Unification of the Urban Minimum Living Standard in China: Using a Consumption Expenditure Percentile Method

Abstract

ABSTRACT. The Minimum Living Standard Guarantee (MLSG) system in urban China was established in the 1990s. As a national income benefit program, this system has huge regional differences as a result of regional variation in economic development and the methods used to calculate the benefit. This article uses a consumption expenditure percentile method to measure and evaluate the benefit level of the MLSG system. The analysis shows that the consumption expenditure replacement rates in central cities are decreasing, but in prefectural-level cities, by contrast, they are increasing. The regional differences in replacement rates when comparing central cities are considerable and are even larger among cities at a prefecture level. Per-capita consumption expenditure is positively correlated with minimal living standards but negatively correlated with the replacement rate. Such variation in the value and operation of the MLSG system suggests an urgent need to implement a national unified scheme. The article proposes a single approach to calculating Minimum Living Standard benefits using a consumption expenditure replacement rate that would allow for local differences while providing national cohesion.