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Systematic government theft of migrant workers’ retirement pensions

By law, Chinese employers are required to contribute to a government-administered retirement pension scheme for all employees. In theory, it sounds like this provides for some kind of security for migrant workers in their old age. But there is a catch. Migrant workers are highly mobile. In Guangdong province, for example, migrant workers only stay for an average of four to six years (People’s Daily, 8 January 2008) and in that time they may well move between several different cities. But when migrant workers leave their city of work, they cannot transfer their pension account either to their new place of work, or to their home town. Generally all they can do is cash in (tuibao) their own contribution. Their employer’s contribution – which is higher than the employee’s – stays with the local government. (Precise contributions differ by place. In Nanjing, for example, employees contribute 8 per cent of their salary, and employers contribute 14 per cent). This is essentially theft of migrant workers’ social security, and this aspect of China’s social security system is in need of urgent reform. No wonder local governments are so keen to enforce the social security regulation on enterprises that have are mainly staffed by migrant workers, because they gain an enormous amount from migrant workers’ social security contribution. That also explains why such factories are reluctant to take out insurance for their migrant workers because they knew that this large sum of money will not go back to the workers, but rather to the local governments.

600,000 migrant workers ‘tuibao’ in Dongguan alone

Still only 15% of China’s estimated 120 million migrant workers have a government pension fund (People’s Daily, 8 January 2008). Before Chinese New Year each year Social Insurance Offices in industrial areas like the Pearl Rive Delta are flooded with migrant workers cashing-in their pension account. Workers have to queue up for hours – often overnight. Some even quit their jobs days before they are due to leave the city just to guarantee an appointment with the Social Insurance Office.
“I’ve already lined up twice before”, a gentlemen with bloodshot eyes told journalists at 6am. “Each day the office only processes 300 people. You can only get your money if you come and line up in the early morning or in the middle of the night.” (Southern Metropolitan Daily, 15 January 2008)

The tuibao phenomenon is most acute in Guangdong, where migrant workers are highly concentrated. In 2007 in Dongguan city alone, more than 600,000 people cashed in their pensions. On a single day in peak season, the city paid out 300,000RMB. In one unnamed district in the region, 95% of migrant workers are supposed to have cashed in their pensions (People’s Daily, 8 January 2008).

But the phenomenon is by no means restricted to Guangdong. In the city of Nanjing in Jiangsu province, 1,714 people cashing in their pensions in the first three months of December 2007 to February 2008, 99% of whom were migrant workers (South Yangze Times, 27 February 2008).

When can migrant workers transfer or draw on their retirement pension?

Regulations differ between different cities. In Shenzhen migrant workers are eligible to draw a retirement pension once they have made pension contributions in that one place for 15 years and have reached the mandated retirement age (50 for women, 60 for men). But extremely few migrants will meet these conditions. Retiring in the city is a virtually impossible prospect given the high cost of living in the city, difficulty finding work in one’s middle age, and obligations to family back home. In the words of a 19 year old female migrant worker from Anhui province, working in Dongguan:
“50 years of age is too far away!… Who can work in one place for 15 years and make the social insurance contributions? Not unless they are a local person!” (People’s Daily, 8 January 2008).

In the words of another migrant worker, from Henan province, working in Nanjing:
“If I could take it with me, then I wouldn’t choose to do something this stupid (as cash in my pension)… I’m about to go to work in Shanghai. I have to start everything all over again. I’ll work in the construction industry, and in the next year who knows how many times I’ll change cities. I can’t take this retirement money with me, and I can’t very well work in another city but come back to Nanjing to pay pension money. Cashing it in is my only option” (South Yangze Times, 27 February 2008)

It is not completely impossible for migrant workers to transfer their pension account either in or out of their city of work, although conditions are very restrictive. Different regulations apply in different places. Guangdong (with the highest number of migrant workers in the country) has set up experimental sites in six cities where, over three years there, will be a trial of an IC card system to make migrants’ pension accounts transferable (People’s Daily, 8 January 2008), but there is no indication as to who will be able to transfer and under what conditions.

By contrast, Suzhou city in Jiangsu province is better. The Suzhou City Social Security Bureau told journalists:
“as long as social security organs in the receiving destination are willing to receive, then social security relations from Suzhou can be transferred out without any obstacles”.
Social security accounts can also be transferred into Suzhou from other cities and provinces. In 2007, 14,932 people transferred pension accounts out of Suzhou, and 8,213 people transferred accounts in. 80% were transfers from within Jiangsu province, but 2,546 were inter-province transfers (South Yangze Times, 27 February 2008).

In Nanjing, also in Jiangsu province, pension transfers are also possible, but conditions are not as favourable as Suzhou. Migrants are able to transfer their own 8% salary contribution out of Nanjing, but even for this partial transfer there are conditions: to apply for a transfer within Jiangsu province, one has to have contributed to a pension account in Nanjing for five years of more: ten years or more for an inter-province transfer. Alternatively, departing migrants can choose to keep their pension account in Nanjing, and continue to contribute from other places, but unless they intend to retire in Nanjing or the full amount can be transferred out this is not a realistic option. Pension accounts can also be transferred into Nanjing from elsewhere but only if the migrant in question is over 45 years of age for men, and 40 years for women. In Nanjing, local people and/or university graduates do not have the option of cashing in their pension. They can only try and transfer (South Yangze Times, 27 February 2008).

Some employers provide an alternative but illegal form of pension payments, whereby they simply deposit a percentage of employees’ salaries into a private bank account, and handover the total amount accrued when an employee leaves the factory. This arrangement is risky for employees. Sometimes companies refuse to hand over the so-called pension money when they want to quit.

The problem of ‘localism’ in a decentralized pension system

These problems stem from the fact that retirement pensions are still de-centralised to local governments. Local government’s refusal to transfer migrant workers’ pensions in full is a clear example of “localism” (difang zhuyi), whereby local governments are not willing to give up resources to other cities or provinces. Local governments are also reluctant to receive migrant workers’ in-transfers because they do not want to have to foot the bill for their retirement – particularly because employers’ contributions are swallowed up by the city where the migrant has been working. As reported by the People’s Daily:
“Even though the national government has ruled that any place should accept the transfer of individuals’ retirement pension, but still some places have set up obstacles… The reason is very simple: the more migrants that retire in any one place, the more the local government must pay out in retirement welfare payments” (8 January 2008).

Retirement welfare payments vary between different regions, according to the relative cost of living. Retirement payments in Shenzhen are relatively high, and so the deputy head of the Shenzhen Social Insurance Fund Management Bureau defends his government’s refusal to accept pension accounts transferred from other parts of the country saying:
“Compared to the whole country, Shenzhen City’s retirement pension is relatively high, probably even one of the highest. So under these circumstances, if people from other places can casually transfer their pension then people who haven’t worked in Shenzhen, or only worked for a few months can transfer their entire account here. Shenzhen’s retirement pension system could not absorb that’ (Southern Metropolitan Daily, 25 February 2008)

National co-ordination of retirement pensions is required to overcome these inter-local struggles for resources which end up robbing migrant workers of their old-age security.

Strong media attention

Around the time of the last Chinese New Year, scores of newspaper articles were written about the issue of retirement pensions for migrant workers. Many articles refuted the common claim that migrant workers are short-sighted and cash in their pensions with no thought to their future. Rather they point out the systematic problems which lead migrant workers to take their pensions in cash, and some articles articulate a need for a national retirement insurance scheme.

In this edition of CLNT, we have translated one long article published in the Southern Metropolitan Daily, distributed in Shenzhen and Guangzhou.

Download the translated article ABRIDGED VERSION here
Migrant Workers Leaving Shenzhen Queue All Night to Cash in their Pensions
CLNT_tuibao_shenzhen_SHORT [150.51KB]

Download the translated article FULL VERSION here
Migrant Workers Leaving Shenzhen Queue All Night to Cash in their Pensions
CLNT_tuibao_shenzhen_FULL [167.56KB]

This piece documents in vivid detail the arduous process that many migrants go through to get their pension money before returning to their home towns. It also documents the anxiety that many feel about their lack of security, and their disappointment at how little they have to show for their years of work.

Download this introduction in PDF form
CLNT_tuibao_intro [177.46KB]


References (Chinese):

People’s Daily, ‘Social Insurance policy has become worthless: a wave of migrant workers resign and cash-in their pension’, 8 January 2008.
社保政策成鸡肋 农民工辞工退保成潮

South Yangze Times, ‘Another wave of pension cash-ins emerges: non-transferrability of pensions amounts to ‘local food coupons’, 27 February 2008.
退保潮再现 养老保险成带不走的地方粮票?

Southern Metropolitan Daily, ‘Homeward-bound migrant workers queue up all night to cash-in their pension’, 15 January 2008.

Southern Metropolitan Daily, ‘Chimo writes: the dilemma of migrant workers resigning and cashing-in their pension (translator’s note: Chimo is a pen name)’, 25 February 2008.

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