Reform Of The Social Security Fund-raising Mechanism Research

After over thirty years of reform and opening up, China has achieved successful transformation from planned economy to socialist market economy, which is a new stage of development. The rapid economic growth has also led to the problem of income distribution and broadening wealth gap. The priority of economic growth has been shifted from rapid development to balanced and coordinated development. At the same time, compared with the developed countries, China faces a serious challenge of ageing, particularly in the countryside. Under such circumstances, the state should uphold the major responsibility to establish and finance the safety net for harmony and common prosperity.Establishing a stable and sustainable financing mechanism for social security is one of the key issues of the current social security reform. This paper will discuss how to improve the financing mechanism of social security to support the sustainable development of the safety net and reach the objective of optimizing income distribution and promoting social equity.Chapter1starts from the theoretical analysis of social security finance. By studying the risks, it expounds the necessity to establish a government-led social security system. This chapter is themed on public risk and social security to define the concepts of individual risk, social risk and public risk. It points out that the content and characteristics of risk facing mankind are in constant evolution, demonstrating the feature of closer connectivity and mutual transformation. Public risk is the only public affair of a state. Therefore, establishing a country-led social security system propped up by public power to help individuals deal with risks and manage public risks eventually is a must. The government should uphold the responsibility to establish and manage the social security system and financial delivery is one of its major responsibilities. This chapter makes a theoretic analysis on the government’s financing responsibility and national conditions. It studies the unique features of government financing responsibilities in different economic, cultural, social and political contexts.Chapter2defines the basic study framework of social security financing, going through every link and factor in the financing research. It articulates definition and connotation of financing responsibility, scale, channel and model in social security, laying a good foundation for further studying China’s social security financing issues.Chapter3to Chapter5make a comprehensive comparative study on each and every link of social security financing, which is on four pillars. Chapter3makes a historical review of China’s social security financing, including the establishment, destruction, reconstruction, experiment and development of the social security system after the founding of the People’s Republic of China and since the reform and opening up. It conducts profound analysis on the background, rationality, reasons behind the success and problems of China’s previous social security system. It then makes attentive study on the experiments in this regard, after the reform and opening up program was launched, and identifies the necessary conditions for establishment and continuous development of the system. At the same time, it presents the achievements and problems found in the system. The Chapter4discusses the status of China’s social security financing and highlights the challenges to China’s financing reform at present despite some achievements made. It goes further to find out problems that should be addressed and reasons behind these problems, thus laying a foundation for solutions in the next step. Chapter5takes a stock of social security reform of developed countries and makes an in-depth research and comparison on financing reforms of those countries. On the one hand, a horizontal comparison is made on financing mechanisms of the chosen countries with different and representative social security models to review the impact of different social modalities on the institutional concept and financing mechanism of social security. On the other hand, a vertical comparison is made on the development trend and trajectory of all links and factors of the financing mechanism throughout the reform process to identify the commonality and specialty of institutional development and reveal its inspiration on China’s financing mechanism reform.Chapter6is the continuation, extension and summary of the analysis in the first five chapters. Based on the argument in the first five chapters, this chapter determines the objective and principle for financing mechanism reform and makes specific proposals for the reform of social security financing mechanism in response to the problems in China’s financing reform and with the enlightenment from international comparison. These suggestions include defining financing responsibilities of relevant entities, rationally setting the financing level, building a financial model of pay-as-you-go and aggregate accumulation, and improve the multi-channel financing mechanism.The main contributions of this paper are the following.First, it starts from the perspective of risks to study the connotation of individual risk, social risk and public risk, as well as their relationship, which lays a theoretical foundation for the establishment and operation of a government-led social security system, and serves as a theoretical basis for the limited liability of government in financing.Second, it proposes the concept that the social security is a supply system from the perspective of supply theory of economics for the first time. It studies the social security financing mechanism as the financing part of the supply system of social security, thus defining a study framework for systemic analysis of social security financing from the perspectives of financing channel, financing responsibility, financing level and financial model, as well as their specific structure, key links and relationship, so that the financing mechanism will be more adaptable. That is to say when the exterior factors vary, the financing mechanism can automatically adjust to those changes and maintain the stability and sustainability of the mechanism.Third, the paper provides preliminary thoughts on the reforms of social security tax and individual income tax and proposals on their integration when conditions are mature. It suggests that individual income tax be used to reduce regression of social security tax and the administration and collection of individual income tax and social security tax be combined to address the problem of double taxation. Preliminary suggestions are raised in the paper to upgrade the level of social pooling, particularly the social pooling of basic old-age insurance to the national level.Fourth, as the structure and form of risks evolve with the changing society, the arrival of risk society will pose new challenges to social security and its financing system. In the financing mechanism of safety net, it is advisable to be proactive to deal with the challenges from the dimension of risk evolution. The paper therefore provides specific policy suggestions to this end.