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Comprehensive social goods culminate poverty alleviation

YUE XIMING and ZHONG CONG | 2021-02-18
(Chinese Social Sciences Today)

Students play with a volunteer teacher during recess at a rural school in Liuzhou, Jiangxi Province, on Sept. 20, 2020. Photo: CFP

China's 40-plus years of growth has been a wonder. Hundreds of millions of people have been lifted out of poverty and the nation's lifestyle has been transformed. By the end of 2020, China achieved its goal of poverty reduction as planned and basically completed the building of xiaokang, or a moderately prosperous society in all respects.
The Fifth Plenary Session of the 19th CPC Central Committee proposed that during the 14th Five-Year Plan period (2021-2025), the people's well-being is expected to reach a new level, including the enhancement of a multi-tiered social security system and health system, the consolidation of achievements scored in the fight against poverty, and a full promotion of the rural vitalization strategy.
As China's poverty alleviation work enters a new stage, it is also necessary to unify the comprehensive social security system to create a sustainable long-term mechanism for rural populations identified as relatively poor, in addition to maintaining the stability of current development-oriented poverty alleviation policies.
Government guaranteed income
At present, China has formed a comprehensive security system which includes social insurance, social assistance, and social welfare, covering everything from pensions and workplace injury insurance, to minimum income guarantees and health provisions. The key to consolidating the achievements of poverty reduction is to build an early warning mechanism that helps people avoid returning to poverty, and to create a sustainable social security mechanism for low-income people to meet basic needs. 
Based on Chinese Household Income Project (CHIP) 2018 data released by the China Institute for Income Distribution, we calculated that government guaranteed income accounted for 12% of disposable income of rural residents in China, while it accounted for 42.38% in poor families. This indicates that poor people are highly dependent on government guaranteed income, and the increase of social security expenditures has an important impact on rural poverty reduction. 
In terms of government guaranteed income, pensions, subsidies for farmers, and subsistence allowances accounted for 14.42%, 10.69%, and 3.65% of the disposable income of poor families, respectively.
The poverty reduction effect of government guaranteed income is mainly measured by comparing the incidence of poverty in rural households with different income components. To clarify, we compared changes in the incidence of poverty before and after receiving subsidies. It is estimated that income from government subsidies can reduce the incidence of poverty in rural areas by 4.53%. 
Specifically, the poverty reduction effect of different types of government transfer payment instruments is not the same. The contribution of rural pensions to poverty reduction is the largest, but the effect of the new rural pension program is most prominent, followed by subsistence allowance, medical insurance reimbursements and subsidies for farmers. Pension income contributed 62.03% of the poverty reduction effect of government subsidy incomes, with the new rural insurance pensions alone registering at 26.05%. 
By 2020, with continuous efforts, all rural people, based on the current criteria in China, have been lifted out of poverty, but there is still the risk of returning to poverty. Demographic structures of low-income populations dictate the importance of comprehensive provision of social goods when consolidating the achievements of poverty alleviation. Studies have shown that people most vulnerable to falling back into poverty are the elderly, children, and those with health issues. In the short term, it is difficult for this group to increase their incomes on their own. With growing spending on medical care, education, and other areas, they are more likely to slip back to poverty, requiring the government to provide long-term basic livelihood support. 
Room for improvement
Despite the positive effect of comprehensive social security systems on poverty reduction, there is room for improvement in aspects such as unbalanced distribution of social security and the need to improve social security standards for low-income groups.
In China, the scale of social security expenditures in government budgets is low, and the distribution is imbalanced between different regions, urban and rural areas, and different groups. In contrast, the scale of social security expenditures in China is significantly smaller than that of developed countries such as the United States and the United Kingdom, so it is necessary to continuously increase the scale of social security expenditures. 
From the perspective of distribution, the social security expenditures on residents in the eastern and central regions are higher than in the western regions, and social security expenditures on urban residents are higher than on rural residents. Our estimate identified that urban residents receive 4 times as much social security as rural residents. 
When poverty is sufficiently reduced, a tiered social insurance scheme should be in place to consolidate achievements of poverty alleviation, with emphasis on increasing the endogenous drive of low-income groups. That said, we need to pay particular attention to helping people increase confidence in their own abilities to lift themselves out of poverty and see that they can access the education they need to do so. We must guarantee compulsory education for children of low-income groups, and install a subsidy system that covers from early childhood education to higher education, to prevent those who have lifted themselves out of poverty from returning to poverty due to schooling fees. 
Meanwhile, it is necessary to improve the infrastructure of schools in underdeveloped areas, encourage young teachers to volunteer, carry out the "Internet + Education" model, and optimize the allocation of resources between regions. On the basis of popularizing general education, it is also vital to promote vocational education and training, and stabilize employment levels in underdeveloped areas.
The most direct function of social security is to provide subsidies to low-income people who have been unemployed or chronically ill, so as to reduce their possibility of returning to poverty due to external shocks. In addition, the comprehensive and multi-tiered social insurance program has a role to play in preventing poverty caused by sudden public events such as large-scale natural disasters and epidemics.
Diversified coverage
Going forward, we need to develop a sustainable multi-tiered social security system that centers on basic pension schemes and basic medical insurance, covering the entire population in both urban and rural areas, with clearly defined rights and responsibilities, and support that reaches the right level. At the same time, we need to promote the coordinated development of social assistance systems for urban and rural residents, and improve the subsistence allowances system.
First, in terms of the basic pension schemes in rural areas, the pension standards for rural residents should be gradually raised. According to our research, the total basic pension expenditure in rural areas in China is 144.7 billion yuan. If the pension is tripled, that spending will be approximately 434.1 billion yuan, which accounts for about 10% of the pension expenditures of all workers in that year. As we can see, there is room for improvement in the scale of pensions for rural elderly residents. 
Social security program should also work to accommodate elderly groups with peculiar needs, such as those who have lost their land, lost their only child, or have reached a highly advanced age.
Second, on the basis of basic medical insurance, people are encouraged to purchase commercial medical insurance, supplementary medical care, and medical insurance for serious diseases. We need to appropriately raise the reimbursement rate for serious diseases, and gradually turn the special treatment for serious diseases into universal treatment.
Moreover, we need to further expand the coverage of medical insurance, subsidize medical insurance for special groups such as the old, the weak, the sick, and the disabled, and support cross-provincial settlement of medical expenses to provide medical security for low-income groups who do not participate in local medical insurance. 
It is also important to promote the equalization of medical services between urban and rural areas and across regions, increase public health service facilities in rural areas, improve medical conditions in rural areas, adopt the "Internet + Medical" platforms to serve people in underdeveloped areas, and reduce the medical burden of low-income groups.
Finally, at present, China has more than 20 million registered poor households in the subsistence allowance program, so we need to improve the subsistence allowance system and build a diversified social assistance system that actively engages non-governmental forces, to continue to improve the living standards and quality of life of the entire population.
The CPC will celebrate its centenary in 2021, and it is also the first year of the 14th Five-Year Plan. This year is crucial to consolidating the achievements scored in the fight against poverty and realizing its effective coordination with rural revitalization. We must unify the comprehensive provision of social goods such as social security, social insurance, social assistance, and social welfare to enhance the sense of gain, happiness, and security for low-income groups.
Yue Ximing and Zhong Cong are from the School of Finance at Renmin University of China.
Edited by YANG XUE