Meeting the Migrant Pension Challenge in China

mandag, 21 juli 2014

China is currently undergoing the largest regional migration in the world’s history. Young rural workers are moving to urban areas, often in a different province, for substantial periods of their working lives. Social security policy in China, while framed by national protocols and policy guidelines, is administered at more than 2000 lower-level jurisdictions, typically cities and counties, and at present this compromises pension entitlements of China’s 150 million rural migrant workers.

This paper proposes a Notional Defined Contribution (NDC) mechanism to ensure pension mobility for migrating workers, in both the accumulation and drawdown phases. Plan governance would ensure independence from the three existing pension systems. Although the plan's design would be of the NDC type, requiring no pre-funding, in practice the relatively young migrant demographic has the potential to generate considerable reserves. An appropriately structured NDC plan of this type is shown to be viable by reference to a previously developed model of Zhejiang Province's social security systems. Such a plan would remove mobility barriers to migrating workers, increase the retirement benefit for mobile workers, and reduce the future government liability for payouts in other pension systems in which migrants currently hold membership.