II. Unemployment Insurance

While promoting the reform of the enterprise employment system and setting up a market-oriented employment mechanism, the Chinese government is speeding up the development and improvement of an unemployment insurance system to guarantee the basic livelihood of employees after they lose their jobs, to help them find new jobs, and accelerate the combination of the basic livelihood guarantee system for people laid off from state-owned enterprises with the unemployment insurance. By the end of 2003 there were 103.73 million people who participated in the unemployment insurance scheme, which provided unemployment insurance benefits of varying time limits to 7.42 million laid-off employees throughout the year.

Standardizing and Improving the Unemployment Insurance System

In 1999, the Chinese government issued the “Regulations on Unemployment Insurance,” which effectively standardized and improved the unemployment insurance system.

Range of participation and premium payment. All enterprises and institutions in urban areas and their employees must participate in the unemployment insurance program, under which employers pay two percent of their total wage bill and individuals pay one percent of their personal wages as unemployment insurance premiums. When the unemployment insurance funds in areas that have participated in the social pool program are not enough, the shortfall shall be made up by unemployment insurance regulating funds or subsidized by local financial budgets.

Qualifying conditions for unemployment insurance. Laid-off persons must meet three requirements to qualify for unemployment insurance: having paid unemployment insurance premiums for at least one year; not having terminated their employment voluntarily; having registered as unemployed and being willing to be re-employed.

Rate of unemployment insurance allowance. The people’s governments of provinces, autonomous regions and municipalities directly under the Central Government determine the unemployment insurance allowance in their own localities, which shall be lower than the minimum wage in their localities but higher than the minimum living allowance for urban residents. Provisions regarding the time limit during which one receives the benefits are as follows: An unemployed person whose former employer and himself or herself have continually paid unemployment insurance premiums for more than one year but less than five years is eligible for benefits for up to 12 months; if they have paid the premiums for more than five years but less than 10 years, the unemployed person is eligible for benefits for up to 18 months; if they have paid the premiums for more than 10 years, the unemployed person is eligible for benefits for up to 24 months.

Other unemployment insurance benefits. If an unemployed person falls ill while enjoying unemployment insurance allowance, he or she is entitled to receiving medical subsidies. If the unemployed person dies during this period, his or her family can receive funeral subsidies as well as a pension. In addition, an unemployed person may receive vocational training and subsidies for job agency services when receiving unemployment insurance allowance.

Unemployment insurance provisions for farmers-turned-contract- workers who are employed by enterprises and institutions in urban areas. Their employers shall pay unemployment insurance premiums as required, while the individual workers shall not. Those who have worked for one year continuously, those who do not renew their contracts upon expiration or those who terminate their contracts before they expire can apply for a living allowance, which shall come in a lump sum depending on the length of time they have been employed.

Promoting Re-employment

While guaranteeing the basic livelihood of the unemployed, the state actively looks for effective ways to steer unemployment insurance in the direction of promoting re-employment. It has strengthened the link between unemployment insurance services and re-employment services. Through prompt registration of unemployment, active provision of employment information and giving comprehensive employment guidance and job agency services, the state helps unemployed people to enhance their capabilities for competitive employment in both skills and mentality. It also increases the input of unemployment insurance funds into job agency services and occupational training. Through organizing training directly or purchasing R and D achievements, the government provides all kinds of job skill training for the unemployed in order to improve their capabilities for re-employment.

Guaranteeing the Basic Livelihood of Laid-Offs from State-owned Enterprises

In 1998, in view of the increased pressure on state-owned enterprises in re-positioning their redundant personnel and the inadequate bearing capacity of the unemployment insurance, the Chinese government created the basic livelihood guarantee system for people laid off from state-owned enterprises.

Making sure that the laid-off personnel from state-owned enterprises receive their basic living allowances in full and on time. Re-employment service centers have been established in all state-owned enterprises with laid-off personnel. After the latter have registered at a re-employment service center, they shall receive from it a basic livelihood allowance a little higher than the unemployment insurance payment in their own locality. The re-employment service center also pays old-age, medical and unemployment insurance premiums for laid-off people. The centers’ funds for basic living allowance payment to laid-off persons and their insurance premiums generally come from the following three sources: one third from the local government’s financial budget, one third provided by enterprises, and the remaining one third from the social pool program (mainly from unemployment insurance funds). From 1998 to 2003, some 24 million laid-off persons from state-owned enterprises across China had registered at the re-employment service centers, and nearly 19 million of them had found new jobs. Those who had registered at the centers had received allowances for basic livelihood in full and on time, and the centers had also paid social insurance premiums for them.

Establishing the “three guarantees” system. Since 1998, the Chinese government has put into operation a system that provides for three guarantees: basic livelihood guarantee for laid-off persons from state-owned enterprises, unemployment insurance guarantee and minimum living standard guarantee for urban residents. Laid-off persons can receive a basic living allowance for up to three years. If they still have not found a job by then, they can receive unemployment insurance payments. If the per capita income of a family is below the local minimum living standard, they can apply for the minimum living standard guarantee for urban residents.

Integrating with unemployment insurance. With the steady improvement of the unemployment insurance system and the increase of the fund accumulations, since 2001, the basic livelihood guarantee system for laid-offs from state-owned enterprises has been integrated with the unemployment insurance program. State-owned enterprises now have ceased to establish any new re-employment service centers, and, in principle, people newly laid off by enterprises have also ceased to register at such centers. Instead, enterprises just terminate their labor contracts according to law, and the laid-off persons will then be entitled to unemployment insurance benefits according to relevant regulations.

For some time in the future, the problem of surplus labor force and the problem of irrational employment structure will still exist, and unemployment insurance will continue to face considerable pressure. The Chinese government will make every effort to expand the coverage of unemployment insurance, and standardize fund raising and payment as well as its use and management. While guaranteeing the basic livelihood of unemployed people, it will give further play to the role of unemployment insurance in promoting re-employment.