance reform in China and provides reference route for planning the whole social insurance system in China.