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Reducing social security contribution rate on the financial performance of state-owned and non-state-owned manufacturing industries in the post-epidemic era

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  • Liangchen Zhang
  • Guangli Yang

Abstract

Social insurance is an essential component of a contemporary social security system since it protects people’s fundamental well-being, but it also incurs a heavy cost for businesses. If social security costs are excessively high, business profitability will suffer, and innovation will be discouraged. The most affected companies would be those in labor-intensive industries and medium-sized enterprises. Chinese businesses have suffered severe losses as a result of the COVID-19 outbreak. Given the circumstance, China enacted additional tax cuts and preferential social insurance premium plans. This article suggests a lower ratio of contribution as a strategy to cut the cost of social insurance premiums for businesses, given the growth of the social security fund in recent years and the proportion of participants to recipients in pension funds. It would be possible to increase firm profitability and lessen the impact of COVID-19 on industries by minimizing this operation burden. In order to compare the financial performance of state-owned manufacturers (SOMs) to that of their non-state-owned peers, who have a lower ratio of contribution, this study uses a multiple regression model. The ratio of contributions was inversely correlated with an enterprise’s financial performance. In other words, financial performance will improve as the ratio of contribution lowers; nevertheless, this effect is more pronounced in SOMs. The final section of this study proposed optimized approaches for social insurance premiums reform.

Suggested Citation

  • Liangchen Zhang & Guangli Yang, 2023. "Reducing social security contribution rate on the financial performance of state-owned and non-state-owned manufacturing industries in the post-epidemic era," PLOS ONE, Public Library of Science, vol. 18(6), pages 1-15, June.
    • Handle: RePEc:plo:pone00:0287596
    DOI: 10.1371/journal.pone.0287596
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    1. Wu, Bao & Liu, Zijia & Gu, Qiuyang & Tsai, Fu-Sheng, 2023. "Underdog mentality, identity discrimination and access to peer-to-peer lending market: Exploring effects of digital authentication," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 83(C).
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