Social pension unification in an urbanising China: Paths and Constraints

Abstract

SUMMARY: A fragmented and segmented social protection system can create barriers for labour migration and be socially divisive. A review of the literature on Europe's integration of its social insurance system demonstrates the preconditions for developing an integrated social insurance system. These include political determination, social agreement by the contributors, administrative capacity and financial management ability. In this article, the author explains that there has been an ongoing process of gradual unification of the social insurance system in China. However, this ongoing process has not been able to achieve a universal system for both the rural and urban populations. A recent push towards further unification has been problematic. Not only have difficulties arisen from an unwillingness to implement policies, as often discussed by critics; they are also embedded in a more profound fragmentation of ideas and interests, and in institutional constraints. The author argues that a new, non-contributory basic pension, together with lowered transaction costs between contributory subsystems, may be a more realistic way forwards.