Only five years ago, Zhang Qianjiang - now 50 - had never felt any job pressure. He had taken for granted that his company, a State-owned construction-material maker based in Deyang, a relatively-affluent city in Southwest China's Sichuan Province, would guarantee life-long employment and "cradle to grave" welfare.

Workers unload a roll of tin plate at a steel plant on the outskirts of Shanghai. Some of China's SOEs have chosen to terminate their contracts with redundant employees to enhance their competitiveness. [Reuters]

But since the summer of 1998, the implicit promise had changed to explicit warnings of being laid off as mounting market competition forces Zhang's company to improve efficiency by, among other things, cutting jobs.

Zhang is one of the "lucky" ones - despite losses during the previous three years, about 200 workers, including Zhang, have kept their jobs.

"I was nevertheless told at the beginning of this year that I will be fired," says Zhang, whose wife is a housewife, and son, a college undergraduate in the provincial capital of Chengdu.

The enterprise recently decided to terminate 50 redundant workers with a one-time compensation, to be paid in accordance with their length of service.

Zhang says he has worked for 20 years; and his payout would amount to 11,000 yuan (US$1,325), with 550 yuan (US$66) for each year of service.

"The compensation is meagre," complains Zhang. In normal course of events, his retirement would have been 10 years away. To secure a stable life after 60, 1,110 yuan (US$132) has been put into his pension fund account each year, he and his employer contributing half each.

But with his 11,000 yuan compensation paid by the local government through his factory in the equation, his employer will stop paying its half of his pension fund once employment is terminated. And the compensation is just enough to pay for his pension benefit till he reaches 60.

"Supporting my wife and son's schooling is really a big problem for me," Zhang laments.

He says most of the 50 soon-to-be-sacked workers are in the same dire situation: They will no longer live with a sense of security. The one-time compensation by no means ensures a long-term stable life for them.

Common story

Even though the newly-reviewed Workers' Union Law askes decisions to cut redundant employees to be approved by the workers' unions first, stories similar to Zhang are becoming increasingly common in many cities.

By 2002, more than half of China's 159,000 State-owned enterprises (SOEs) had launched reforms; and the once monolithic State ownership of about 85 per cent of the country's small SOEs has pluralized.

"Nearly half of China's SOEs have been closed," Li Rongrong, minister in charge of the State-owned Assets Supervision and Administration Commission (SASAC) under the State Council, said recently.

Experts believe that although some workers in shut-down SOEs have been given one-time compensation, they are still out of the social security network. There is no official statistics on how many workers received such payouts but experts believe at least 20 per cent of China's restructured SOEs have adopted the practice.

Lin Yueqin, researcher with the Chinese Academy of Social Sciences, says that Zhang's plight will be repeated in many parts of the country.

He predicts more workers will share the fate of Zhang.

"But the practice is in conflict with government policy," says Lin.

According to the law, local governments or enterprises are required to share the pension payments with jobless workers till they reach 60.

As China moves from the planned economic system to a market economy, the oversupply of labour has seen State enterprises stuck with surplus employees, whom the State enterprises find a heavy burden.

They have had no other choice but to aggressively trim the numbers of redundant employees to enhance efficiency, which has led to massive lay-offs.

Some enterprises, which did not have an efficient social insurance system, were asked to set up re-employment centres to take care of the laid-off workers. The workers are allowed to stay in the centres for at least three years, being paid by at least 50 per cent of their previous salary and getting skills training for new job opportunities. If they don't find work within three years, they get jobless benefits after they leave the centres.

Re-employment

Thanks to these re-employment centres, shocks to society caused by massive layoffs have been cushioned to the minimum.

But some SOEs did not set up such centres, ending labour contracts with one-time compensation.

But the central government has decided to phase out re-employment-centre measures by this year. It means that some of the laid-off workers from State enterprises have been transferred to new work positions, or transferred to the management of unemployment insurance departments under local governments.

In either case, the labour relationship between the workers and their original enterprises have been terminated. It is the responsibility of the social insurance department to take care of the unemployed in the future.

"But in practice, some workers will not receive such insurance benefits because local governments and their enterprises want to compensate them once and for all," says Lin, pointing out that the practice has at least two-fold disadvantages.

"If they are not brought into the social security network, how do they spend their life after getting old?" he asks.

While the number of people currently over 60 stands at 132 million, the figure is expected to climb to 400 million by 2050.

By that time, the number of people over the age of 80 will increase to 100 million from the current 13 million. And the elderly population of China is forecast to grow by 3.2 per cent every year.

"The practice today will cause more serious problems among those people who are not under the coverage of social benefits and it will become a serious social problem for China," says Lin.

Tang Jun, vice-director of the Social Policy Research Centre under the Chinese Academy of Social Sciences, says urban poverty is mainly considered to stem from restructuring of State-owned enterprises.

"They are poor because of a lack of job opportunities and social security," said Tang.

According to Tang, 75 per cent of impoverished urban residents are laid-off workers, unemployed people and employees in troubled enterprises.

Medical treatment

"Medical treatment is the biggest problem for those people now," says Tang. "Another is education fees for their children."

According to rules, school fees for children from impoverished families should be reduced or waived.

"But during our investigation, we found that many places didn't follow these rules and some children hide the truth from their families because of a sense of shame," says Tang.

Last month, the chairman of the Social Security Council, Xiang Huancheng, vowed to expand the coverage of social welfare in urban areas and increase aid to the poor this year.

Xiang, former finance minister, said the government would grant low-income allowances to employees in troubled State-owned enterprises sustaining perennial losses or having stopped production for a long time.

This type of employees are currently out of the reach of government subsidies. Generally, retired and laid-off workers of State-owned enterprises and urban residents living under the poverty line receive government assistance.

Lin Yueqin of the Chinese Academy of Social Sciences also says the one-time compensation will add a financial burden for SOEs.

Generally, half of the compensation for workers comes from government and the other half paid by the enterprises. "Some of the enterprises have already been in debt for years and this will make them go from bad to worse."

Fortunately, some provincial governments such as those in Liaoning and Yunnan have enacted measures to stop such practices; they have decided to bring all jobless workers under the protection of social security.

Governments at all levels doled out more than 7.1 billion yuan (US$855.42 million) during the first half of last year to more than 21 million urban residents who are living below the minimum subsistence levels.

"Finding jobs for the jobless is the most active form of social security," says Lin.

But it's hard.

The country will face an aggravated labour oversupply as the number of new job seekers entering the labour market is expected to reach about 15 million each year between 2003 and 2020.

Meanwhile, only 8 million jobs can be created annually even if the economy maintains a growth rate of 7 per cent.

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