Why is China’s social security payment ratio so high?

Recently, media reported that China’s social security expenditure accounts for more than 40% of an individual’s salary. An employee with an average salary in Beijing has paid nearly one million yuan in corporate and individual contributions over the past 30 years, of which the corporate burden theoretically exceeds 70% of the total.

In my country, social security is paid jointly by the unit and individual employees. For pension insurance, the unit and individual pay about 20% and 8% of the personal salary respectively; medical insurance: the unit and the individual pay about 10% and 2% respectively; unemployment insurance: Units and individuals pay about 2% and 1% respectively; maternity insurance: units pay about 0.8%, individuals do not pay; industrial and commercial insurance: units pay about 2%, individuals do not pay.

The five contributions add up to approximately 46% of an individual’s salary, of which the unit contribution accounts for approximately 35% of the employee’s salary and the individual contribution accounts for approximately 11%.

This means that 76% of the social security expenditure of 1 million yuan should be borne by enterprises.

Although the specific payment ratios vary from place to place, it is an indisputable fact that the payment ratios are generally high.

During this year’s two sessions, Vice Premier Ma Kai said that China’s pension insurance payment levels are on the high side.

Among the 12 countries in the world where social insurance premium rates exceed 40%, 11 are in Europe and the other one is China.

The 11 high-rate countries in Europe correspond to high welfare, while the high rates in my country correspond to low welfare.

This is the first time an official has admitted that China’s social insurance rates are high.

Why is China's social security payment ratio so high? The main reason is that when social security was cut off and "corporate pension" was changed to "state pension", sufficient financial security was not provided.

In order to raise funds, we have to levy more and more harshly, which is equivalent to "using employees' money to support their elders" or "eating pig's trotters".

High social security payment rates are actually paying for the "policy gap."

What are the consequences of a high social security payment ratio? Because social insurance premium rates are too high, when the proportion of total national income is low and fiscal revenue has grown rapidly for 20 consecutive years, it has a huge impact on employee wages and corporate accumulation.

The squeeze is also deepening.

The direct consequence of squeezing employee wages is that personal consumption power is increasingly insufficient, and the role of consumption in driving the economy is declining.

The consequence of the accumulation and squeeze of enterprises is that the investment capacity of enterprises is reduced and the motivation for sustainable development is weakened.

Not only that, at the level of international competition, in Europe's 11 high-rate, high-welfare countries, companies do not need to face pressure from the government because of layoffs, and the government does not need to suffer stable pressure because of company layoffs, and employees will not lose their jobs due to unemployment.

And make life lose security.

China's enterprises, individuals, and the government are all facing strong pressure to maintain employment and prevent unemployment. The total labor costs driven up by social security costs have also become one of the major obstacles to corporate restructuring and mergers and acquisitions.

In the past year or two, the government has done a lot to reduce the burden on enterprises, but it seems that no policy can be more conducive to reducing the burden on enterprises and promoting consumption than reducing the proportion of social security contributions.

Experts suggest that we should solve the social security problem as soon as possible, increase national financial subsidies for social security, reduce the burden on individuals and enterprises, and gradually reduce the social insurance premium rate to the level of 30%-35%.

Even so, our country is still among the 30% of high-rate countries in the world.

What should we do if we reduce the payment ratio and social security funds cannot make ends meet? We need to increase the intensity of raising social security funds, and relying solely on delayed retirement will not solve the fundamental problem.

Policy issues must be resolved by policy.

The most fundamental thing is to speed up the implementation of the transfer of state-owned shares to social security.

Shandong is at the forefront of the country in this regard.

In February this year, Shandong issued the "Plan for Transferring State-owned Capital of Provincial Enterprises to Enrich Social Security Funds", proposing to transfer 30% of the state-owned capital of 471 state-owned enterprises in Shandong Province to enrich the provincial social security fund.

This is the first of its kind in the country.

The Shandong Provincial Government held a ceremony on May 18 to officially transfer 30% of the state-owned capital of three provincial state-owned enterprises (Shandong Energy Group, Shandong Airport Co., Ltd., and Shandong Salt Industry) to approximately 3.3 billion yuan to enrich the provincial social security fund.

In the next few years, Shandong Province will complete the equity transfer of all provincial state-owned enterprises.

Zhang Hong'an, deputy general manager of Central Huijin Investment Co., Ltd., commented: Shandong's reform of state-owned assets and state-owned enterprises is "full of reform ideals."

Such an evaluation cannot be overstated.