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Introduction of Urban Poverty Reduction in China

Introduction of Urban Poverty Reduction in China. Huidong Zhang International Poverty Reduction Center in China 2005.12.8. Content. Preface Preview of China urban poverty Determinants of poverty Urban poverty reduction polices in China

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Introduction of Urban Poverty Reduction in China

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  1. Introduction of Urban Poverty Reduction in China Huidong Zhang International Poverty Reduction Center in China 2005.12.8

  2. Content • Preface • Preview of China urban poverty • Determinants of poverty • Urban poverty reduction polices in China • Features of poverty (poverty reduction) in urban areas and in rural areas

  3. 1.Urban poverty is an emerging issue in the developed economy and society of China. 1.1 Urban poverty is a newly tapped issue compared with rural poverty. 1.2 Negative effects of economic transition and market-based economic system ☆Economic transition caused restructuring ☆Negative effect of market economy: enlarging gap between rich and poor ☆Correlation between economic growth and wealth gap 1.3 It is an important issue to be addressed in building a harmonious society The eradication of urban poverty is the mandate of a socialist society, a foundation for coordinated development and a requirement in setting up the market-based economy.

  4. 2 Preview of Urban Poverty in China 2.1The root and evolvement of China urban poverty 2.1.1 In a centrally-planned economy——urban poverty was beneath the surface 2.1.2 At the beginning of reform and opening-up(1978—1990):urban poverty was taking shape 2.1.3 Reform on full swing（mid-or-late of 1990s-now）：urban poverty was rampant

  5. 2 Preview of Urban Poverty in China 2.2、Magnitude and composition of urban poor 2.2.1Magnitude The standard adopted to measure urban poor in China was the minimum security line in each areas: necessities, prices Number below the line in 1997：2 million； Number below the line in 2003：22.468 million Song and Qi（2005）：those below the low income line numbered 50.21 million and among which those with difficulty numbered 25.1 million

  6. Fang Cai（1998）：Assessed by household expenditure：37.07 million Assessed by household income：14.77 million UNDP（2004）：Urban poverty incidence began to rise rapidly since the 1990s. Official statistics showed the total urban poor reached 19.3 million by mid of 2002, an equivalent of 4% permanent urban residents，(floating population not included). Mei and Qin：Two views：Ⅰ.16-18 million as concluded by Ministry of Civil Affairs, National Bureau of Statistics, All-China Labor Union and experts from Asian Development Bank. Ⅱ.Over 30 million which is more popular in academies The White Paper on the China Social Security and Relevant Policies：The number of poor entitled the urban minimum security allowance is 22.47 million and if those neglected were added, the number of urban poor may reach 30 million. Conclusion: China urban poverty shall be between 25 million and 35 millnio.

  7. Changes of Urban Poverty in China Source：Hong，Urban Poverty in China Since the Reform and Opening-up，2003

  8. 2 Preview of Urban Poverty in China 2.2、Magnitude and composition of urban poor 2.2.2 Composition ◎Laid-off workers from State-owned and collective-owned enterprises dominate the total urban poor: ◎Old and childless people entitled to social relief are called Three-no-people: with no provision, no labor ability and legal supporter ◎Newly-added unemployed ◎Workers not included in official employment framework: migrant workers from rural areas

  9. Various types and corresponding proportions of these types of urban poor Source：From Statistical Statement by Disaster Relief Department, Ministry of Civil Affairs and excerpted by Song and Qi in October 15, 2002 Others：Those without social insurance, those with disease, those with low or no income and those coming to cities for a job. A survey by All-China Labor Union showed 21.9% of urban poverty come from East China and 25.2% from mid China.

  10. 2 Preview of Urban Poverty in China Resource：China Statistics Yearbook，2003 and 2004。 2.3Livelihoods and Development of Urban Poverty 2.3.1 Low income and single source of income Per Capita Disposable Income of Urban Households（2002——2003，Yuan）

  11. Per Capita Annual Living Expenditure of Urban Households（2002——2003，Yuan） Source：China Statistics Yearbook，2003 and 2004。 Source of income: Salary from State-owned or collective-owned enterprises, benefit from self-employed and non-official business and social transfer payment.

  12. Average income of Staff and Workers in Various Enterprises（2001——2002） Source：China Statistics Yearbook，2003。

  13. 2.3.2 Basic living demands dominates the total consumption . Low expenditure, unreasonable composition of consumption, excessive proportion of food and insufficient expenditure on social service Composition of Per Capita Annual Living Expenditure of Urban Households（2003 ，%） Resource：China Statistics Yearbook，2004。

  14. Per Capita Annual Purchases of Major Commodities by urban Households classified by Income level（2002） Resource：China Statistical Yearbook 2003.

  15. Number of Durable Consumer Goods Owned Per 100 Urban Households at Year-end by Level of Income（2002） Resource：China Statistical Yearbook 2003.

  16. 2.3.3 Large scale of poor households, high burden Employment Condition of Urban Households（2003） Resource：China Statistics Yearbook（2004）

  17. 3、Determinants of Urban Poverty 3.1 The result of economic transition and following restructuring 3.2Underemployment 3.3Incomplete Social Security System 3.4Unequal income distribution

  18. 3、Determinants of Urban Poverty 3.1 The result of economic transition and following restructuring 3.1.1Strategic restructuring of state-owned economy State-owned economy is declining in its share of national economy aggregate with weaker competitiveness: less employees being absorbed and less new workers Junior laborers more and more prevail the state-owned economy, especially in Northeast, mid and northwest. The rise of non-public economy relieved unemployment pressure but no without concerns. 3.1.2 Consequence of Restructuring Primary industry lowered its share. A large number of laborers broke away from agricultural production and stormed to cities which caused environmental deterioration and new low incomers

  19. Secondary industry upgraded its structure ahead of schedule, in which capital replaced labor. Tertiary industry can hardly absorb laborers, especially in those mid and small sized cities in northwest, northeast and mid China. 3.1.3 Negative effect brought by fluctuation of macro-economy Between the end of the 1980s and the mid and late of the 1990s: inflation of commodities closely related to daily life Between mid and late of the 1990s and the early 21st Century: deflation which constrain the increase of income

  20. 3、Determinants of Urban Poverty 3.2 Underemployment: Direct cause of urban poverty Large number of unemployed, rising urban registered unemployment rate each year, actual unemployment rate in urban areas 10 times as much as registered number (wang and shen，2005) Surveys showed: households with unemployed members account for 13.2% of total households: those without account for 2.8%（xue and wei，2004) Redundant laborers remain huge with basically low qualification. Large gap between labor supply structure and that of demand. Invisible unemployed: Staff in stagnant or semi-stagnant operation Rapid increase of new laborers can not be sufficiently absorbed by various industries. Rural population poured into urban areas, adding to the already severe unemployment. Unemployment is worse in mid and west China than in east areas.

  21. Actual Unemployment Rate in Urban China（%） Source：Wang and shen，2005 Note: the actual unemployed include registered unemployed, laid-off workers and invisible unemployed

  22. 3、Determinants of Urban Poverty 3.3 Incomplete Social Security System ◎Narrow coverage of social security: those who are entitled to security are not all included ◎Low security level and few security items ◎Low social awareness, low payment rate of security fee. ◎Single source of security funds ◎Higher incomers get better social security service and vice versa. ◎Social security is excluded from the reform agenda of other sectors which results in the high cost and heavy burden on poor households even if they received the security.

  23. 3 Determinants of Urban Poverty 3.4 Unequal income distribution 3.4.1 Enlarging income gap during the early of economic growth Economic rule: during the economic growth, a country would undergo a period of gap enlarging followed by gap narrowing as it transformed from a laggard agricultural country to an advanced industrialized country. China is in the early days of the above-mentioned period. 3.4.2 Unequal income distribution in China Rapid economic growth, enlarging income gap, unequal distribution of benefits from development

  24. Comparison of economic growth and Gini coefficient during 1995-2004 Estimate may be different from one another, but they are common in the general judgment that all the figures are rising year by year.

  25. Consequence：The poor are bereft of the ability and possibility to share the benefits from economic growth and they finally turn to social security for help. Evidence： Enlarging income gap among urban residents Enlarging income gap among various social sectors Enlarging income gap among areas; unbalanced development On the other hand, the basic living cost is rising too fast, so that the poor are harder to make living than the rich. Cost of education, medical care and housing

  26. Average income by Sector（2002）

  27. Resource：China Statistical Yearbook 2003.

  28. 4 Policies to reduce urban poverty 4.1Features of policies 4.2Policies and measures 4.2.1Increase employment 4.2.2Security system for laid-off workers 4.2.3Unemployment insurance 4.2.4Minimum security system for urban residents 4.2.5Public services and social relief 4.2.6Other policies Changes：4.2.2、4.2.3、4.2.4 are regarded as the three major lines of security，4.2.3 and 4.2.4 shall take their place shortly，laid-off issue and unemployment insurance issue shall be unified to one issue 4.3Emerging challenges in the new century

  29. 4 Policies to reduce urban poverty 4.1Features of the policies ☆Create favorable conditions for employment and market access ☆The goal is a highly-efficient social security system in a market-based economy: direct transfer payment and social pooling ☆Government guidance ☆Mobilization of social resources ☆Coordination of social resources

  30. 4 Policies to reduce urban poverty 4.2Policies and measures 4.2.1 Policies of increasing employment （1）Content：Reemployment of laid-offs and unemployed, employment of newly-added laborers （2）Measures： A. Reemployment projects B. Industrial restructuring, expanded employment sectors and number C. Improve reemployment service system

  31. 4.2 Policies and measures 4.2.2Basic livelihood security system for laid-off workers （1）Inception： In 1998, the Central Party Committee and State Council issued a note that under the basic livelihood security system, employers shall establish reemployment center or similar institutions for the laid-off workers from enterprises, provide them with allowance and pay the pension, medical and unemployment insurance fees for them. （2）Executors： Reemployment centers in all sectors，托管下岗职工。 （3）Approach： Deliver allowance to laid-offs by month, with no exceeding of 3 years; pay the insurance fees for the laid-offs; instruct or train the unemployed to help them find a job. （4）Source：government input 1/3；employer 1/3；social pooling 1/3。

  32. Financing and Expenditure of Re-employment Service Center（2003）（100 million Yuan） Resource：China Labor Statistics Yearbook 2004。

  33. 4.2 Policies and measures 4.2.3 Unemployment insurance （1）Inception： 1986：Tentative Regulation on Temporary Unemployment Insurance for State-Owned Enterprise Laid-off Workers 1999：Regulation on Unemployment Insurance A social system to provide material support and reemployment opportunity for those involuntary unemployed. （2）Approach：Execution by legal force, and insurance funds established by society （3）Coverage：Staff of all public units and enterprises throughout urban China. It covered 96% of all workers in 2002 and 99% in 2003. （4）Evolvement

  34. 4.2 Policies and measures 4.2.4 Minimum security system for urban residents （1）Inception: Pilot in 1993，established by the government in 1997, the relevant Regulation on minimum security was promulgated in 1999. The government shoulder the responsibility to provide relief for those who can not survive even when they have received medical benefit, unemployment insurance, pension and the income above the official minimum income line. （2）Source：Local financial budget, fund earmarked for social relief, etc. （3）Standard：Up to the local particularities, allowing for changes of the necessities items and their prices （4）Execution：Applied by individuals, inspected and approved by government A. Those urban residents without provision, supporter or provider for their livelihoods are entitled to full allowance B. Those with meager income may cover the gap between their income level and local minimum security level with the corresponding amount of the allowance.

  35. Number of Poor Receiving Minimum Security Allowance in Urban Areas（10000 Person） Any changes happening to their income, the allowance may be pended, reduced or increased. Local governments shall support them by instructing them of employment and self-employed business apart from the delivery of allowance. Open to the public and supervised by the public proportion of minimum allowance in the aggregate government budget：0.11% in 1998，0.48% in 2002 Central finance input 9.2 billion RMB in 2003；local finance input 15.1 billion RMB In 2003，930 households were benefited, among which 1.793 million on job, 5.184 million laid off, 907 thousand retired, unemployed 4.091 million and three no people 9.999 million.

  36. 4.2 Policies and measures 4.2.5 Public service system and social relief system Domains relevant：Medical care, education, employment, housing and disaster relief. A. Targets: Those who are entitled to low income insurance, extremely poor staff, low income retirees, laid-offs, chronicle unemployed, poor with disease. Projects：medical care and medicines Resources：government input and social pooling. B. Education support：Free occupational training Retraining to farmers with land lost, migrant laborers and disabled. C. Policies of disaster relief：Material donation and service to the disaster-stricken poor Number of poor having received emergency relief in urban China ( 10 thousand person time) Source：China Statistics Yearbook 2003。

  37. Number of Social Welfare Institutions and Enterprises（2002）（Units） Resource：China Statistical Yearbook 2003.

  38. Basic Statistics on Social Welfare Relief Funds（0.1billion RMB） Resource：China Statistical Yearbook 2003。

  39. Regulation on Managing the Poor with No Livelihoods in Urban Areas ☆In 2003, government announced to support the vagabonds and poor without livelihoods in urban areas. ☆Local governments set up relief stations with the fund needed by the stations put into government budget ☆Public security, health, transportation, railway, urban security management agencies. ☆Items to be provided: ⅰfood；ⅱhousing；ⅲmedical care；ⅳcost of travel back home ☆County government shall take steps to address the production and living problems, raise the awareness of people to support and take care of the disabled, youth and the elderly.

  40. 4.2 Policies and measures 4.2.6 Other policies A. Fiscal policies： Special financial input Increase the proportion of government input in the total fund Tax policies：adjust the total amount of tax collected from the poor and others and some preferential taxation policies to the poor. B. Monetary policies： Credit preference to labor-intensive, medium and small sized and self-employed enterprises. C. Income distribution policies： Interfere the first time distribution in a reasonable way and adjust the structure of second time distribution.

  41. 4.3 Emerging Challenges 4.3.1Raise poverty standard to refine the targets. 4.3.2Poverty of mobile population 4.3.3Neglect and exclusion of vulnerable groups: unofficial groups 4.3.4Complete social security system：Expand coverage and improve fundraising

  42. 5 Difference of poverty (poverty reduction) in urban and rural areas 5.1 Difference of determinants Rural：Low agricultural revenue Poor production and living condition High burden Unreasonable resource distribution （Economic transition brings positive effect） Urban： Negative effect of economic transition Incomplete social security system Unreasonable resources distribution among different income groups

  43. 5 Difference of poverty (poverty reduction) in urban and rural areas 5.2 Difference of poverty reduction strategies Rural：Enhance productivity Promote rural development: improve production and living conditions. Reduce burden on farmers Distribution of public resources in favor of rural areas Complete rural market economic system Urban： Promote employment Eradicate polarization of rich and poor Complete social security system Eradicate public resource distribution problems

  44. The End！

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