China has announced plans to lay off more than a million workers in the railway sector by the year 2000. This would amount to about a third of the current workforce. It is the latest in a series of cutbacks announced in the state sector, which officials say employs millions more workers than it needs. Workers made redundant as a result of the overhaul have been assured of government help in finding new work as well as financial assistance. But as our Chinese affairs analyst James Miles reports, the country's fledgling social security system is still unable to provide adequate long-term support for many of the unemployed.

The Chinese government's decision to cut the railway sector's workforce by more than a million people in the next two years is part of an increasingly determined drive to make state owned enterprises more profitable by laying off surplus staff. It's a step that Beijing feels it has little choice but to take. With more and more state-owned industries running at a loss, the government is finding itself financially crippled by the cost of propping them up.

Chinese officials acknowledge that streamlining of these industries will be a painful process. One reason for this is that China is still only in the early stages of setting up a nationwide, government-sponsored social security system. In the past, the welfare of workers was entirely in the hands of their employers. The staff of state-owned enterprises were given medical and housing benefits as well as pensions after retirement. Workers made redundant would continue to receive such benefits as well as a basic wage until they found new work.

Now, however, many state-owned industries are so burdened with debt that they can't afford to keep on supporting their existing staff, let alone retirees and those they've made redundant. Workers in China increasingly complain of the difficulty of getting employers to pay in full for medical care. Some enterprises are unable even to pay wages.

There've been increasing reports of strikes and demonstrations by workers or former workers in state owned enterprises triggered by grievances over social security benefits, which, according to a 1994 Labour Law, they're entitled to receive. This is undoubtedly why Beijing keeps emphasising that reforming the payment system is a top priority.

At present, fewer than half of China's cities pay subsistence benefits to those living below the poverty line. Beijing wants to extend this practice nationwide by the end of the century. But it allows local governments to decide how much to give based on the local cost of living, and often the amount is only a fraction of the worker's former wage.

The government is trying to encourage more workers to buy unemployment insurance. It's also ordered bankrupt enterprises that sell off their assets to make compensating their employees their top priority. But Beijing's orders are not always heeded. There have been hints in the official media that some cash-starved local governments have been diverting funds earmarked for unemployed workers and pensioners for other purposes.

In the coming year, the problem of providing social security is likely to become an even more prominent one in China as increasing numbers of state-owned enterprises cut their staff or close down altogether.
 

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