A Research on the Impact of the Social Security Payment Burden on the Survival Risk of Chinese Enterprises

Abstract

For a long time, most enterprises in China’s market are facing a greater withdrawal risk, and their average life span is relatively short. The impact of the social security payment burden on the survival risk of enterprises has been a hot topic of social concern. Based on the theoretical analysis, this paper examines the impact of the social security payment burden on the survival risk of Chinese enterprises and its mechanism by using the method of propensity score matching and Cox proportional hazard model. The results show that under the condition of other factors unchanged, the increase in the social security payment burden will have a U”-type effect on the market exit risk rate of enterprises, which will be reduced first and then increased. This is due to the combined effect of social security contributions on the scale of labor investment in enterprises and the promotion effect on labor output. Specifically, in the low-burden stage, improving the level of social security contribution will help to promote the efficiency of labor output and reduce the risk of withdrawal; but when the social security burden of enterprises exceeds the optimal rate, if we continue to increase the social security burden, it will restrain the investment of enterprises in labor force, which will lead to the increase of the risk of withdrawal of enterprises. The optimal social security contribution rate (calculated by total corporate social security contributions/total wages payable”) is about 20.28% on average. Different types of enterprises have different tolerance to the social security burden. On average, small and medium-sized enterprises are less able to bear the social security burden than large enterprises; new enterprises are less able to bear the social security burden than long-term enterprises. Based on these findings, this paper argues that it is necessary to reduce the statutory social security premium rate of enterprises in China, because the statutory social security premium rate of enterprises in most regions is more than 25%. But at the same time, the implementation of the social security policy needs to be strengthened, because many enterprises in China have not paid social security fees in full, and the average actual social security premium rate is far lower than the statutory rate. In addition, this paper also puts forward other policy suggestions to help to reduce the survival risk of enterprises.