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MANUFACTURING EMPLOYMENT AND COMPENSATION IN CHINA - page 41 / 106

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Cost

Percent

Required employer social insurance payments to the government... Required housing fund payments...................................................... Additional employee welfare costs not included in earnings............

28 4 12

Other labor-related costs not specified in detail................................ 10

In table 8, therefore, average 2002 total compensation for employees of urban manufacturing enterprises is estimated to be 17,152 yuan.

Note that the amount China’s urban employers are required by law to remit to the government every month as the employer contribution to the social insurance system and,

in some cities, the home purchase fund varies from city to city.114

For example, the

following tabulation shows the additional amount, expressed as a percentage of earnings, that manufacturing employers in three cities are required to contribute: 115

Contribution

Changshu City, Jiangsu province

Wuxi City, Jiangsu province

Beijing municipality

Old-age pension fund....................... Medical insurance fund.................... Unemployment insurance................ Workers’ compensation insurance... Maternity leave insurance................ Employee housing fund...................

16.5 8.0 2.0 .6-.8 1.0 --

22.0 8.0 2.0 -- -- --

20.0 9.0 1.5 1.0 -- 8.0

Not only do the required employer contributions vary by municipality and city, but also, the amounts have been increasing over time. Therefore, it is likely that the legally required employer contribution to the social insurance funds for the average manufacturing employee has increased since 2002.

The inclusion in total labor compensation of the amorphous, vaguely reported categories of welfare costs and other unspecified labor-related costs just discussed may help offset some of the likely downward biases in the basic earnings data. To minimize individual and corporate taxes and required social insurance payments, urban employers tend to underreport earnings to the extent possible, neglecting to include some in-kind benefits in the reported earnings and offloading as many employee subsidies and benefits as possible into the welfare fund category or “other” labor compensation category. (Underreporting of urban manufacturing employment and earnings is discussed shortly.)

For TVE manufacturing employees, there is ample evidence that the reported earnings total may capture almost all of their total compensation, because TVE workers do not have many of the social insurance and other welfare benefits that urban employees often get. For example, by the end of 2002, the number of rural and smalltown workers with any rural social pension insurance was minuscule.116 China’s urban towns and rural areas have very weak or nonexistent social benefit systems for pensions, medical insurance, unemployment insurance, workers’ compensation, and the like. Pension and medical insurance systems paid into by employers and employees essentially do not exist in China outside of cities today.117 A survey of large manufacturing enterprises in Nanjing Municipality, the capital of Jiangsu Province on the country’s east coast, found that welfare benefits for workers, above and beyond earnings, for the years 1994-2001

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