Croding Out Effect Of Social Insurance On Wages

Social security reform has been the focus of the whole community and the academia, it plays an active role in promoting enterprise development and safeguarding employees. Social security cost is the focus of debate in academic circles today.Employees is the basis in a company,there existed a close relationship between wages and social insurance. Enterprises have to pay staff salaries, benefits, bonuses, and a variety of subsidies, but also have to pay social insurance and housing accumulation fund. Social insurance is related to the fundamental rights of citizens. For businesses, however, will undoubtedly increase the burden. At present, China’s enterprises have to pay social insurance premiums about30%of the basic wage, employees pay about11%. It can be seen that companies pay the main social insurance. With the gradual improvement of the social security system. the possibility of social insurance is decreasing.Under market-economy, business as the active micro-economic subjects pursue profit maximization as the goal and follow the rules of survival of the fittest. its strength depends largely on the level of production costs, which labor costs is an important part of the whole cost. General speakingly, in the international.the labor costs in the industrial output value of0.6to0.7, while after34years of reform and opening up, although our economic structure have a large development, but China is still a labor-intensive country.According to the National Planning Commission estimates is generally0.7to0.8. This situation is more serious in small and medium enterprises and private enterprises, because the private sector accommodate the majority of employment, are labor-intensive enterprises. the cost of labor is very high.In the deepening of economic globalization, have to face the increasingly competitive between international and domestic markets, corporate social insurance payment burden is difficult to pass higher prices onto consumers. As a result, in order to maintain the existing level of profitability, and some even to survive, may be taken to reduce employee wage to avoid the cost of social insurance, which led to the crowding-out effect of the wage income.2011started to implement social insurance law, business and individuals pay social insurance premiums on base wage,so the elasticity must be positive.According to the labor supply-demand theory, when labor costs more, the demand for labor is a corresponding reduce and decrease in labor wages. Companies will make the hardest effort to reduce costs, then passed the cost on to staff to become one of the choice. Such a negative correlation exists between them. If this phenomenon really exists in the enterprise, then not only affect the immediate interests of employees, but also contrary to the original intention of countries to develop social insurance law.This paper studies the relationship of the social insurance premiums and wages. However, this effect exists or not needs the support of empirical research. This paper will use the enterprise panel data and econometric models to analyze the crowding-out effect. Although the extent of every companies is different, but in common reflects our enterprises have passed on the cost of social insurance to employees more or less. Finally, according to the above analysis,we give the advices how to avoid the phenomenon and how to reduce the burden of social insurance.This is divided into six parts:Chapter Ⅰ introduce the problem, the background and the significance, and summarize the exist research results at home and abroad. This chapter introduces the related concepts and review the theories of corporate labor costs, including the Cobb-Douglas production function, labor supply and demand theory and Grubber demand-supply model. When labor costs increase,supply and demand is how-mutual changes and achieve a new equilibnum,and pointed out why the coefficient of elasticity symbol is a negative sign.Chapter Ⅱ describes the relevant literature review, the enterprises of different ownership and industry, its profit ability and payment of social insurance are also different. Because of the different size of the business, monopoly, staff qualifications and technical competence. Relatively speaking, social insurance contributions in the state-owned enterprises more positive, while the private sector social security payment becomes pitiful. Social insurance wage crowding-out effect studies show that there exist more or less. But most studies in this field are concentrated in developed countries, in developing countries there are much less. In Shanghai existence of enterprises evade social security responsibility indeed.Chapter Ⅲ describes the vast majority of China enterprises to take the social insurancerate in more than30%, we introduce the enterprise" mandated insurance in2004-2007. Due to factors such as inflationand and salaries growth, to eliminate the impact of this, therefore this article the focus on the percentage of social insurance expenses to the wage, Chart shows the corporate wage growth rate is much lower than the growth rate of social insurance costs. there is the possibility of Crowding out effect.Chapter Ⅳ discusses why the Crowding-out effect occur and the employee’s own reason and why this phenomenon can be sustained.From the different perspective (the cost of business, competitive, an the point of view of employees and the government departments to illustrated.Chapter Ⅴ analyzes the effect of social insurance premiums when passed. first, to reduce the current income level of the employees, affecting the current consumption.From the entire consumer market, the weakening of the consuming power of the entire market, it grow adverse effects. Another problem is employment. we also analyzed the insurance premiums passed on to bring the impact on enterprises and employees.Chapter Ⅵ use the empirical analyzes the Crowding-out effect, Analysis of empirical results and explan the result.Chapter Ⅶ show the advices how to avoid the companies crowd out social insurance. Including the transformation of enterprise development patern, government develop a new view of GDP on the social security payment ratio and get rid of local protectionism. Through these measures protect employee benefits and development of enterprises.I still shallow academic standards, measurement analysis of the technical level is limited.In addition, study Crowding-out effect in China just begin, references are limited. So errors and inadequacies is inevitable, many problems also to be more in-depth research.