Social Security Assignment

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  • 8/8/2019 Social Security Assignment







    Ms Vandana Sharma JULI SAIKIA

    M.B.A. 3rd

    Roll No: 109032



  • 8/8/2019 Social Security Assignment


    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. Kautilyas

    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-

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    y Social Security and insurance, employment and unemployment.y 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, Workmens 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) Right to an adequate means of livelihood. [Article 39(A)]

    (b) The 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)

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    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

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    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.N

    ational Health Service (N

    HS) 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:

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    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


    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.

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    In 1991, under the Conservation Party Administration, for the purpose of promoting more

    efficient operation ofNHS, 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 ofNHS, home help service, meal

    service, and day service provided by local authorities. Facility care services include hospitals,

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    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

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    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 forNHS 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), non-

    contributory benefits (e.g. child's benefits, workmen's accident compensation insurance, and

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    disability allowances), and income-based benefits (e.g. income support). Among others, income-

    based benefits are regarded as public assistance. Income-based benefits are mainly classified as


    (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

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    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.

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    As regards the public assistance system, the Administration considers to deal with the low-

    income 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


    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 forNeedy Families (TANF).

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    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 (tax-

    rate 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

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    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

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    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

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    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 forNeedy 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 child-

    care 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

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    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 WorkOpportunity 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, long-

    term 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 forNeedy 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

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    those receiving the Old-Age, Survivors and Disability Insurance (OASDI). Supplementary

    benefits are given in a number of states.

    As ofO

    ctober 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 forNeedy 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 fixed-

    amount assistance system provided from the Federal government to state governments pursuant

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    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


    ood 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

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    supplied is $73.30 per person a month, and the annual total amount supplied is about $23.5


    3. Challenges of the Social Security System

    In August 1997, the Clinton Administration entered into the budget agreement to realize a well-

    balanced 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

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    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

    WorkOpportunity 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 orFederal 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

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    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


    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,

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    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


    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,

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    the instability of which makes long-term planning difficult.


    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 PensionF

    und 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

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    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

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    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.F

    or 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

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    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

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    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

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    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


    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,

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    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 mayorYuriy Luzhkov followed the

    Soviet pattern of forcibly removing vagrants from the city, especially at times when large

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    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

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    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

    otherOECD 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

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    (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 ConventionalWelfare State: Toward OptimumWelfare 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

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    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.

    SustainableWelfare 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

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    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-OrientedWelfare 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

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    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

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    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 part icipants, 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


    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.

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    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

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    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


    (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

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    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.

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    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


    (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


    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

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    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 forF

    amily 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. (so-

    called "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.

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    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

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    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

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    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.