December 10, 2008 / 4:18 PM / 10 years ago

China grapples with new social safety net

BEIJING (Reuters) - When China marks the 30th anniversary of its economic reforms this month, it will pass another milestone — the Communist Party will have spent as many years trying to unwind a Marxist economy as it did imposing it.

A migrant worker cleans the glass wall of a building in Taiyuan, Shanxi province December 10, 2008. Creating a new social safety net for millions of workers cast adrift in the past 15 years has emerged as a key challenge for the Communist Party -- especially given the global economic downturn could create waves of more unemployed. REUTERS/Stringer

Nowhere has this played out more starkly than in Beijing’s crowded brick hutongs, or alleys.

There, migrants from northern China, seeking their fortune in the big city, live side-by-side with workers from bankrupt firms who can no longer count on the cradle-to-grave security that was a bedrock of the socialist system.

Creating a new social safety net for millions of workers cast adrift in the past 15 years has emerged as a key challenge for the Communist Party — especially given the global economic downturn could create waves of more unemployed.

The government has only slowly begun building a modern welfare state despite three decades of rapid growth that has made China the world’s fourth-largest economy.

Yang Chaomei, who has two years to go before she can claim 200 yuan ($29.08) a month in old-age payments, is like millions of urban workers still teetering between the disintegrating socialist system and plans to build a new safety net.

She survives on sales of padded slippers in the absence of routine welfare payments. Her son, who claims to have a job but who spends afternoons smoking by her stand, also helps out.

“Sometimes a stipend comes, sometimes it doesn’t,” said Yang, whose neighborhood work unit went bankrupt long ago. “Apply for welfare? Hah! I wish I knew how.”

IRON RICE BOWL NO MORE

Under the socialist system, state-owned enterprises completely regulated the lives of their workers. The social compact was called the “iron rice bowl.”

All that changed in the 1990s, when many urban Chinese lost their jobs as state firms went bust.

Those workers are now covered by a patchwork of pensions, early retirement schemes and one-off handouts designed to keep unhappy jobless off the streets.

For those in utter poverty, China’s version of welfare is the “minimum livelihood insurance” program called dibao — which carries a stigma because it identifies them as the poorest of the poor.

It boosts recipients’ monthly income to a level equivalent to just over 20 percent of average disposable income in their cities. In all, about 23 million city dwellers nationwide are covered.

The minimum varies from 169 to 344 yuan a month in larger cities, but most recipients don’t get the full amount because they have other, tiny sources of income.

Dibao recipients are closely monitored by the authorities who dole out funds, in an effort to avoid cheating but which also keeps them from making trouble, said Dorothy Solinger, a professor at the University of California, Irvine.

The process “keeps people politically passive and socially marginalized. They have very little interaction with other recipients, perhaps because they are ashamed,” Solinger said.

“It’s just enough to keep body and soul together.”

WELFARE STATE WITH CHINESE CHARACTERISTICS

Over the next four years, China will create the first stages of a modern social safety net, including the dibao scheme, medical insurance and pensions for all urban and rural residents, the state-owned Xinhua news agency said last month.

The goal is to become “a socialist welfare society with Chinese characteristics” by 2049, the 100th year of communist rule, it said.

Rich Chinese cities first experimented with dibao payments in the early 1990s. The central government extended that scheme to all cities after the mass lay-offs at state firms in the late 1990s, and is now rolling it out for the rural poor.

“China was facing mass unemployment, the peasants were flooding out and the state-owned firms were dissolving. They realized they couldn’t solve this in the short term,” said Tang Jun, who heads social policy research at the Chinese Academy of Social Science.

Beijingers who are not quite poor enough for dibao can draw on a bewildering variety of other funds, including pensions covered by former employers or the city, retraining grants, insurance, and old-age payments. They can also receive one-off allowances for pork, cooking gas, rent or education.

“No-one’s too embarrassed about getting dibao now. They probably were at the beginning, but society has come a long way, it’s more accepting,” said a 48-year-old woman wearing pajamas and chatting in a shabby alley, where a 13-sq-meter room for a family of three rents for 800 yuan a month.

She hastened to add that she gets early retirement funds.

The embarrassment of being left behind as China gets rich is mitigated for those who have ties to a successful work unit.

One old man, sweeping leaves in front of a ramshackle building, said his firm was still in business, and still paying his pension.

Migrant workers keep warm around a fire on a cold winter day on a street in Guiyang, Guizhou province December 7, 2008. Creating a new social safety net for millions of workers cast adrift in the past 15 years has emerged as a key challenge for the Communist Party -- especially given the global economic downturn could create waves of more unemployed. Picture taken December 7, 2008. REUTERS/Stringer

“We were in foreign trade. That survived,” he said proudly.

($1 = 6.877 yuan)

Editing by Dean Yates

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