Abstract: Higher contribution rate and lower treatment is a typical feature of China’s social insurance system. In the practice of each province, higher contribution rate has never brought any high treatment, on the contrary, it is faced with a serious fund imbalance. Therefore, this paper constructs an explanatory framework and demonstrates its validity from the angle of labor participation. The results show that labor participation of the people near the legal retirement age is insufficient, which leads to the higher support rate of the social insurance system and insufficient effective contribution. In order to relieve the payment pressure on the fund, the government has the internal demand to reduce the treatment and raise the contribution rate, while the increase of the legal contribution rate would strengthen the motivation of enterprise to avoid the payment, at the same time, it also would reduce the work willingness of the employees who are going to retire, thus leads to the insufficient participation of the elderly labor, in turn it results in further insufficient effective payment, in this way, a“vicious circle”is formed, finally the legal rate of China’s social insurance system is staying at a higher level, and there is an asymmetric relationship among the contribution rate, treatment and the fund balancing ability in different provinces.

Key words: social insurance; contribution rate; replacement rate; fund imbalance