Emergency pay fund for unemployed considered

50% of toy firms 'gone in 2 years'

By Zhan Lisheng (China Daily)
Updated: 2008-10-22 07:27

GUANGZHOU: Authorities in Guangdong will consider setting up an emergency fund to protect workers against losing their wages in the event of further factory closures, the provincial labor and social security department said on Monday.

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50% of toy firms 'gone in 2 years'

Responding to a resolution put forward by a member of the provincial political consultative conference, the department said in a statement that the feasibility of such a fund will be considered and that financial departments at various levels will likely contribute to it.

The fund will primarily be used as insurance against firms going bust or unscrupulous bosses absconding, the statement said.

Zhang Xiang, director of the labor department, said in the statement: "From time to time, the boss of a company in financial trouble will flee and leave his debts behind, and that creates turmoil.

"In the current economic climate, there is a good chance that more companies, especially labor-intensive ones, will collapse.

"This fund would help protect against some of the financial and social problems caused by such closures."

Zhang said that traditionally, companies paid a premium, on top of their rent, to the owners of the factory buildings they occupied.

In the event of a firm suffering financial difficulties, or the boss absconding, this money could then be used to cover wage payments for the workers.

"But the funds were seldom big enough to cover the total wage bill," he said.

The labor department has also been urging firms to start paying their workers via bank transfer to enable closer monitoring, he said.

Furthermore, the department is currently seeking to work more closely with other local bodies, including the people's bank, industrial and commercial administration, and the foreign trade and economic cooperation department, to develop a better picture of companies' credit ratings.

Not everyone, however, believes the insurance fund is a good idea.

Li Qingqing, an associate professor of economics at South China Normal University, told China Daily yesterday: "Taxpayers' money should not be used to support failing businesses.

"An infinite amount could be lost if firms continue to go out of business.

"Instead, companies should be made more responsible, perhaps by paying some form of premium when they apply for registration."