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People’s Lives: Self-Employed Chinese Are Quitting the Social Security Program

Facing a big shortage in the government’s medical insurance system (partly due to COVID spending and partly due to corruption), many local governments have adjusted the medical insurance funds: The first adjustment was to cut the monthly payments to individual healthcare accounts for those who are company employees. The second was to cancel the monthly payment to self-employed people.

This triggered the public’s concern about the government’s changing its policy at will.

As a result, many self-employed people recently decided to quit their participation in the government’s social security program. The reasons: One, they cannot afford the monthly contribution of 1,492 yuan, while many of them have a monthly income of only three or four thousand yuan. Two, the government keeps adjusting the benefit payout plan. Some local governments extended the minimum contribution period from 15 years to 25 or 30 years, and there is a rumor that the government may defer the retirement age to 65. This means the participants will have many more years to contribute but fewer years to receive benefits. On a simple calculation without adjusting for inflation, paying 1,492 yuan per month for 20 years will end up contributing 358,000 yuan in total. If the retiree starts to receive a social security payment of 2,000 yuan per month at age 65, he needs to live to age 80 to break even, but the average age for Chinese is only 77. Thus many people may end up receiving less than what they contributed. Therefore, they would rather keep the money in their own account instead of putting it in the government’s account.

According to the National Labor Union’s statistics, in the year 2021, China had over 200 million self-employed people. Only 48.6 million, or 24 percent, participated in the social security program.

1. website, February 21, 2023
2. Radio Free Asia, February 21, 2023