rapidly, and a pilot urban resident pension program was announced in July 2011 with the aim of covering all cities by the end of 2012.<sup>3</sup> Understanding low coverage rates requires insight into both the decisions of employers to provide mandatory contributions to social insurance funds and the participation decision of wage-earners and other residents. This paper highlights two important disincentives for participation in social insurance programs: the relatively high rate of combined employer and employee contributions, which are even higher at low incomes, and the consequences of institutional fragmentation. Both mandatory programs, financed from employer and employee contributions, and voluntary programs are funded and administered locally. As a result, the levels of protection, degree of fund pooling, and management quality vary both by social insurance scheme and across provinces. Decentralization and differences in governance across social insurance schemes are unsurprising as they reflect the decentralized implementation characteristic of China’s economic reform process. Unfortunately, they inhibit portability and create an important disincentive for China’s mobile workforce to participate in these new schemes.<sup>4</sup> Section two, below, first briefly introduces the history of social insurance reform and documents changes in the patterns of coverage. Section three introduces specific social insurance programs and their targeted populations. In this discussion, we use both administrative sources and survey data to document levels of coverage for different groups of workers and present hypotheses for explaining continued low levels of coverage. Section four introduces the China Urban Labor Survey (CULS) which we use to describe the correlates of participation in social insurance programs by different targeted subgroups of the population. We focus on informing as to how incentives and program design may affect coverage. Taking a cue from a rich literature on the gender wage gap in China, the descriptive analysis also documents the existence and sources of gender differences in social insurance coverage.<sup>5</sup> A final section then concludes by highlighting important features of China’s decentralized social insurance system which could further frustrate efforts to expand coverage.

> 3In design and basic framework, the urban pension scheme is very similar to the new rural resident pension scheme, which was introduced in 2009 and will cover all counties by the end of 2012.

> 4According to China’s sixth population census, 261.4 million rural registered residents (rural _hukou_ holders), or 39.2 percent of the urban population, now live in China’s cities. These newer urban residents comprise the majority of workers outside the formal sector, and tend to be far more mobile geographically than urban registered residents. 5Earlier research emphasized that gender wage gaps between men and women were higher in the private sector (e.g., Liu et al.,2000; Maurer-Fazio and Hughes, 2002), and more recent work has emphasized that the gender gap has ceased to grow (Liu, 2011) and persists primarily among less educated workers urban workers in the lower end of the wage distribution (Chi and Li, 2008; Li and Song, 2011).

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