What determines employer willingness to “top up” social insurance? Evidence from Shanghai's 25 plus X scheme

The purpose of this paper is to examine the factors predicting which employees receive employer‐funded commercial pension insurance contributions in Shanghai's zhenbao (town insurance) program, introduced by the Shanghai Government in 2003.

A series of hypotheses are developed to examine whether employees with characteristics that make them more influential constituencies will be more likely to receive voluntary commercial pension insurance contributions. The hypotheses are tested through application of a ReLogit model to data on 103,095 employees enrolled in the town insurance scheme in one district as at the end of 2004.

The study finds that only a small proportion of individuals in the sample receive commercial pension insurance. The most important determinant of whether an employee received commercial pension insurance is his or her level of education.

The study provides support for the societal corporatist perspective that employers who place a premium on human capital and invest significant resources in the skills of their workers will favor social policies that target benefits to a selected group of workers to reward their performance and foster commitment. A limitation of the research is that it is based on data collected soon after the town insurance scheme was introduced. The low level of employee coverage may improve once employers become more familiar with the operation of the scheme.

Employers should consider social insurance as a labor market strategy to retain staff and enhance the human resource base of the firm.

Little attention has been given to the role of employer‐funded social insurance within the ambit of labor market strategies designed to enhance the human resource base of the organisation. This is the first study to use micro level data to examine the determinants of voluntary employer contributions to social insurance.