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SOCIAL SECURITY IN VARIOUS COUNTRIES
SOCIAL SECURITY AND LABOUR WELFARE
Ms Vandana Sharma
JULI SAIKIA M.B.A. 3rd Roll No: 109032
PUNJAB INSTITUTE OF MANAGEMENT AND TECHNOLOGY MANDI
Social security legislations in India
In India social security programmes have been in existence since times of immemorial and joint families, Panchayats (Guides), religious and charitable institutions have continued to provide assistance to the needy for various common risks, misfortunes and calamities. Kautilya¶s Arthashastra and Manusmriti bear testimony to the fact that the social structure in those days was to evolved and codes so designed as to provide security to all the people. The main purpose was collective security of life and property, freedom from want and misery, and security against common risks.
But organized social security measures in statutory form are only of recent origin.
Social Security for employees is a concept which over time has gained importance in the industrialized countries. Broadly, it can be defined as measures providing protection to working class against contingencies like retirement, resignation, retrenchment, maternity, old age, unemployment, death, disablement and other similar conditions.
With reference to India, the Constitution levies responsibility on the State to provide social security to citizens of the country. The State, here, discharges duty as an agent of the society in order to help those who are in adverse situations or otherwise needs protection owing to above mentioned contingencies. Article 41, 42 and 43 of the Constitution do talk about the same. Also, the Concurrent List of the Constitution of India mentions issues like-
Social Security and insurance, employment and unemployment. Welfare of Labour including conditions of work, provident funds, employers' liability, workmen's compensation, invalidity and old age pension and maternity benefits.
Drawing from the Constitution of India and ILO Convention on Social Security1 (ratified by India in 1964), some of the legislations that have been enacted for social security are Employees¶ State Insurance Act, 1948, Workmen¶s Compensation Act, 1923, Employees¶ Provident Fund and Miscellaneous Provisions Act, 1952, Maternity Benefit Act, 1961, Payment of Gratuity Act, 1972, etc. A social security division has also been set up under the Ministry of Labour and Employment which mainly focuses on framing policies for social security for the workers of organized sector.
Our guarantees social security in the following words:
The State shall, in particular,, direct its policy towards securing:
(a) ³Right to an adequate means of livelihood.´ [Article 39(A)]
(b) ³The state shall within the limits of its economic capacity and development, make effective
provision for securing public assistance in case of unemployment, old age, sickness,
disablement and other cases of undeserved wants.´ (Article 41)
(c) The State shall endeavor to secure to all workers agricultural, industrial or otherwise,
work, a living wage, conditions of work ensuring a decent standard of life´« ( Article 43)
Apart from above mentioned enactments, since the last decade the government has initialized efforts to extend the benefits to the unorganized sector too. Legislative enactments like the National Rural Employment Guarantee Act, 2005, Unorganized Sector Workers¶ Social Security Act, 2008 and the Domestic Workers (Registration, social security and welfare) Act, 2008 are examples of the same.
The National Rural Employment Guarantee Act, 2005 aim at curbing unemployment or unproductive employment in rural areas. It focuses on enhancing livelihood security to rural people, as it guarantees productive wage employment for at least 100 days in a year. The Fiscal budget, this year, has also hiked the allocation to its job guarantee scheme NREGA by 144% and also the beneficiaries under the scheme would, henceforth, be entitled for a minimum wage of Rs. 100 per day.2
Also, there is Unorganized Workers¶ Social Security Act, 2008, which targets at extending social security measures to unorganized sector workers. The law thereby aims at extending to workers in informal sector status and benefits similar to that of formal sector workers.
On the same lines, Domestic Workers Act, 2008 has also been enacted. The legislation aims at regulating payment and working conditions of domestic workers and entitles every registered domestic worker to receive pension, maternity benefits and paid leave that is a paid weekly off.
These legislations for organized and unorganized sector workers need to be bestowed attention
because this will help improve their productivity and industrial relations and thus ensure development of the country.
Social security law in the United Kingdom
1. An Overview of the Social Security System and Recent Trends The social insurance system was established by National Insurance Act of 1911 under the tradition of a friendly society, which is a mutual-aid organization for workers, in England. A blueprint of the social security system was drawn in the "Beveridge Report" published during World War II, and the system was built after the war.
Income security is classified into three: 1 contributory benefits, of which resources are from insurance premiums paid by everybody, 2 non-contributory benefits, of which resources are from tax revenues, supplied regardless of income, and 3 income-related benefits, of which resources are from tax revenues, for the people with low income. National Health Service (NHS) is peculiar to the United Kingdom. Through NHS, medical care services are provided free of charge, in principle, with tax revenues.
(1) Retirement Pension Plan
All working people (except those whose income is under a certain limit or none) who are over the age for completing the compulsory education are obliged to participate in the retirement basic pension. In addition to the basic pension, the employed choose as a second-tier portion among the several programs, including: the SERPS: State earning-related pension, or an occupational pension or personal pension that meets certain standards. Participation rate (1995) are as follows:
35% for SERPS, 39% for occupational pension, and 26% for personal pension. Payment of the retirement basic pension starts at the age 65 without regard to whether the person actually has retired or not (the age is currently 60 for women, but it will be in stages raised to 65 between 2010 and 2020). The retirement basic pension, which is the first-tier portion of the pension, is 64.70 pounds per week for participants and 38.70 pounds per week for their dependent wives. Certain amounts are added for those who are age 80 and older and those with dependent children (1998).
Since establishment of the Labor Party Administration in May 1997, pension system reform was one of agenda for the social security system. In December 1998, the future concept for the pension system was announced. Maintaining the basic pension system, this concept proposed revisions as follows: that is, 1 to institutionalize the stakeholder pension (a personal pension with reduced premiums by decreasing administration cost) as a new option for the second-tier portion, and 2 establish a "second national pension" with higher benefits for the people with low income than SERPS to replace SERPS.
(2) Health Care Services
In the United Kingdom, the National Health Service (NHS), established in 1948, publicly provides all people with comprehensive medical services, including disease prevention and rehabilitation services free of charge, in principle. Citizens choose general practitioners (GP) and register beforehand, and GPs refer patients to specialists in hospitals when necessary.
In 1991, under the Conservation Party Administration, for the purpose of promoting more efficient operation of NHS, the NHS Reform (establishment of "internal market") was put into effect. It included
1. the GP fund holder system (covering more than a half of the whole population, even for GPs only at their requests) and
2. Hospitals into self-financing corporations (hospital trust system). The Labor Party criticized these approaches that; 1) there was a difference or inequality in the period until patients receive services whether they register to the GP fund holder system or not, and 2) establishment of "internal market" caused increase of clerical staff and decrease of medical staff including nurses. In December 1997, the Labor Party announced the white paper on the NHS reform stipulating 1 to abandon the GP fund holder system to transfer to the primary care group system in which the GPs in regions (with the population of about 100 thousand people) jointly manage their budgets, and 2 to establish an organization to set specific standards for treatment or medication. Such reform is to be carried out sequentially from April 1999.
(3) Health and Welfare Policies for the Elderly
In the United Kingdom, health and welfare services for the elderly are mainly classified into two, namely, medical service provided by government-managed National Health Service (NHS) and social welfare service provided by local authority. In-home care services include health care guidance, home-visit service by nurse provided as a part of NHS, home help service, meal service, and day service provided by local authorities. Facility care services include hospitals,
nursing homes, and residential homes that patients can be admitted when they can move about in the facility with some assistance.
Since 1993, community care reform has been carried out for the purpose of focusing on in-home care policies and providing more efficient welfare services. According to this reform, the government changed its system from direct provision of services by local governments after judgment on needs of respective service (e.g. day service or home help service) and decisions on each services, to the purchase of services from outside service providers such as companies or non-profit organizations after care managers of local authorities comprehensively judge demands of the people who need care and prepare the care plan.
(4) Policies for Children and Families
The central issue in policies for welfare for children and families is how to deal with single parents reaching about 1.7 million families. Besides increase in the number of single-parent families (about 600 thousand families 25 years ago), it is pointed out that most of those families are beneficiaries of social security benefits. The Labor Party Administration develops the policies named "Welfare to Work," putting emphasis upon enhancement of occupational training and employment services. The Administration regards that those families' acceptance of occupational opportunities may enable to secure income and result in solving problems deriving from excessive dependence on social security benefits.
Income security benefits for children include the child benefits supplied to every child, and the Family Credit for low-income families having jobs and taking care of children. As of 1997, the child benefits are supplied in 11.45 pounds per week for the first child of families taking care of
children less than the age 16 (less than the age 19 in case of receiving all-day education), 9.30 pounds per week for the second child and younger. In April 1999, the amount for the first child was decided to be increased by 2.50 pounds per week. It is furthermore to be examined to impose tax on the child benefits for high-income families.
(5) Sources of Revenue
In case of the employed, employees and employers share the insurance premiums for the national insurance. The premium rate depends on the income of employees. Those who participate in an occupational pension or personal pension that meets certain standards are not obliged to participate in the state earning-related pension system, and are exempt from insurance premiums corresponding to it. Self-employed people whose income is over a certain level are charged for the insurance premium at a certain rate in proportion to income, in addition to the insurance premium of a fixed amount. A part of the insurance premium collected for the national insurance is spent for the National Health Service (NHS).
Most of funds for NHS are paid by the National Treasury in principle, except contributions from the national insurance. The child benefits, benefits for single parents, long-term care allowance for people with disabilities, and income support among others are exclusively paid from the National Treasury. Social welfare services are operated through local taxes and funds from the National Treasury among other sources.
2. Summary of Public Assistance System Cash benefits are traditionally classified into contributory benefits (e.g. retirement pension), noncontributory benefits (e.g. child's benefits, workmen's accident compensation insurance, and
disability allowances), and income-based benefits (e.g. income support). Among others, incomebased benefits are regarded as public assistance. Income-based benefits are mainly classified as follows.
(1) Income Support
It acts the central role for public assistance. Different from the Japanese system, it is required in the United Kingdom that beneficiaries work or do not work less than 16 hours per week. From October 1996, people, who have no jobs despite of their abilities to work, are disqualified from receiving the income support, but they are subject to Jobseekers Allowance when satisfying some requirements (e.g. engaging in activities to seek jobs).
(2) Income-based Jobseekers Allowance
It is established in October 1996 as a result of integration of contributory unemployment benefits and income support. Jobseekers allowance is classified into contributory benefits and income based benefits (without any contributory requirements) under the same scheme and standards (even similar with the income support). However, income of the whole family members is examined for contributory benefits. Contributory benefits are supplied for 182 days at maximum. If the beneficiary is continuously unemployed even after the expiry of contributory benefits, he/she receives income-based benefits (no restriction is given for the period receiving benefits).
Application is usually made to Job centers, with a certain qualifications (e.g. continuous activities to seek jobs).
(3) Family Credit
This is the income support for families with children working at least 16 hours per week. Even in case of having any income more than standard amounts, only 70% of excess over the standard amounts (i.e. 30% is supplied). In case of working 30 hours a week, some additional amount is given. Beneficiaries are examined whether they satisfy the qualifications (e.g. income limit) every 26 weeks.
From October 1996, a pilot scheme of income support for the low-income people without any child is conducted in eight regions.
(4) Disability Working Allowance
It has a similar system to the Family Credit, but higher benefit standards.
3. Challenges of the Social Security System
Right after its establishment, the Blair Administration focuses on the social security reform as one of the most important agenda, with making remarks that the social security expenses do not function sufficiently (e.g. a raise in income difference, and increase in the number of people excessively depending on the system) despite of occupying an overwhelming portion and show the rapid increase in the governmental expenditures. The Administration advocated the basic policy to make the people that are able to work have any jobs as much as they can and assign higher priority to those that are really difficult to work due to severe disabilities, and have proposed and publicized some approaches including more moderate benefits for the employment-oriented system as well as positive employment promotion measures. Quite a few in the Labor Party bitterly opposed against reduction in the traditional system and has resulted in restricted proposals.
As regards the public assistance system, the Administration considers to deal with the lowincome pension beneficiaries. From October 1999, the Working Family Tax Credit and Disability Working Allowance are to be replaced by Ireland Revenue benefits (i.e. Working Families Tax Credit and Disabled Person's Tax Credit, respectively).
It is expected that the social security reform is going to elicit considerable discussion (e.g. announcement of proposals for the pension reform as mentioned above). With a hint of depression in the economy of the United Kingdom, which made a steady growth in the recent several years, financial restriction is expected to expand. Now, it may attract public attention how the Blair Administration emphasizing practical and steady policies will handle this situation.
Social Security system in the United States
1. An Overview of the Social Security System
In the United States, the spirit of self-support that assumes that the government should not interfere with private lives in general is strong, as is the authority of states that constitute the nation due to the federation system. This affects strongly the structure of social security in this country.
Major social security programs in the United States include Old-Age, Survivors and Disability Insurance (OASDI), which covers most paid workers; a public health insurance program called Medicare, which covers medical care of the aged and the disabled; the Medicaid, which provides a medical assistance program for people on a low income. Public assistance programs include Supplementary Security Income (SSI) and Temporary Assistance for Needy Families (TANF).
Generally, in the field of social welfare, the private sector takes a very significant role, and the state governments often play a major role in implementation of the policies.
(1) Pension System
Pension System is largely divided into two categories, that is, a general program (OASDI), and separate programs for people of certain occupations, such as public service employees and railway workers. OASDI is a Federal program, and most employees and self-employed individuals are covered by this plan. The pensionable age is generally 65 for the old-age pension, but it is going to be raised to 67 gradually between 2003 and 2027. The major financial source of OASDI is the payroll-tax that is collected from employers, employees and self-employed (taxrate is 12.4%, which is shared equally between employers and employees). The fund is managed as the Social Security Trust Fund separate from the general account of the Federal Government.
There are extensive private pension plans in the United States, and tax preferential treatment to encourage savings is offered to qualified private pension funds that meet certain requirements based on the Internal Revenue Code (IRC). The Employee Retirement Income Security Act (ERISA) defines the requirements that should be met for establishment, operation, and termination of the private pension plans, in order to protect participants and beneficiaries. In August 1996, the Code was revised to simplify qualification requirements for private pension taxation, to reduce the operating burden for private pension, and to encourage small employers to offer pension plans.
(2) Medical Security System
The United States is the only developed country that does not have a public medical security system that covers all citizens. Private health insurance programs take a major role in the health insurance system in the United States. Employers often purchase health insurance plans for their employees as a part of employee benefits and welfare packages at the workplace. Responding to the recent steep rise in health care expenditures, the number of participants of managed-care plans, such as HMO and PPO, has been rapidly increasing.
Public medical security programs include Medicare and Medicaid, a medical assistance program for low-income people (mentioned below). Medicare is a federal-governmental program that covers old-age pension beneficiaries, disability pension beneficiaries and patients with chronic kidney disease. Medicare consists of Part A (compulsory hospital insurance, which covers for inpatient hospital services, etc.) and Part B (supplementary medical insurance, which covers for outpatient hospital and other services such as physicians' examination). Part A is funded through the Social Security tax (tax rate is 2.9%, which is shared equally between employers and employees), and Part B is funded through insurance premiums (monthly premium amount is $43.80 in 1998) and general revenue.
In the meantime, the number of people not covered by any health insurance or public medical security program reached about 43.4 million (i.e. 16.1% of the population), and this fact becomes an important social issue. To solve this situation, the Government just took some countermeasures to expand and promote coverage by medical insurance programs. For instance, as part of the Balance Budge Act of 1997, the Children's Health Insurance Program (CHIP) was established led by state governments, for the purpose of reducing the number of uninsured children with promoted coverage by Medicaid. It is expected to raise the budget of $24 billion
for five years. At present, CHIP is conducted in almost all the states and to expand public medical security coverage to more than 2.5 million children.
(3) Public Health Policies
In 1990 the Department of Health and Human Services announced the "Healthy People 2000," a health objective that stated what the U.S. Government aimed to achieve by 2000 (setting a top priority for 300 numerical goals in 22 areas). To achieve these goals, councils consisting of specialized organizations and volunteer groups, as well as the federal and state governments, have been promoting approaches for health education at home, schools, workplaces, and in communities, to prevent death, disabilities, and sickness.
Hospitals in the United States are established by diverse entities and provide various services. Focusing on the average number of days stayed, they are classified into two types: short-stay hospitals with a hospitalization period of less than 30 days, and long-stay hospitals with a hospitalization period of more than 30 days. Additionally, there are residential facilities for those elderly with chronic or other diseases (termed "nursing homes"), which have a significantly larger number of facilities and beds than hospitals.
(4) Health and Welfare Policy for the Elderly and Disabled
Federal government supports social welfare services for the elderly pursuant to the Older Americans Act, but the budget allocation is very small. Therefore, benefits are mainly supplied by Medicare and Medicaid for the expenses paid to nursing homes and home care services. Descriptions of and expenses necessary for those services vary according to area and income. In
order to diffuse private insurance for long-term care, the law for medical insurance was revised in August 1996 that long-term care expenses is subject to tax deduction, like medical expenses.
By the way, people with disabilities can mainly receive the disability pension, supplementary security income (SSI), Medicare, and Medicaid.
(5) Child Welfare
Policies for child welfare and families include the Temporary Assistance for Needy Families (TANF) (explained in detail below), an assistance system for low-income families taking care of children, education and training programs for the TANF beneficiaries, and child care services for low-income people. These services are for low-income people, and more general child assistance systems (such as child allowance system) are not conducted now.
Standards for facilities and personnel of child care services are set by state governments, which are supported financially by the Federal government. The welfare reform in 1996 unified the "child-care program" that used to be divided into four according to the people subject to assistance into Child Care and Development Block Grant (CCDBG) program with the increased amount to be supplied. Working women with children use diverse measures to take care of their children, that is, asking their families or relatives to take care of their children, or using childcare services at individual homes. Only about 30% of children before going to elementary schools go to any child-care facilities.
Improvement in child-care services is one issue that the Clinton Administration especially dedicates to among others. The Administration have increased the assistance amount by nearly 70%, as well as enhancing the system with establishment of a division in charge in the
Department of Health and Human Services. Pursuant to the Internal Revenue Code, workers can be subject to tax deduction by 30% at maximum of the amount necessary for child care. The Federal government provides programs such as the after-school care for elementary school students, and child care service for children under the age 13. Some measures are taken including extended school hours and community services for after-school child care programs.
2. Summary of Public Assistance System
There is no Federal general public assistance system in the United States like the public assistance system in Japan. The system is divided and developed as follows according to the characteristics of the beneficiaries, such as the elderly, people with disabilities, and children. Some of them are directly managed by the State governments. Reform of public assistance system is an important issue for the Federal government because it is related to financial affairs of the Federal government. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 was established for the purpose of promoting independence of the people receiving public assistance for a long time and reducing the relevant budget. Pursuant to the said law, longterm receipt of the assistance becomes restricted, working requirements gets stricter, and authorities of state governments are enhanced, with some revisions including establishment of the Temporary Assistance for Needy Families (TANF).
(1) Supplementary Security Income (SSI)
This is a cash benefits system provided by the Federal government to low-income people pursuant to the Social Security Act. Beneficiaries should be the elderly of the age 65 and older or the disabled, who satisfy the qualifications for assets and income. About 40% of beneficiaries are
those receiving the Old-Age, Survivors and Disability Insurance (OASDI). Supplementary benefits are given in a number of states.
As of October 1997, the number of beneficiaries (including those of supplementary benefits provided by state governments authorized by the Federal government) is about 6.5 million, consisting of about 1.4 million for the elderly of the age 65 and older, and about 5.1 million for the disabled (including the aged disabled). The standard benefit amount provided by the Federal government as of 1997 is $484 for an individual or $726 for a couple, but these amounts are revised every year in proportion to the consumer price indexation.
(2) Medical aid
This is a medical assistance system jointly provided by the Federal and state governments for low-income people pursuant to the Social Security Act. States determine the qualifications and service range, pursuant to the Federal-government guidelines including the qualifications for beneficiaries. Each state has different programs to give. In 1996, about 36 million people receive medical services through Medicaid. Medicaid is managed in the form that a certain portion of the expenses necessary for the states is complemented by the Federal government. Total expenditures in 1996 are about $162 billion ($92 billion for the Federal government, and $70 billion for the state governments).
(3) Temporary Assistance for Needy Families (TANF)
As a part of welfare reform in August 1996, TANF was established replacing the existing Aid to Families with Dependent Children (AFDC). TANF (enacted in full scale in July 1997) is a fixedamount assistance system provided from the Federal government to state governments pursuant
to the Social Security Act for cash benefits given by the state governments to needy families with children or pregnant women. In order to promote independence of people receiving long-term aid and financial reform, discretion rights of state governments are enhanced to be more flexible, with the standards for beneficiaries, income limit, and benefit amounts being set by states, respectively. In 1996, some reforms were carried out including time limits on benefits, limitations on aid given to immigrants, and enhancement of working requirements.
As of 1996, the average number of beneficiaries of AFDC and TANF per month is about 4.6 million, making a downward trend. Assistance amounts from the Federal government to state governments are required to keep the level of 1995 in each state, with the annual total of $16.5 billion by FY2002.
(4) Food Stamps
This is a system to supply coupons for food purchase for low-income people, pursuant to the Food Stamp Program. Although the Department of Agriculture is responsible for this system with the Federal government paying the costs, the rights are transferred to state governments. Food stamps are usually provided to each family by the regional welfare offices, like TANF and Medicaid. Beneficiaries are required to have assets (except real estates) of $2,000 or less, gross income occupying 130% or less than the poverty line, as well as the amount of gross income minus medical expenses for the elderly among others being below the poverty standards. Supplied amount is decided according to the number of family members and family income pursuant to the national standards. Standard amount is annually revised in proportion to the rise in food price; that is, $122 for a single person or $408 for a four-person family, as of 1998. In 1996, the average number of beneficiaries per month is 26.9 million, the average amount
supplied is $73.30 per person a month, and the annual total amount supplied is about $23.5 billion.
3. Challenges of the Social Security System
In August 1997, the Clinton Administration entered into the budget agreement to realize a wellbalanced financial situation by 2002. Due to the revenue increase as a result of the recent favorable economy in the United States and the control of fiscal expenditure (e.g. health care expenses), the Administration achieved the well-balanced financial situation three years earlier than the year provided in the agreement. However, due to aging of baby boomers, it will be necessary to maintain income security after retirement, control fiscal expenditure for mandatory expenses including those for health care, as well as conduct reforms to ensure financial stability of the Social Security system.
As regards Old-Age, Survivors and Disability Insurance (OASDI), Social Security Trust Fund is estimated to be exhausted by 2032, caused by the increase in expenditures for aging population. In January 1997, the Advisory Council on Social Security established by the Executive Office of the President announced its final report. This consists of three proposals: 1) to maintain the basic structure of the current system and adjust benefits and contributions; 2) to create individual accounts held by the government; and 3) to create larger individual accounts managed privately and replace a portion of Social Security.
President Clinton strongly claims to bring up the social security pension reform as an important issue. In the State of the Union Address in January 1999, the President made proposals to obtain higher income with investing a part of the financial surplus to commercial markets so as to
maintain the social security system, as well as establish individual accounts to secure income after retirement separate from OASDI system.
Pursuant to the Balance Budge Act of 1997, the expenditures for Medicare is to be controlled to $115 billion for the next five years into favorable financial situation by 2007, by declining the payment to medical service providers and raising the insurance premiums (for Part B). As it is necessary to conduct reforms from longer point of view, a bipartisan study committee was established in the Congress to hold discussions.
Recent rapid spread of managed-care plans, such as HMO, is evaluated to have contributed to restraining in health care expenses. However, others criticize that these managed-care plans prevent patients from having opportunities to receive appropriate health care services at specialized doctors or non-contracted medical care facilities, and from securing necessary care. Therefore, the Congress deliberates about establishment of the "Patients' Rights Bill" consisting of 1) attachment of option in care policies for patients, 2) security of emergency medical care, 3) information disclosure to patients, and 4) appropriate handling of complaints.
As regards public assistance policies, since establishment of The Personal Responsibility and Work Opportunity Reconciliation Act of 1996, it has become an issue to secure the working opportunities for the public assistance beneficiaries. The Balance Budge Act of 1997 introduced an employment assistance system provided by the states or Federal government to welfare beneficiaries ($1.5 billion in FY1998 and FY1999, respectively). President Clinton proposed to raise subsidies for the purpose of further encouraging the public assistance beneficiaries to have jobs. After establishment of the welfare reform, as of June 1998, it was reported that the number of beneficiaries decreased by 3.8 million persons (accounting for more than 30% decrease). The
Government gives a favorable evaluation as a whole for the policies to encourage the beneficiaries to have jobs, with most of the states achieving the goals set pursuant to the welfare reform.
Social Security in Russia
As Russia makes the transition from a command economy to a partial free-market system, the provision of an effective social safety net for its citizens assumes increasing urgency. A 1994 World Bank report described the current social-protection system as inappropriate for the market-oriented economy toward which Russia supposedly was striving. Among the major shortcomings noted in the report were the continued major role played by enterprises as suppliers of welfare services, as they had been in the Soviet period; the absence of any coverage for large groups of people and the inadequate level of benefits in some regions; a growing disparity between a shrinking wage base and the demands placed on the system; and the failure to target the neediest recipients. As the economic transition of the 1990s forces more of Russia's citizens into poverty, the state has tried to maintain the comprehensive Soviet system with severely constrained resources.
The system's inefficiency is exacerbated by its fragmentation. As in the Soviet period, allowances and benefits are administered and financed by diverse agencies, including four extrabudgetary funds, several ministries, and the lower levels of government. The Ministry of Social Protection is the primary federal agency handling welfare programs. However,
that ministry focuses almost exclusively on the needs of people who are retired or disabled; other vulnerable groups receive much less attention. The four extrabudgetary funds that provide cash and in-kind social welfare benefits at the federal level are the Social Insurance Fund, the Pension Fund, the Employment Fund, and the Fund for Social Support.
Social security and welfare programs provide modest support for the most vulnerable segments of Russia's population: elderly pensioners, veterans, infants and children, expectant mothers, families with more than one child, invalids, and people with disabilities. These programs are inadequate, however, and a growing proportion of Russia's population lives on the threshold of poverty. Inflation has a particularly deleterious effect on households that rely on social subsidies. Women traditionally have outnumbered men in such households.
The Fund for Social Support supplements a variety of in-kind social assistance programs in Russia. It is financed through the Ministry of Social Protection and supplements social welfare programs at the subnational level. The federal government has transferred most responsibility for social welfare, health, and education programs to subnational organs but has failed to ensure their access to adequate revenue. The total allocation of transfers from the federal budget to localities amounted to less than 2 percent of Russia's gross domestic product (GDP--see Glossary) in 1992. Thus, the quantity and quality of social services at the local level--including the provision of food vouchers and cash payments to cover specific items such as heating bills--are far from certain as time passes. Under these conditions, local jurisdictions have come to rely increasingly on extrabudgetary sources,
the instability of which makes long-term planning difficult.
Pensions Pensions are the largest expenditure of the social safety program. The Pension Fund accounts for 83 percent of Russia's extrabudgetary allocations. At the end of 1994, about 36 million citizens, or 24 percent of the country's population, were receiving pensions, an increase of about 5 percent in the first three post-Soviet years. Two broad categories of pensions are paid in Russia: labor pensions, which are disbursed on the basis of a worker's payroll contributions, and social pensions, which are paid to individuals who have worked for less than the five years needed to qualify for a labor pension. All Russian citizens who have worked for twenty years are entitled to at least a minimum pension. In 1994 about 75 percent of all pensioners received labor pensions. The Pension Fund also finances some child allowances and other entitlements.
The Pension Fund is administered by the Ministry of Social Protection and financed by a 29 percent payroll tax and by transfers from the state budget. Between 1991 and 1993, the real income of pensioners was cut in half as prices rose rapidly and pension indexation failed to keep pace. Inflation also severely eroded the value of the life savings of retirees, and a disproportionate number of pensioners were victimized by financial scams. A 1994 law requires quarterly indexation of pensions, but the law was not observed consistently in its first year, and in mid-1995 the average pension fell below the subsistence minimum for pensioners. Beginning in 1994, the government's failure to pay pensions on time led to large rallies in several cities. In August 1994, an estimated 10 million pensioners did not
receive their checks on time, and pension arrears mounted in the two years that followed. By mid-1996 the payment backlog was estimated at US$3 billion. The present system includes an important provision that has kept many pensioners above the poverty line: it allows workers to draw pensions while continuing to work. In 1995 as many as 27 percent of Russian pensioners continued to work after retiring from their primary job.
Russian and Western experts agree that the pension system requires comprehensive reform--although its rate of payment compliance by enterprises is substantially better than that of the State Taxation Service. The most pressing needs are an effective system of indexation of pensions to purchasing power, an insurance mechanism, individualized contributions, higher retirement ages, and the closing of loopholes that allow early retirement. In 1995 the Ministry of Social Protection began work on a reform that would establish a three-tier pension system including a basic pension, a work-related pension in proportion to years of service, and an optional private pension program. In 1995 Prime Minister Viktor Chernomyrdin admitted that the state budget lacked the money to continue indexing pensions according to living costs. In November 1995, a decree by President Yeltsin, On Additional Measures to Strengthen Payments Discipline for Settling Accounts with the Pension Fund, set stricter reporting standards for payments to the fund by organizations and citizens, in an effort to preclude nonpayment. In the midst of his campaign to be reelected president, Yeltsin then approved two laws increasing minimum pension levels in three stages, by 5, 10, and 15 percent, between November 1995 and January 1996.
Women are entitled to retire when they reach age fifty-five, and men when they reach age
sixty. Nevertheless, financial hardship leads many women to remain in the labor force past retirement age, even while continuing to receive pensions, in order to prevent a drop in their families' standard of living. In 1991 women constituted an estimated 72 percent of pensioners. The disproportion between the genders stems from women's earlier permissible retirement age and their greater longevity. Aside from pensions, women receive other retirement privileges. Mothers of five or more children are entitled to a pension at age fifty. "Mother Heroines"--women with ten or more children--receive an allowance equal in sum to the pension, and the time they spent on child care leave counts toward the minimum twenty years of work required for labor pensions. For these reasons, many women retire before age fifty-five, while most men wait until they reach sixty-two. (Many job categories routinely allow retirement for both sexes before the standard ages.)
Worker Protection and Benefits
Legislation has established numerous protective devices at the enterprise level to provide a social safety net that is particularly attuned to the needs of women of childbearing age. Thus, family policy and employment policy are inextricably linked. In addition to basic allowances for all workers, special allowances exist for children of military personnel, children with unmarried, divorced, or widowed mothers, and children who are disabled. Women who have an employment contract are entitled to paid maternity leave from seventy days prior to giving birth until seventy days afterward. Maternity leave benefits are based on the minimum wage rather than on a woman's current wage, however.
Russia also provides a maternity grant, which is a onetime payment totaling three times the
minimum wage or 45 percent of the minimum wage in the case of mothers who have worked less than one year. In order to receive a maternity allowance (or sickness benefits), a woman must have an employment contract. The maternity allowance amounts to 100 percent of the mother's salary, regardless of her length of employment.
Maternity allowances in Russia are followed by a monthly child allowance of 80 percent of the minimum wage in the case of children up to eighteen months old. This allowance may be supplemented by a child-care allowance, set at 35 percent of the minimum wage, to compensate for earnings lost in the course of caring for children in this age bracket. The latter allowance is paid to mothers over the age of eighteen who have been in the labor force at least one year. An additional compensatory child-care allowance, equivalent to 35 percent of the minimum wage, is available to mothers or other caretakers of children under the age of three.
Russia also has an extended child allowance of 45 percent of the minimum wage (60 percent for children of military personnel, children living with a guardian or in an orphanage, and children with AIDS) to assist families with the care of children between the ages of eighteen months and six years. Single mothers and those who receive no child support from the father of their child may obtain an additional 45 percent of the minimum wage up to their child's sixth birthday; this figure is then increased to 50 percent and remains effective until the child is sixteen. In May 1992, special cost-of-living compensations were introduced to cover the increased expense of meeting children's basic needs. These compensations ranged from 30 percent of the minimum wage in the case of
children less than six years old to 40 percent in the case of those ages thirteen to sixteen.
Among other benefits provided by enterprises to their workers are access to special shops that sell subsidized milk for families with low incomes and small children and an allowance to children for the purchase of a school uniform when they start school and again at the age of thirteen. Other regulations focus more specifically on families with small children. These include protective legislation prohibiting the dismissal of pregnant women or women with children under the age of three, banning night work and overtime for mothers of small children, stipulating workload concessions to pregnant women and mothers of young children, and providing flextime, part-time work, home-based employment, nursing intervals, and additional paid and unpaid leave to mothers to care for sick children. Many workplaces also permit informal leave arrange-ments for the purpose of food shopping.
A significant portion of Russian workers have entitlements to housing, child care, and paid vacations, regardless of their rank within an enterprise. Housing entitlements involve either outright provision of a low-rent apartment (most apartment rents are very low) or various forms of cash or in-kind assistance. Moreover, occupants obtain an implicit ownership right extending beyond their term of employment. They may also have the legal title of the apartment transferred to their own names without paying any purchase price (see Housing, this ch.).
Besides housing allowances, most large and medium-sized enterprises provide on-site medical facilities or they contract for outside health care facilities for their employees. The
medical care provided through the auspices of enterprises is free and often is of much higher quality than the care available in government-run facilities (see The Health System, this ch.). Finally, enterprises provide their employees with goods ranging from foodstuffs to consumer durables. The enterprises procure these items through direct purchase, barter, or from their own farms, and make them available at below-market prices.
The Social Insurance Fund is the administrative mechanism for payments to workers of birth, maternity, and sickness allowances, and child allowances for children between the ages of six and sixteen. The fund is managed by the largest union organization in Russia, the Federation of Independent Trade Unions of Russia (Federatsiya nezavisimykh profsoyuzov Rossii--FNPR) and serves as the repository of enterprise contributions consisting of 5.4 percent of the total payroll (see Social Organizations, this ch.). Nominally an independent institution since its establishment in 1991, the Social Insurance Fund is in fact responsible to the FNPR.
In 1993 an overhaul of the fund's administrative structure began as a result of enterprises' low levels of compliance with contribution requirements, charges of serious abuse by trade union officials, and the government's desire to promote democratic accountability. Since 1993 the management system has been in flux, and the quality of administration varies considerably throughout the country. Most worker contributions to the fund are retained by the enterprise for distribution. About one-half of the money goes to sick pay and one-fifth to subsidize treatment at sanatoriums. Family support includes birth and maternal allowances intended to replace lost wages, but child allowances do not address poverty
directly because payments are not in proportion to household income.
Russia also has an overall system of family benefits. These can be grouped into three broad categories: those payable to all families with children, regardless of income or other qualifying conditions; those payable to working mothers; and those payable to disadvantaged families.
The communist system, for all its economic and moral deformities, provided virtually universal employment, so that every able-bodied citizen had an opportunity to earn income and thus social security. In postcommunist Russia, the phenomenon of unemployment is openly acknowledged and growing (see Unemployment, ch. 6). At the end of 1995, some 8.2 million people were registered as unemployed, indicating a far higher actual number. Three years earlier, about 5 million were registered. The "new poor," in the parlance of the World Bank, put a considerable strain on the resources available in Russia for social welfare.
Administered by the Ministry of Labor, the Employment Fund, which is financed by a 2 percent payroll tax from all enterprises, disburses compensation to jobless people. The level of compensation, already low in 1995, was expected to drop further if unemployment rose. As part of its assistance package to Russia, the World Bank is providing a computerized system that will help the country register claimants for unemployment and pay adequate benefits.
The Ministry of Labor's subsistence minimum is based on the cost of nineteen staple items considered sufficient to ensure survival, plus an estimated minimum cost for utilities,
transportation, and other necessities. The calculation varies according to age-group and region; trade unions use other formulas that usually expand the number of people identified as living below the poverty line. In early 1996, the State Duma considered a law that would make the Ministry of Labor's figure the legal basis for establishing minimum wages, pensions, and other levels of social support. Barring such legislation, the subsistence minimum has no legal status.
The Homeless The urban homeless are a category of the socially disadvantaged that received no official recognition in the Soviet era. Because Soviet law banned beggars and vagrants, the homeless (meaning anyone who lost his or her place of residence for any reason) were imprisoned or expelled from the cities. When the ban ended in the early 1990s, thousands of homeless people, mostly men, appeared in Russia's cities; the majority had migrated to urban areas seeking work or were refugees from the armed conflicts that erupted in the Caucasus and Central Asia when the Soviet Union dissolved.
In 1995 Moscow authorities estimated that city's homeless population at 30,000, but Western experts put the figure as high as 300,000. An estimated 300 homeless people died in Moscow in the first half of the winter of 1995-96, and on-site medical personnel reported widespread disease. At that point, Moscow had one shelter, with a capacity of twenty-four, and other Russian cities offered no sanitation or temporary residence centers of any sort. In the mid-1990s, the government of mayor Yuriy Luzhkov followed the Soviet pattern of forcibly removing vagrants from the city, especially at times when large
numbers of Western visitors were expected. Police routinely harass and beat vagrants found on the streets. The Soviet propiska system of residency permits, which granted housing and employment to individuals only in the place where they were officially registered, has been found unconstitutional several times by Russia's Constitutional Court. However, many local authorities, including those in Russia's largest European cities, continue to require Soviet-era documentation; in 1995 Moscow assessed a fee of 35 million rubles (about US$7,000) for registration as a permanent resident of the city, and several other cities adopted similar measures. In the face of such restrictions, many homeless individuals are unable to change their status.
Through the first half of the 1990s, no specific agency of the Russian government has borne responsibility for aiding the homeless; the Federal Migration Service, a badly underfunded and understaffed agency created in 1992, has not been able to carry out its legal responsibility to locate housing and employment for internal and external migrants (see Migration, ch. 3). A number of Western humanitarian organizations, such as the Salvation Army and Doctors Without Borders, are the main source of assistance. In late 1995, the many deaths of homeless people prompted the Moscow government to announce plans to build ten new shelters and to ease the procedure for obtaining residency permits.
Private charities in Russia have suffered from an absence of government support and a general lack of social acceptance. In 1995, for example, the soup kitchen of the Christian Mercy Society in Moscow, which fed 400 poor people daily, had to pay city officials to stay open, and the organization was unable to obtain a designated space in which to operate. In fact, Russian law gives no status whatever to private charities, so such
organizations must fend for themselves in helping the increasingly large number of urban poor. Russian society generally distrusts charities, partly because no such institutions existed either in tsarist times (royalty and the nobility provided whatever assistance went to the needy) or in the Soviet era, and partly because society has become fragmented by the difficult economic conditions of the 1990s.
According to Western experts, a comprehensive system of social protection is an urgent need of the Russian government, both for humanitarian reasons and as a prerequisite to financial stabilization and economic restructuring. The quality of future Russian society also will depend on reversing a steep downward trend in the quality of education and health care that has eroded the ability of Russians to improve their economic standing and to feel the sense of basic security that the Soviet system provided to some degree. Under Russia's conditions of drastic social and economic change, such forms of support are especially missed in the mid-1990s.
Social Security in Japan
In the 1950s and 1960s, the Japanese economy grew at around 10% per annum in real terms. Thanks to the high rate of economic growth, the per capita GDP of Japan caught up with those of other OECD countries at the beginning of the 1970s. Remarkable development of social security in Japan began in 1973, which was called "the first year of welfare." The social security expenditure, including social services, such as medial care services and personal social services
(note1), began to expand rapidly. The proportion of social security benefits to national income increased from 7% in 1970 to 16.4% in 1994.
One of the reasons for the fast development of social security can partly be explained by the nation's economic success. When economic welfare became substantially satisfied, Japanese people became aware of the relative backwardness in social security and the quality of life. The national goal then transformed from economic growth to improving welfare and the quality of life. "Dammed-GNP" and "Post GNP Era" - catch phrases at the beginning of the 1970s symbolized the change of Japanese national goal.
Beyond Conventional Welfare State: Toward Optimum Welfare Mix Another factor that has helped develop the social security in Japan was the fast aging of the population. The proportion of the elderly (65 years old and over) to the total population is estimated to increase from 7.04% in 1970 to 15.4% in 1997. It is estimated to increase to 18% in 2005 and 28% in 2030 according to the latest government estimate. As the ratio of social security costs increases as the elderly ratio (the proportion of the elderly to the total population) increases, at least in Japan, it is estimated that the future costs of social security will become large if Japan follows the Scandinavian model of welfare state that depends too much on the government and public sector. If Japan follows the Scandinavian model, the tax ratio, including social security contributions, will become too high, for the elderly ratio in future Japan is estimated to be much higher than that of present-day Sweden. This is one of the reasons why Japan cannot follow the Scandinavian model of a welfare state, though Japan has learned much and will continue to learn from the experiences of the Scandinavian welfare state. Welfare mix (Richard Rose & Rei Shiratori eds., 1986, Maruo, 1984) or a welfare pluralism that tries to share the role of welfare
supply and costs by the government sector, market sector and informal sector will be required to moderate the excess burden of tax and social security contributions in the future.
Another feature of Japan's welfare policy is the productive aspect of social security. Social security is usually considered a burden in terms of economic efficiency and economic growth. However, social security policy contributes to economic growth, too. In a demand-short economy, the expenditure of social security will encourage economic growth and employment. On the supply side, the encouragement of employment of older people and the disabled will contribute to increase GDP and tax revenue (including social security contributions) on the one hand and save social security expenditure on the other. The same is true of Japan's family policy that supports working women with children. Besides, adequate policies for the elderly will be helpful to promote what is called "productive aging" (Dr. Robert N. Butler). It is necessary to moderate the increase in the "welfare dependent ratio" (the proportion of those who receive social security benefits to those who pay the costs through tax and social security contributions) by encouraging increases in the workforce participation ratio and enlarging the tax base on the one hand, and by decreasing the number of those who have to depend on social security benefits on the other.
Sustainable Welfare Policy
As population aging is progressing very fast, it is sometimes argued that social security funds will go bankrupt in future. However, econometric analyses show that if appropriate policies are introduced and steady economic growth is maintained along with full employment, the after tax
income in real terms will improve steadily and social security in Japan can be sustained. Japanese model of welfare mix, productive welfare and sustainable welfare are the key phrases for the future Japanese model of welfare state.
Market-Oriented Welfare Policy and its Prerequisites
Fourth, social security will become more market-oriented. This is favorable in terms of efficiency improvement. However, market-oriented politics sometimes increase inequality in income and assets. One measure to cope with the inequality problem is a provision of a social security safety net. Another way is a positive asset distribution policy. Important effects of asset growth and fluctuations in economic stability and distribution must be taken into account. The effects are especially large in Japan, where the total value of national assets is nearly 20 times as large as the national income and 26 times of total employees compensation. This means that the capital gain from a 1% increase in asset prices is the equivalent of 26% of a wage increase.
A combination of Keynesian demand management and income distribution by tax and social security benefits in a conventional welfare state in the second half of the 20th century will partly be replaced by a combination of asset demand management and asset distribution policy in the 21st century.
Social Security in China
1. An Overview and Recent Trends in the Social Security System The social security system in the People's Republic of China (hereinafter referred to as "China") was originated from establishment of the "Labor Insurance Act" in 1951, which institutionalized
old-age benefits and medical benefits for governmental corporation employees. Subsequently, systems for public officials and people living in agricultural areas were gradually developed. Such occupational classification still continues, in principle.
The Cultural Revolution destroyed the social security system. Welfare system for workers was improved as enterprises paid all costs for pensions. At the Third Plenum (of the 11th Party Congress Central Committee) in 1978, it was stated that social security reform is one of the important policies among socialistic economic reform. Since then, rapid reform is underway. In the ninth five-year plan (1996-2000) this basic direction is stipulated as "to establish the basic stage of multi-layer social security system organically combining social insurance, social relief, social welfare, and welfare service for families of the deceased military personnel, mutual aid, private-saving type accumulation insurance altogether, as well as conduct reform insurance systems for pension, unemployment, and medical care."
In 1998, the Ministry of Labor and Social Security was established, it centrally engages in and supervises social security services, which spread across multiple divisions.
(1) Pension System
The endowment insurance system for company workers previously provided that enterprises were required to be responsible for supplying benefits. However, the system reform started in the 1980's. Diffusion of the nationwide unified basic endowment insurance system for company employees is underway.
This basic endowment insurance system corresponds to public pension in Japan, which everyone is obliged to join. The government encourages the citizens to join voluntarily any of
complementary programs such as complementary endowment insurance (similar to corporate pension in Japan) and private-saving type endowment insurance (similar to private endowment insurance in Japan). As regards basic endowment insurance, citizens annually pay 11% of average wages of the previous year's average wages to their own accounts (originally 4% paid by citizens, and 7% by enterprises, but these ratios are to be changed to 8% for citizens and 3% for enterprises). Enterprises pay a fixed portions (20% or less of total wages including those paid to private accounts) of total wages amount to the fund. The social insurance fund for each area (e.g. provinces, districts, prefectures, and cities) manages individual accounts and fund.
Basic pension benefits are paid to men of the age 60 and older and women of the age 50 to 55 and older paying the premiums for more than 15 years. Paid amounts are equivalent to 20% of the average monthly salaries of the areas, as well as additional benefits in about 0.8% of the amounts accumulated in individual accounts. As of the end of 1998, this system covers 88 million participants, 23 million beneficiaries, with 57 billion yuan in basic accumulated amounts in the fund, 120 billion yuan in premium income (as of 1997), and total supplied amount in 108 billion yuan. Participation breakdown is: 95% for state-owned enterprises, more than 50% for group-managed enterprises, and about 30% for others (foreign-capital enterprises and private enterprises).
Endowment insurance programs for public officials are managed pursuant to the endowment insurance system for public officials, except some areas. Governmental organizations pay all necessary costs for benefits, without any premiums collected. Benefits are 60 to 90% of standard income in proportion to working hours.
Endowment insurance system for the people living in agricultural areas have not been developed due to its vulnerable economic infrastructure, with only 800 thousand participants in the mid 1980's. A "Five-S" system (mentioned below) has been developed as a social relief system. In 1991, the Ministry of Civil Affairs published the basic bill for "endowment insurance for agricultural societies." At present, based on this bill, the endowment insurance system for agricultural societies is underway by way of trial. As of the end of 1997, the system covers 8.2% of the population.
(2) Medical Insurance System
As regards medical insurance system for company employees, people working for or being retired from enterprises used to participate to some insurance programs established by those enterprises, and receive medical services at clinics or hospitals managed by or under contract with those enterprises. However, in the 1980's, development of the open economy reform caused difficulties such as 1) slack business of state-owned enterprises, 2) increase in the number of non state-owned enterprises, and 3) raise in medical expenses. To solve such difficulties, the system continued to be reformed in full scale in the 1990's. As a result of the reform, the policies were prepared to execute and diffuse a new nationwide medical insurance system for urban workers by the end of 1999.
In the basic medical insurance system for urban workers, employers pay 6% of total wage amount (30% of the amount will be transferred to workers' personal accounts) to the fund, and workers pay 2% of their wages to personal accounts. Administrative districts or larger districts (or cities with direct jurisdiction) are in principle responsible for managing personal accounts and the fund. If it is difficult, prefectures may also be in charge of management. Medical benefits
are in principle supplied from personal accounts. However, in case of medical expenses exceeding 10% of average wages, the benefits are supplied from the fund up to the amount four times the average wages at maximum (the medical benefits in proportion to wages are changeable responding to the case of communities). In case of receiving benefits from the fund, patients are required to pay a certain amount.
Public-funded medical care system for public officials has a certain restriction in benefits. However, the government pays all necessary costs for benefits, without any premiums collected. When the basic medical insurance system for urban workers is put into effect, public service employees will also participate in the system with some assistance from public funds.
People may voluntarily participate in the medical insurance system for agricultural areas. It has a flexible structure that an implementing entity and benefits description are decided corresponding to regional conditions. Benefits supplied are generally low, and its diffusion rate is only about 10%.
(3) Health and Medical Services
Organizations responsible for public health include the Ministry of Health in the central government, as well as the Chinese Academy of Medical Science, the Chinese Academy of Preventive Medicine, hospitals directly managed by the Ministry of Health, and hospitals of medical colleges directly managed by the Ministry of Health. As regards local organizations, the Class 1 administrative districts (corresponding to prefectures in Japan) include 23 provinces, five autonomous wards, and four cities with direct jurisdiction (and Hong Kong, a special administrative district with an advanced autonomy). Under provinces, districts of the Class 2
administrative districts, prefectures of the Class 3 administrative districts, xiangs and zhens (municipalities) as the lowest administrative organizations, and then several villages without administrative authorities follow, serially. Administrations include the provincial health care agencies, district health care agencies, and then prefectural health care offices. In provinces, districts, and prefectures, health care services are provided in health care and epidemics control centers, mother-child health care centers, special disease prevention research institutes, provincial people's hospitals, provincial hospitals of medical colleges, district hospitals, prefectural hospitals. Xiangs and zhens are governed by the municipal authorities and provide health and medical care services through health care centers. Villages have residential committees that are autonomous organizations for residents and village clinics. The public sector occupies dominant portions for health care services, that is, about 50% of hospitals or 70% of beds. Average number of beds per thousand people is 2.4 for hospitals and health care centers, and average number of days of hospitalization (in hospitals in prefectures or larger governments) is 13.8 days.
Health care service system is less developed in agricultural areas than in urban areas. About 90% of villages have temporary medical care facilities (e.g. village clinics), and even those facilities can provide the minimum services. Thus, improvement of health and medical care services is an important issue. As regards the people engaging in medical services, there are 1,985 thousand doctors (including those finishing medical schools), that is, 1.65 doctor per one thousand people. Agricultural villages have 970 thousand doctors with one or two year education in medical schools. National certification had not been developed for doctors before establishment of the Medical Doctor Law in 1998. National examination system is to be carried out in 1999. The number of nurses is 1,198 thousand, that is, 0.99 person per one thousand people.
Although there are no official statistical figures for gross national medical expenses, those for workers account for 77.33 billion yuan, 28 times the figures of 1978, with the annual increase by 19%.
(4) Welfare Policies for the Elderly and Disabled
The population of the age 60 and older is 120 million in number (9.7% of the whole population), which is estimated to reach 130 million (over 10% of the whole population) in 2000, and then exceed 400 million in 2040, at the year which is regarded as the peak of the aging society. At the advent of such a full-scale aging society, the Elderly Human Rights Security Law was established in 1996, as the basic law for welfare policies for the elderly. This Law stipulates the obligations to maintain families, as well as basic provisions about social security, education for the elderly, personnel training, cultural lives, facility development, and social participation. Community organizations managed mainly by community people based on the spirit of autonomy, self-help, and mutual aid carries out welfare services for the elderly. These services include facility development, health and medical care services, and social education activities. There are 42 thousand residential facilities for the elderly (e.g. welfare facilities and elderly homes) with 785 thousand residents. 5,000 senior citizens' universities and schools are developed.
As regards welfare policies for the disabled, the Disabled Security Law was established in 1990. The Law stipulates basic provisions about the rights, governmental responsibilities, and rehabilitation, education, employment, cultural lives, welfare policies, social environment, and legal responsibilities for the disabled. The number of the disabled is estimated as about 60
million at present. Community organizations take the lead to provide welfare services for the disabled, with 10,469 regional rehabilitation centers and 5,646 welfare service facilities.
(5) Policy for Family Planning
The population of China reached 1,236 million at the end of 1997. Plowland area per capita is one quarter of the world average width. The population is increasing by about 13 million persons per year. It results in producing the surplus workforce of more than 100 million persons in agricultural areas. Under such circumstances, for the purpose of restraining such significant population growth, the national government stipulates in the current Constitution established in 1982 to promote family planning to adjust the population increase to the economic and social development plan, as well as imposing obligations to married couples to planned delivery. (socalled "only-one child policy").
Specific measures are provided pursuant to the regulations of local government authorities. Those regulations stipulate 1) the raise in the marrying age (from the age 22 for men and 20 for women provided in the Marriage Law), 2) preferential treatment for deliveries and raising of children pursuant to the policies, and 3) sanctions against infringement of the policies. Although married couples are allowed to have only one child in principle, there are some exceptional measures taking regional economic and social situations into consideration. It is strictly restricted to have only one child in big cities, but, in many agricultural areas, married couples are allowed to have the second child after a certain period of time since the birth of the first child if it is a girl, or to have the second child. In the minority tribe residential areas, it is also allowed to have the second child or thereafter.
As a result, natural population increase rate decreased to 10.06% in 1997, compared to 25.83% in 1970. Besides, this policy may induce rapid progress in aging. From 1994, this policy was combined with other policies including those for maternal and child health care to focus not only on the population restraint but also on improvement of daily living in agricultural areas, maternal and child health care, and women's social positions.
2. Summary of Public Assistance System (Social Relief)
There are wide differences between urban cities and agricultural areas in the social relief system to rescue the people, who are unable to maintain basic living standards due to old age, feebleness, sickness, disabilities, or loss of working abilities.
The social relief services in urban areas are provided pursuant to the local governmental regulations. They are mainly classified into two: that is, relief of the people with difficulties in daily lives, and relief of the elderly living alone and orphans. There are differences in specific requirements for beneficiaries, benefit descriptions, and certification among others. Increase in the number of the poor in urban areas according to the progress in economic reforms results in development of a nationwide minimum public assistance system for the people living in urban areas at present. This public assistance system is for the people, who have no fixed income, working abilities, or dependents, who have the average household income equivalent to or below the minimum public assistance limit amount with no possibilities to engage in any job after the period of the unemployment benefits supplied is to be finished. The government grants the certification for applicants and then supplies the amount deducting the actual income from the minimum public assistance limit. The minimum public assistance limit amount set as the standards for benefits varies according to living standards and economic situations, between
about 100 yuan and 250 yuan per month. It is permitted to be wholly funded by the government or jointly funded by the government and companies, with the total annual investment of 1.2 billion yuan. This system is to be developed in all cities and zhens of prefectural capitals by the end of 1999. As of the end of 1998, it covers 2,337 thousand persons of 584 cities (87% of all cities) and 1,035 prefectures (61% of all prefectures).
Besides, the social relief services in agricultural areas are also provided pursuant to the local governmental regulations under several formulas. They vary in contents, however centered on the "Five-S" system. "Five-S" means to secure foods, clothing, residence, medical care, and funerals. Xiangs and zhens are responsible for enforcement of the system. It is a social relief service system for the elderly, disabled, and minor satisfying the conditions (e.g. loss of working abilities or fixed income, or absence of dependents) to provide foods, fuel, clothing, reasonable amount of money, residence qualifying basic conditions, medical or funeral services, and education for the minor. Specifications of benefits are decided with taking the regional living standards into consideration. Well-conditioned xiangs or zhens may admit the elderly to the elderly homes. Xiangs and zhens pay 1.7 billion yuan and the government 110 million yuan for its financial resources. The "Five-S" beneficiaries are 2,003 thousand persons with the average annual amount of 856.9 yuan per capita.
3. Challenges of the Social Security System As regards the social security system, the government made decisions on the basic medical insurance system for the people working in urban areas, as well as the basic endowment insurance system for company employees, the minimum public assistance system for the people living in urban areas. Reforms in urban areas are spreading now. Current issues include to stably
diffuse such a nationwide universal system in local areas in full scale, and to develop the legal system with establishment of regulations required for the social security system (e.g. social insurance, pension, and medical insurance). Preparation is underway.
In the meantime, for the people in agricultural areas, occupying about 70% of the whole population, reforms are still in an experimental stage. Standards in benefits are largely different from those in urban areas, and it is important to diffuse and develop social security systems in agricultural areas.
A problem in the medical insurance system is how to deal with the increasing medical expenses. The government endeavors to control medical expenses for the new basic medical insurance system for the people working in urban areas with opening personal accounts to motivate patients to be conscious of their own medical costs. Besides, reforms are underway for pharmaceutical and medical service systems. They include enhanced management of medical services with preparation of drug lists and standards for medical services covered by the insurance and other measures, promotion of competitiveness among medical institutions, and separation of dispensing from medical practice.
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