Overview of the UEBPS

The current UEBPS reflects tremendous changes in the urban welfare regime. Initially, the regime was designed to deliver social security to the urban working population through work units. Up until the mid-1980s, urban workers’ pensions were provided by their employers through an enterprise-funded system.Footnote ¹² This system made pensions virtually immobile, since changing work units meant losing all previously accumulated pension benefits provided by former employers. With the restructuring of the urban labour market, a revised pension framework was introduced. The new framework was geared towards integrating the roles of various parties (government, employer and employee) in pension provision. It increased individual responsibility and defined government support as a last resort. Following pilot studies conducted in Shanghai and Guangzhou, a new urban pension system was rolled out nationwide in the late 1990s in place of the traditional enterprise-based one.Footnote ¹³ Pension responsibilities that formerly rested with enterprises had now shifted to local governments.

The UEBPS is financed by employers and employees in the form of monthly premiums, which are adjusted periodically (see Table 1).Footnote ¹⁴ A general trend is a moderate increase in the employee's contribution and a moderate decrease in the employer's contribution. Employees currently pay a premium of 8 per cent of their pensionable wage (PW) (column B), which is subject to the lower and upper limits of the contribution base (CB).Footnote ¹⁵ The CB is defined as the local average wage in the previous year (column A). The employer contributes a premium of 21 per cent of the employee's PW (column C). The employee's contributions are deposited into individual accounts (column D), along with any local government subsidies, collective subsidies and financial assistance from other socio-economic organizations. Contributions to individual accounts are credited with interest annually, which is based on the nominal interest rates on one-year term deposits declared by state financial institutions. Prior to 2006, part of the employer's contribution (about 12 to 14 per cent of the total contribution paid by the employer) was credited to individual accounts, with the rest being diverted to the local pension pool (column E). Since 2006, however, all contributions made by employers are paid into the local pool.

Table 1: UEBPS Premiums, Shanghai Municipality

Source:

Compiled according to data published on the Shanghai Municipal Bureau of Human Resources and Social Security website, http://www.12333sh.gov.cn.

Monthly-paid pension benefits (the cash amount provided to beneficiaries) comprise two components which are financed by: (1) the basic pension (jiben yanglaojin 基本养老金), which is payable from the local pension pool,Footnote ¹⁶ and (2) personal savings (geren yanglaojin 个人养老金), which have accumulated in the individual account. Payment is based on an annuity factor, which is set as a monthly “annuity” of 1/139th of the accumulated balance for those who retire at 60 and 1/175th for those who retire at 55. Nonetheless, pension benefits are paid for the remaining life term of the beneficiary. Once the reserve accumulated in the individual account has been depleted, the benefit will be paid out at the same rate from the locally pooled fund. Local governments take both the longevity risk and the risk of any shortfall in meeting benefit payments. Any remaining balance in the individual account when the insured beneficiary dies can be inherited by others. Participants who complete the vesting period are entitled to the basic pension once the statutory retirement age (60 for men and 55 for women) is reached.Footnote ¹⁷ Those who fail to meet the vesting provision can withdraw savings from their individual accounts for a lump sum payment but are not eligible for the basic pension.

Across the country, regionally-based pension pools formed along administrative lines (county, city, prefecture or province).Footnote ¹⁸ The function of a pension pool is to build up capital in order to compensate for any deficits if there are insufficient individual contributions and savings. The level of pooling is highly localized as a result of the decentralization of social spending and assignment of fiscal revenues, and only recently have efforts been made to create pools at the provincial level. China is among the most decentralized countries in the world when it comes to intergovernmental fiscal relations and government expenditures. Under the current tax-sharing fiscal system, subnational governments account for around 80 per cent of total budgetary expenditures and bear almost full responsibility for the provision of vital public services including education, health, minimum living guarantees, social housing, and community services.Footnote ¹⁹ City governments draw the resources to meet welfare commitments mainly from their own jurisdictions, resulting in a fragmented UEBPS, with various pension pools across different levels of government.

UEBPS membership does not distinguish between rural and urban, or along hukou lines. In an important move aimed at equalizing the entitlements of local and non-local workers, it was stipulated that the UEBPS should cover any migrant with an employment contract. However, various sources indicate that only a small portion of the migrant workers in urban areas with rural hukou are covered by the scheme. In Shanghai, which has been a magnet for migration, it was reported in 2015 that 3.5 million rural workers were enrolled in the UEBPS, corresponding to 35 per cent of all migrants in the city and 25 per cent of participants in the system.Footnote ²⁰ One survey found that, nationwide, 166 million rural workers employed outside of their hometowns had signed up for pension insurance as of 2013, with a participation rate of 15.7 per cent.Footnote ²¹ Other sources have reported membership gaps between migrant and non-migrant workers. By 2013, 25.3 per cent of migrant workers had joined the UEBPS, far lower than the 80 per cent participation rate of local workers.Footnote ²² By 2015, roughly 55.85 million rural migrant workers were enrolled in the UEBPS, representing 33 per cent of all rural out-migration workers.Footnote ²³ Assuming enrolees were all contributing members, they made up 16 per cent of all contributors to the system.

The fragmented UEBPS, which combines individual accounts with various pension pools, improves pension transferability but does not guarantee full transferability of long-term benefits. Individual accounts function to smooth labour mobility across employers within a local pension pool. Nonetheless, inter-pool moves are not addressed, because moving from one pool to a new pool results in the loss of accumulated benefits. Until 2010, no national guidelines existed for the transfer of accumulated pension rights between jurisdictions. If workers left the city where they had paid in contributions, their basic pension relationships were terminated and the accumulated payments from their individual accounts were refunded as a single lump sum. Migrant workers therefore experienced vesting loss, that is, withdrawal from the UEBPS before completion of the vesting period.

In 2010, regulations regarding pension transfers were promulgated to reduce the loss of benefits owing to labour mobility.Footnote ²⁴ These regulations took several steps towards improving the transferability of any entitlements by permitting the aggregation of contribution periods and the exportability of partial benefits in cases of labour migration across jurisdictions, thereby ensuring future vested rights to some extent. A worker can transfer the accumulated amount of the individual account plus up to 60 per cent of the contributions made by the current employer (i.e. exportability of 60 per cent of the pooled fund) to the new work jurisdiction. The pension relationship can be switched and the years of contribution in different jurisdictions can be totalized.

While pension rights are partially transferable, there are practical barriers. Eligibility for transfers is dictated by specific requirements, including age threshold, vesting conditions, and hukou registration (Figure 1). These specifics aside, what stands out is a sort of unequal treatment between entry to and exit from local pension pools. The eligibility requirements are skewed against establishing vested rights in the new pool. While transfer out of the current pool is relatively easy, transfer to the new pool seems much more difficult. Restrictions on rights transferability are further increased by the double vesting liabilities imposed on the disbursement of the basic pension benefit in any given locale. Specifically, access to the basic pension depends not only on the liability of 15 years’ totalization that aggregates all contribution periods in all jurisdictions but also on the liability of at least a ten-year period of contributions to the current pool.Footnote ²⁵ Those who complete the first liability but fail to satisfy the second can only return to their place of hukou registration to draw pension benefits. Heretofore, the requirements prevented workers from gaining better benefits in a place where they only made a short period of contribution but where the basic pension funded by the local pension pool was high. In short, the current transfer policy for pension rights means that the costs to the benefit can be raised at both individual and system levels. At the individual level, this refers to annuity loss: a migrant worker's accrued pension rights are calculated on the basis of the accrual income rate in the place where (s)he is entitled to draw pension benefits without taking full account of the income level in each of the places where (s)he made prior contributions to the UEBPS. At the system level, the current pension transfer regulations provide a windfall profit for the pool a worker leaves, but create a burden for the pool a worker joins, producing unfair financial redistributions across jurisdictions.

Source:  MHRSS and MOF 2009.

Figure 1: Conditionality of Pension Rights Transfer

Annuity Loss of Basic Pension at the Individual Level

In quantifying the transferable loss of pension benefits as a result of migration, the basic pension carries significant weight because it is not made for full portability in policy and because it resets the level of eligible benefits. First, pension benefits consist of two components: the basic pension and personal savings. While there is little difficulty transferring personal savings, the basic pension, financed by the employer's contribution, is not fully transferable. Second, the basic pension accounts for a large fraction of the total benefit. Table 2 shows that, of the total amount of pension benefit, the actuarial value of the basic pension was about two to four times as high as that of the personal savings. Ratio differences between columns suggest that the basic pension is more important for rural migrant workers who are often engaged in low-paid jobs and whose personal contributions to their pension are generally low.

Table 2: Ratio of the Basic Pension to Personal Savings

Source:

Calculated based on provincial pension parameters.

Note:

The estimates assume that workers contribute to the UEBPS for 15 years and then are entitled to pension benefits for 139 months.

Under the current rules, transferability loss at the individual level is a deduction of the actual basic pension from the amount that would have been paid if there had been no inter-jurisdictional moves during the working life of the UEBPS member. Assuming that the member makes one move only, the loss can be estimated by equations 1 and 2:

(1)$$P^a - P^b = \displaystyle{1 \over 2}\left( {W_{}^a - W_{}^b} \right) \times \left( {m + n + \sum\limits_1^{m + n} {R_i}} \right) \times 1\% $$

(2)$$\alpha = \left( {P^a - P^b} \right)/P^a = \left( {W_{}^a - W_{}^b} \right)/W_{}^a $$

Where P ^a and P ^b are the basic pension in the two different jurisdictions. The amount of transferability loss is correlated to years of contribution in the different jurisdictions (m and n) and a ratio of pensionable wage to the CB (R _i). The rate of transferability loss (α) depends on the difference in CB between jurisdictions (i.e. W ^a − W ^b).

Table 3 provides an overview of the possible loss of basic pension that rural migrant workers might suffer.Footnote ²⁶ Heilongjiang province is taken as a benchmark, simply because its CB is the lowest among all provincial units. By comparing Heilongjiang with other provinces, one can easily observe changes in the basic pension caused by inter-provincial migration. As shown, the impact on the expected basic pension would be negative or positive for a worker who moves to another province when compared to a worker who does not move. Column A identifies the potential losses (indicated by a minus sign) caused by moves from higher-income to lower-income provinces, while column B demonstrates the potential gains that result from the reverse moves. The reduction in the basic pension varies widely, ranging from 1.64 per cent (from Henan to Heilongjiang) to over 45 per cent of the full basic pension (from Beijing to Heilongjiang), depending on the actual income gap between the province a worker leaves and the province (s)he moves to. A higher gap leads to a greater reduction. Conversely, the basic benefit increases, ranging from 1.67 per cent (from Heilongjiang to Henan) to 82 per cent (from Heilongjiang to Beijing). According to the national average, the reduction and increase rates are 27.13 per cent and 37.24 per cent, respectively.

Table 3: Changes in Basic Pension Benefit

Source:

Calculated based on equations 1 and 2, and provincial pension parameters in 2014.

In practice, an increase in basic pension for rural migrant labour is an unlikely scenario. First, the dual vesting period prevents rural workers from gaining access to the basic pension with only a few years of contribution to the local pension pool. Following job opportunities, rural migrants move frequently and work in multiple jurisdictions. Many of them have a truncated history of contributions during their working lives and are therefore unlikely to surpass the vesting period in a specific city in order to access the basic pension.Footnote ²⁷ Consequently, their only feasible option is to retreat from the UEBPS and withdraw their payments from their individual accounts without entitlement to basic pensions.

Second, access to the UEBPS does not necessarily mean rural migrant workers become fully integrated into cities in socio-economic terms.Footnote ²⁸ Apart from the hukou system, many structural barriers still exist in the urban labour market, which makes it difficult for migrant workers to take advantage of the UEBPS. While rural-registered but urban-residing workers are eligible to participate in the UEBPS that is traditionally reserved for urban-hukou residents only, they work predominately in low-paid, unskilled and unstable jobs, often with many uncertainties in host cities. The UEBPS does not help much to ease social integration. Because of their urban inferior status, migrant workers from rural areas often maintain tight links with their rural communities and remain footloose in urban life. Like circular migrants in other parts of the developing world, migrant workers from the countryside often retire to their rural villages in their old age. Some of them have fulfilled the liability of the vesting period accumulated from the years of contribution in each of the cities where they have worked, but they can only withdraw their basic pension in their hukou-registered hometown, where the actuarial value of their basic pension benefit is usually much lower than that in the city where they paid in their pension contributions. Their retirement benefit therefore remains undervalued.

Incomplete transferability inhibits participation incentives.Footnote ²⁹ Those whose employment histories are spread over two or more different cities and who have contributed to multiple pension pools during their working lives suffer benefit loss. For example, two UEBPS members with the same history of contributions would receive different levels of pension benefit if one had spent all his working life in one jurisdiction while the other worked in more than one jurisdiction. Incomplete transferability has resulted in significantly less than anticipated future returns. By treating the UEBPS simply as severance pay – rather than as security against the risk of no income in old age – many migrant workers have remained outside the UEBPS.

Systemic Barriers to Pension Transferability

Two systemic impediments have been factors in the barriers to pension transferability: the unfair redistribution of the pension burden and the fragmented administration of the pension system.

Redistribution of the pension burden at the regional level

The current policy produces different distributive outcomes: the departure of a UEBPS member can bring about a financial advantage for the pension pool of the sending jurisdiction; the introduction of a member can impose a financial burden on the pension pool of the receiving jurisdiction.

Specifically, the financial advantage can be defined as the proportion of the employer's contribution that is not allowed to be transferred out of the local pension pool when the UEBPS member moves out of the jurisdiction. The amount (Q) and the rate (β) can be derived from an algorithm expressed in equations 3 and 4, if we limit our attention to the period of 1993–2015:

(3)$$Q = \sum\limits_{i = 1}^{22} {P_i \times \left( {w_i + e_i} \right)} - \sum\limits_1^9 {P_i \times 20\% - \sum\limits_{10}^{17} {P_i \times 23\%}} $$

(4)$$\beta = 1 - {{\left( {\sum\limits_1^9 {P_i \times 20\% + \sum\limits_{10}^{17} {P_i \times 23\%}}} \right)} \bigg/ {\sum\limits_1^{22} {P_i \times}}} \left( {w_i + e_i} \right)$$

Where P _i is the amount of the employer's contribution in year i, and w _i and e _i are the premiums paid by the employer and employee in year i, respectively.

Financial burden is an additional amount that is required for the liability of basic pension. This deficit is caused when the total contributions made by the new employer plus the amount of transfer to the local pool are insufficient to cover the future basic pension for the incoming UEBPS member from another jurisdiction, and is calculated using equation 5:

(5)$$T^b - T^a = \sum\limits_{i = n + 1}^{m + n} {(C_i^b - R_iW_i^a \times 12\% )} $$

Where T ^b is the amount of an employee's pension benefit paid by the pooled fund in jurisdiction b; T ^a is the amount of exportable pooled fund from jurisdiction a plus the employer's contribution in jurisdiction b; $C_i^b $ is the amount of the employer's contribution in year i in jurisdiction b; R _i is a ratio of pensionable wage to the CB; $W_i^a $, m, and n are denoted in equation 1.

Whenever UEBPS members transfer out of a jurisdiction, the move yields two gains for the pool they were affiliated with at the time. The first gain is the retained contribution in cash terms. As illustrated in Table 4, the retained contribution value per annum was much larger during the period of 1993–1997, worth more than 68 per cent and up to almost 90 per cent of the balance of the total contribution (the contribution paid by the employee plus that of the employer). This was because those who left the pool were not allowed to take away a substantial fraction of the contributions made on their behalf by their employers during that period. Financial gains to this pool were reduced after 1998 as a result of a reduction in pension portability losses, but they were still quite significant (from 19 per cent to 33 per cent). The second gain is the withdrawal of the financial commitment to provide pension benefits for potential pensioners. In addition to the significant amount of the employer contribution held by the pool, the sending jurisdiction would also be relieved of the responsibility for financing the future basic pensions of out-of-pool workers.

Table 4: Financial Advantage for Sending Jurisdiction (Shanghai Case)

Source:

Calculated based on equations 3 and 4, and Shanghai pension transferability provision.

While the monetary gains for sending jurisdictions appear substantial, receiving jurisdictions are typically disadvantaged in the current framework. The receiving jurisdictions bear the risk of financial burden, which is measured by the extra cost incurred in order to fulfil the basic pension commitment to the workers transferred to the local pool. The cost is the difference between the value of accrued benefits for potential insured workers (committed basic pension paid by the pooled fund of the current jurisdiction) and the total amount of social contribution (the contribution made by the new employer to the current pool plus intake transfers) (equation 5).

Owing to the actuarially unfair structure of the transfer system, additional financial cost is accrued by the receiving jurisdiction that admits workers transferred from the pension pool in another jurisdiction to the local pool. Table 5 presents the magnitude of this cost. Again, Heilongjiang province was chosen as a benchmark, for the same reason mentioned above. As shown, the arrival of a potential pensioner entailed a financial burden for the local pool (indicated by a minus sign). While all receiving provinces were suffering in the sense that their pension pools had to take on the extra burden of paying pension liability, the richer provinces seemed to suffer more. The magnitude of the burden is proportional to the income gap between the sending and receiving provinces. The larger the income gap, the higher the pension burden, since the basic pension, ostensibly funded by a local pension pool, is linked to income level. In Shanghai, the average annual pay-out from the local pension fund was 28,363 yuan per pensioner in 2015; pensioners in the central province of Shaanxi received one-fifth of that in the same year. Table 5 shows that a move from the second highest income province (Shanghai) to the lowest income province (Heilongjiang) yielded 210 yuan in pension arrears for Heilongjiang. For a move in the opposite direction, the arrears for Shanghai were 4,128 yuan, more than 19 times as large as in Heilongjiang. Only in cases where the income gap between two provinces is wide enough to allow the amount of transfer out of a higher-income province to offset the funding effect of a new liability in a lower-income province could the actuarial gain be achieved in the receiving jurisdiction (such as a transfer from Beijing to Heilongjiang in Table 5). Given the potential financial burden on the local pension fund, the rationale behind transferability conditionality is easy to understand, particularly from the perspective of receiving jurisdictions.Footnote ³⁰

Table 5: Redistribution of Pension Burden

Source:

Calculated based on equation 5 and provincial pension parameters in 2014.

Fragmentation of the UEBPS

More fundamentally, the fragmented administration of the pension system accounts for the transferability problems described above. China's pension system is fragmented owing to the existence of multiple pension pools and decentralized administration. Arguably, until national pooling becomes a feasibility, provincial pooling is a choice better than any other. Thus, one reform, pushed at the central level since the 1990s, is to broaden the scope of pension pools, from city or county level to provincial level.Footnote ³¹ In 1991, the State Council issued regulations urging administrative regions that had not implemented provincial-level pools to hand over their pension pools and administration functions to their provincial governments. Since then, all documents promulgated at the central level have repeated this goal.

Two unifications – of pension provisions and of pension governance – are envisaged for the integration of pension pools at the provincial level.Footnote ³² Unifying pension provisions should resolve technical issues, while pension governance is related to macro control. Unification in pension provisions refers to the standardization of eligible conditions, the CB, premiums, and benefit formulas within any given province. Concerns about unification in pension governance focus on consolidation of fund collection and (re)allocation, a uniform quality of services (such as pension insurance registration, account transfer and continuation), and centralization of service administration at the provincial level.

Table 6 shows that, by the end of 2014, all provinces (except for Guangdong) had implemented standardized premiums which were universally applicable to employers and employees within the province (Column A). That is to say, uniform mandatory rates of pension contribution from employees and employers had been established in all sub-regions of the province. Many provinces had also unified their policy standards for collecting funds, setting CB and benefit levels, and certifying qualifications for benefit-claiming. Nonetheless, out of China's 31 provinces, six had stipulated various CBs for their sub-regions to determine the amount of contributions (Column B). Also, in six provinces, criteria to decide pension entitlements and benefit levels varied considerably among the sub-regions (Column C).

Table 6: Pension Provision and Administration, by Province (as of 2014)

Source:

The authors’ compilation based on multiple policy documents. Taking Shanghai as an example, these documents include Shanghai Municipal Bureau of Finance, Shanghai Municipal Bureau of Human Resources and Social Security and Shanghai Municipal Bureau of Medical Insurance 2006; Shanghai Municipal Government 2007; Shanghai Municipal Bureau of Finance, Shanghai Municipal Bureau of Human Resources and Social Security and Shanghai Municipal Bureau of Health 2007.

Notes:

Abbreviations: Y (Yes); N (No); UPCBP (unification of premium collection and benefit payment); TLR (two-level redistribution); OLR (one-level redistribution); PBP (pension budget plan); PBMR (pension budget management regulation); HA (hierarchical administration); LA (localized administration).

Within a province, various practices existed within pension governance. In cases of shortfall, three models were operated to ensure adequate financing at the local level for meeting national mandates in pension provisions (Column D). Six provinces had established a unified fund-collection and benefit-payment model for fund allocation and redistribution. In this model, pension pooling is instituted at the provincial level, and fund collection and benefit expenditure are placed under the direct control of the provincial government. This strengthens the sovereign power of the provincial government to redistribute pension assets. Thirteen provinces were using the one-level redistribution model, which meant that fund collection and benefit expenditure were managed at the city or county level. If local pools experience deficits, the provincial government steps in with the necessary funds. The two-level redistribution model was implemented in 12 other provinces. In this model, the financial gap at the local level is plugged using two sources: the prefectural-level government and the provincial government. If the prefectural government lacks the fiscal capacity to meet the demand for financing pension entitlements, the provincial government then bears financial responsibility for local pensioners. The operation of the last two models indicates that many provinces had not at that time established pools with the capacity to cover the entire administrative area.

In order to improve budgeting processes and execution, all provinces had made their own annual pension budget plans (PBP) (Table 6, Column E). Nonetheless, pension budget management regulations (PBMR) were legislated and enacted in only eight provinces. Specifically, pension budget planning is merely financing planning through which the provincial government allocates line-item resources to its low-level governments. It does not play a significant role in monitoring budget execution. The legal base for the treasury function and accountability over the management of pension assets is rather weak. In comparison with pension budget plans, pension budget management regulations assign the provincial government more comprehensive oversight authority on spending, thus the provincial-level budgetary control increases accordingly. The regulations include control processes to manage pension revenues and expenditures. They evaluate performance and are implemented in an effort to harden the budget constraint for local spending units. Put simply, the provinces which introduced pension budget management regulations implemented more unified pension governance at the provincial level.

Table 6 shows that in terms of pension service administration, two different institutional modes existed: localized administration and hierarchical administration (Column F). As shown, localized administration was more predominant than hierarchical administration: only five provinces had adopted hierarchical administration.

In general, local pension services are executed under the aegis of the Ministry of Human Resources and Social Security at the central level and the corresponding social welfare departments at provincial, municipal, and county level. Under localized administration, pension services are administered mainly on a territorial basis. Social welfare apparatuses at different levels are linked by professional relations rather than by leadership relations. Professional relations require consultation on business issues and technical guidance from above, along administrative pathways, but implementation details are left to subordinate bureaus which are absolutely obedient to the local government. The upper-level apparatus does not have absolute policy authority (such as rule-setting for pension provision) over its subordinate. It is local governments who are in fact responsible for supervising and administering local pension matters.

Under the hierarchical administration, each territorial social welfare apparatus has leadership relations with the corresponding apparatus on the next higher level in the provincial administrative hierarchy, which means that the upper level dictates to the lower level and the lower level must obey. For example, the social welfare apparatus one level up has the authority to investigate the status of the pension revenue and expenditure, management and investment operation of the pension funds. That is to say, the upper-level apparatus has a strong role to play in such institutional arrangements. As a consequence, the mode of hierarchical administration can be considered as a more “centralized” policy implementation than the mode of localized administration.

Taken together, it is evident that, albeit still in progress, the central government's push for the integration of pension pools at the provincial level has not worked as intended. Thus far, only three provincial units (Shanghai, Tianjin, and Shaanxi) have operated a unified pool inside their jurisdictions. In seven provincial units (Liaoning, Shandong, Guangdong, Inner Mongolia, Hubei, Jilin, and Henan), city- or county-level units have remained the basic unit of pension financing and provision. Most provincial-level units have taken positive steps to establish a unified pool but have only managed to achieve unification in pension provision rather than in pension governance. The fragmented state of UEBPS has made pension transferability especially challenging, as jurisdictions differ in pension contribution, entitlement and governance.

Concluding Remarks

In analysing the UEBPS, this paper shows that poor transferability of acquired pension rights creates a conflict between labour migration and retirement security. We examine several barriers to labour mobility and entitlement accomplishment, including pension benefit loss suffered by migrant workers, unfair regional redistributions of the pension burden and the fragmentation of the pension administration system. Migrant workers, as we have seen, cannot fully preserve their accrued pension rights in the sense that they suffer benefit loss each time they switch between jobs in different cities. Those from rural areas pay pension contributions in high-benefit locales (for example, cities) but withdraw their pension benefit in low-benefit locales (for example, villages). They have to accept low replacement rates for their contribution payments. At the regional level, pension transferability may impose additional costs on the receiving jurisdiction when it receives UEBPS members who have transferred from another pension pool. Although the centre's goal is to promote a higher level of pension administration, the mission is in fact still a remote possibility. The locally-administered UEBPS works as an impediment to the complete transferability of pension rights because of the low degree of uniformity in pension governance across jurisdictions.

Given the massive scale of migration, a better understanding of rights transferability takes on intellectual relevance for migration and entitlement barriers in reform-era China. In the context of the Chinese political economy, state-regulated population mobility has long been considered as an important administrative instrument. Initially, the hukou system was established to serve as an invisible wall to prevent rural labour from leaving the countryside and to exclude rural migrants from the urban welfare regime. As a result, there was sharp differentiation between urban-registered residents’ entitlements and migrants’ entitlements. Since its implementation, the hukou system has undergone substantial reforms.Footnote ³³ Market-oriented reforms have diminished its intrusive role in controlling labour migration. Although migrant workers are still excluded from social assistance-type benefits (for example, urban unemployment allowance) provided by city governments, they are granted access to urban contributory benefits financed by themselves and their employers. While the functionality of the hukou system becomes less strong in curbing labour mobility and delineating welfare status, the transferability of social benefits seems more relevant in explaining the entitlement gap between rural migrants and urban residents. Our analysis shows that the welfare entitlements of migrant workers are constrained not so much by accessibility but more by the poor portability of acquired rights. This is a reflection of the fact that migration and entitlement barriers today may spring not so much from a particular form of hukou exclusion but rather from insufficient rights portability. Notwithstanding various reforms that make the hukou system less divisive than it once was in defining welfare eligibility in a particular city, vesting benefit entitlements remains skewed against the migrant population.Footnote ³⁴ Thus, a comprehensive understanding of the structural constraints of reform-era migration and entitlement attainment needs to take into account the transferability of social rights for migrant workers. Such an understanding should go beyond a narrow cognition of the hukou system per se; it also suggests that reform of the hukou system by itself will not be enough to improve the socio-economic status of migrants.

Our analysis shows that greater labour mobility across China is not compatible with the predominantly regional pension systems whose parameters, fund management, financing and governance are determined at the provincial or municipal levels. In order to promote universal social protection and build a well-functioning social security system that works better for migrant workers moving between urban areas, China needs to design standards for rights transferability that are equitable and more in line with the financial consequences of mobility. Even more importantly, China needs to knit its fragmented social welfare provision into a more coherent framework of support. These challenges appear daunting if not insurmountable. As recently shown by Li Zhang and Meng Li, for most cities, regularly available public resources are insufficient to meet the increasing demand for an ever-expanding scope of public services.Footnote ³⁵ Thus, an important issue of such reform that has emerged from this analysis is the recognition of the need for development of an integrated intergovernmental fiscal transfer system that will be capable of closing the financial gap, given that few lower-level governments have sufficient own-source revenues to finance the services for which they are responsible. The necessary reform thus has both redistributive and spatial dimensions. To finance pension transferability under the current framework, the amount transferred from the sending jurisdiction's pooling fund should be consistent with the additional financial cost accrued by the receiving jurisdiction. In the future, greater transferability would be complemented by elevating the pension administration to higher levels, first to the provincial level and ultimately to the national level.