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The Social Benefit System in Urban China: Reforms and Trends from 1988 to 2002

Published online by Cambridge University Press:  24 March 2016

Qin Gao
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Abstract

This article systematically reviews the macrolevel social policy changes in urban China during recent years. It also provides empirical evidence on how such policy changes reflect on microlevel family benefit levels from 1988 to 2002 using the national China Household Income Project data. The social policy reform process gradually shifted away from welfare provision through work units to greater emphasis on individual taxes and contributions. The government has also taken a more active role in providing a safety net for the urban poor. Empirical results show that even though the real value of social benefits increased over time, its increasing pace was laggard by that of market earnings, yielding a smaller share in final household income since the reforms. Pensions, public assistance, health, and education benefits increased during the period, while housing, food assistance, and supplementary income decreased.

Keywords

social benefitssocial policy reformurban China
Type
Articles
Information
Journal of East Asian Studies , Volume 6 , Issue 1 , April 2006 , pp. 31 - 67
Copyright
Copyright © East Asia Institute 

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References

Notes

I thank Enid O. Cox, Irwin Garfinkel, Stephan Haggard, Sheila B. Kamerman, Andrew J. Nathan, Carl Riskin, Michael Sherranden, Jane Waldfogel, Fuhua Zhai, and two anonymous reviewers for very helpful comments and suggestions. Financial support for this project was generously provided by the V. K. Wellington Koo Fellowship through the Columbia University Weatherhead East Asian Institute.Google Scholar

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58. Primary factors considered included local residents' average income and consumption level per capita, the price level of the previous year, the consumption price index, the local cost necessary for maintaining a basic livelihood, materials for the basic needs of food, clothing, and housing, and the expenditure on children's compulsory education.Google Scholar

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65. More details on the design and sampling methods of the CHIP surveys can be found in Eichen, M. and Zhang, M., “Annex: The 1988 Household Sample Survey—Data Description and Availability.” In Griffin, K. and Zhao, R., eds., The Distribution of Income in China (New York: St. Martin's Press, 1993); and Gao, Qin, The Chinese Social Benefit System and Its Impact on Income Inequality: From 1988 to 2002 (New York: Columbia University Press, 2005).Google Scholar

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69. Different equivalent scales have been proposed and adopted in the existing literature, mostly when studying the Western industrialized nations. Some scales are proposed for studying developing countries, but there seems no particular fit for urban Chinese households. I also ran the results using the OECD equivalent scale that accounts for household size by dividing household income by the square root of household size, and the result patterns largely remain the same. All missing values—except for health benefits in 1988 and education benefits in both years that are imputed using administrative data— are imputed using multiple regression models controlling for individual and household sociodemographic characteristics.Google Scholar

70. These included salary (including bonus) from working for an employer, wage from secondary jobs, and other “income from compensation” (buchang shouru), fees paid by relatives or friends who regularly ate in, and in-kind incomes from others as a form of payment.Google Scholar

71. In 1988, taxes and fees paid for private enterprises or self-employment were asked separately, and then subtracted from the total reported gross income from this type of employment. In 2002, families were directly asked to report the net income from private enterprises or self-employment. Thus, the two years' data are compatible in this regard, but it was impossible to know the amount of taxes and fees paid for private enterprises or self-employment in 2002.Google Scholar

72. The 1988 market value of rent was not directly asked in the survey and thus is estimated by a formula adopted by the CHIP Research Team, accounting for both provincial construction cost at the time and sanitary facilities of the house as reported by survey participants. In 2002 families were asked to estimate the market rental value of the housing. Rental value of owner-occupied housing is then imputed by subtracting self-reported debts or loans on housing from the estimated market rental value of housing. The rental value of owner-occupied housing made up 8 percent of total household market income in 1988 and 5 percent in 2002.Google Scholar

73. This article relies on these self-reported data on taxes and fees, but I should note that these data are neither fully comparable across the two waves nor complete. Future work is needed to address this limitation.Google Scholar

74. Administrative data on public health expenditures for retirees from different types of employers do exist. However, the survey data do not contain information on retirees' employer type. Therefore provincial per capita public health expenditure on retirees is computed by dividing total public health expenditures on retirees across employment types by the total number of retirees.Google Scholar

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76. One is to assign the provincial per capita health expenditure to individuals who reported that they contributed to health insurance, which results in a per capita health benefit of ¥118. The other is to estimate the provincial level proportion of contributors among all employees and retirees, and then impute provincial per capita health expenditure to all employees and retirees adjusted by the proportion. The imputed individual level benefits are then summed at the household level and divided by household size to get the per capita measure. This approach yields a per capita health benefit of ¥174.Google Scholar

77. Provincial per capita education expenditure data are derived from the China Education Expenditure Statistical Yearbook (CEESY) 2003, and the China Provincial Education Expenditure Annual Development Report 1989. Google Scholar

78. I use the following formula to calculate: where E denotes per capita education expenditure, N denotes total number of students enrolled, all denotes overall provincial level, urban denotes urban areas within a province, rural denotes rural areas within a province. The numbers of enrolled students are from China Statistical Yearbook (CSY) 2003. CSY 2003 provides data on the number of combined senior high school and junior high school enrolled students as well as the number of senior high school students only at each of the three areas. I subtracted senior high school students from the total to yield the number of junior high school students. The CSY 2003 provides the number of students by three geographic classifications: urban areas (chengshi), counties and towns (xianzhen), and rural areas (nongcun). There is no formal documentation on the classification rules of the three areas. Because the majority of enrolled students in “county and town” schools are from villages, and the county and town per capita expenditures are closer to those in rural areas, I assume the counties and towns are part of rural areas. I also tried treating “counties and towns” as part of urban areas, and it did not make a big difference in the final results.Google Scholar

79. ECEC benefit was asked in the 1988 survey but not in 2002, while there is a lack of administrative data on ECEC in China to do imputation. Administrative data on higher education (technology or vocational school, normal school, and college or university education) are available in both years. However, students in such higher education institutions often lived in campus dorms both years and thus were most likely not covered in the household surveys. Some employers—particularly public institutions and state and collective enterprises—often provided other cash or in-kind education benefits such as advanced training and educational materials to employees, especially before and during the early stages of the reforms. The 2002 survey asked about such education benefits from employers, but such questions were not included in the 1988 survey. To be consistent, this study does not count this type of education benefits.Google Scholar

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