Thursday, June 14, 2012

Chinese Work Comp Surprisingly Similar

Yesterday I posted on Facebook a link to a horrific photo in the Wall Street Journal of a Chinese construction worker getting steel bars cut from his body - the look on the faces of the people helping conveys the sheer terror of the situation.

The photo is here (I am unsure if this is subscription content, so it may not work):

I wondered if China had workers' compensation - turns out it does.

China passed a workers' compensation law that took effect January 2004. While workers' compensation is "voluntary" in China (until "ordered"), employers that do not subscribe to the insurance program are required to pay the same benefits available through the program.

Sort of like the Oklahoma non-subscription model that didn't pass this year with some key differences.

But China is different because such a large percentage of the population works for the government or the military. About half of the population is still agricultural.

China's work injury protection history follows a similar path to Western cultures that have workers' compensation systems and it is rooted (pun intended) in the transition from agricultural to industrial economies, and in China this means a transition from a command economy (where the government decides what is done, when, and with what resources) to a market economy.

It turns out that China, prior to its Cultural Revolution (between 1966 and 1976), had an employment insurance system which included work injuries. This system was interrupted by persecution of dissidents and the Cultural Revolution, and then beginning around 1978 the economic transition started.

This transition saw the migration of workers from agricultural regions to urban regions as the economy required more labor to build things, rather than feed themselves. At first these migrating agricultural workers were seen culturally as less than equal (sound familiar?) - they had low levels of training and skills, and consequently high rates of accidents and deaths on the job. These people were regarded as peasants and were not covered by insurance though arguably they were the most in need of some form of work injury protection.

While this migration pattern was going on there was also transition in State-owned Enterprises (SOE). Laws were changed as the economy moved from command to market based, and as a consequence SOEs had to compete on a cost basis with market based companies. This meant that savings were sought everywhere possible, and thus worker safety was secondary to company profit.

In 2004, with China's manufacturing economy rapidly growing, the government's Regulations on Work Injury Insurance became law. All employers are required to participate with insurance funded solely by employer premiums, which are generally less than 1% of payroll, with different rates based on classifications. Both injury and illness is covered and it is administered through the Work Injury Insurance Board affiliated with the Labor Department.

For employers that paid into the system as requested the insurance would pay for most compensation items such as medical expenses, lump sum indemnity, monthly pensions, survivor's benefits - there is no loss of earning compensation though - employers are required to maintain wages during the period of medical treatment. In addition an employer can not terminate an employee during the period of medical treatment and if an employment contract ends during that period the law requires its continuation until the end of the medical period.

For employer that did not pay into the system they would be "ordered" to do so - the penalty for failure to do so is that if a work injury occurred during the period of non-insurance the employer would be liable for all benefit just the same as though they were part of the system.

Benefits under the Chinese system are similar to Western systems, though probably with less subjectivity and more concrete divisions in levels of, for instance, permanent disability. Medical expenses are advanced by the employer or injured worker and then are reimbursed by work injury insurance. As mentioned above, wages are maintained so there is no lost earnings paid (thus no "temporary disability"). And permanent disability is paid via a lump sum system that is based on "degrees" of disability.

There is a bifurcated dispute resolution system in place depending upon whether the employer pays into the system or not. If the employer pays into the system then any dispute is between the injured worker and the Work Injury Insurance Board. If the employer is a non-subscriber then there are two systems: compensability is determined in an action by the injured worker to the Work Injury Insurance Board. But compensation matters are treated the same as labor disputes, with mediation, then labor arbitration, then litigation with review by a higher court.

And like counter parts in the West the system is subject to "reforms". And like in the West employers carry on about the cost and how it inhibits competition while Labor fights for fair treatment and working conditions.

There is one very big important difference from the Chinese model and the Western model that stems from how the different governments work: the Western model is a provincial level system - meaning that each state has its own system, and even different Federal risks have different systems (e.g. LSHW, DBA, etc.). But the Chinese system is national in scope - the provinces do not have separate systems. 

I have obviously glossed over the Chinese workers' compensation system, and certainly there are experts who probably should correct my many generalities here.

What I find of particular interest is that, even though it was established after almost 100 years after the Western model was established, how similar the system is with nearly the same types of benefits and detriments. 

It turns out that humans are all the same - regardless of whether we live in the East or the West, motivations, emotions, the process of life are no different.

What we have in the US may just turn out to be about as good as it can get. It may not be perfect, and there will always be disputes, but if the Chinese had 100 years to figure out something better you'd think they would - and it turns out they haven't...

A very good PowerPoint slide show on the Chinese workers' compensation system is available for download from the University of Ottawa's website.

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