From Demographic Dividend To Reform Dividend
Chapter 11: Labor market institutions and social protections
The Duke of She asked the best way to govern. The Master answered: “it is what satisfies those who are governed and attracts those who are not.” (The Analects of Confucius) Alongside China’s rapid economic growth, the Chinese government has implemented a nationwide program of poverty alleviation in rural areas, increased labor mobility, strengthened labor market regulations, and established social safety nets for vulnerable people in rural and urban areas. For over three decades, however, the Chinese government’s main priority has been to promote economic growth rather than to provide social protections. China’s progress in the provision of social protections and public services has lagged behind its economic performance. Additionally, a significant gap still remains between rural and urban residents’ access to public services and social protections. One of the lessons China should draw from the experience of middle-income-trap countries is that the middle-income level of the developmental stage entails many social risks. Both theories and experiences indicate that the inequalities present in the insufficient provision of social protections in developing countries are not just due to constraints on governments’ financial capacity, but also caused by a lack of incentive for the government to devote adequate resources to provision in social areas. Since both capacity and incentives alter as the stages of development change, it will be useful to explore how the Chinese government’s social protection policies change as the national economy enters its new stage.
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