The government is set to announce a 3 percent hike in salaries for military personnel, civil servants and teachers, a move that would increase state expenditures by NT$21 billion (US$722.5 million) a year. This is a classic example of raising salaries for the few, with an eye on elections, and the burden being spread over the majority. Not only is this unfair, it is also unlikely to achieve the government’s professed objective of stimulating salary increases in the private sector.
Since President Ma Ying-jeou (馬英九) came to power, he has concentrated on the economy. Even now with figures pointing to an economic recovery, ordinary people don’t seem to be getting any of the benefit. Concerned about the Chinese Nationalist Party’s (KMT) chances in the looming legislative and presidential elections, the government has decided to increase public sector salaries in an attempt to affect those in the private sector through a kind of financial osmosis, hoping that salaried workers will see real benefits from the recovery.
The central government received more than NT$1.6 trillion in tax revenue for last year, but still recorded a NT$4.4 billion deficit. This year, the nation’s accumulated debt is expected to total NT$159 billion. The government will have to finance the proposed salary increase with debt. Furthermore, the salary increases will be accompanied by upward adjustments to pensions for retired military personnel, civil servants and teachers, as required by law, putting even more pressure on a pension fund already on the brink of bankruptcy. Again, this will come out of the taxpayers’ pocket and may even mean higher taxes.
At present, the average monthly salary for public sector workers is NT$60,000. Civil servants also get a range of perks to supplement this, such as preferential mortgage rates, 50 percent discounts on amenities bills and certain expenditures for their children’s education, state pension payments, 18 percent preferential interest on savings, a monthly pension, a year-end bonus and travel discounts. They already get a better deal than many people in the private sector. There is still much anger in Taiwan remaining from the recent 18 percent preferential interest rate controversy and this proposed salary increase will exacerbate the sense of relative deprivation.
Although the government has called on the private sector to follow its lead, only a small number of companies, such as TSMC and Formosa Plastics, have promised to do so. Other companies in highly competitive industries, or small and medium-sized businesses, are too busy worrying about rising costs and generating adequate revenues. If they do relent to pressure from the government and raise salaries, they might find themselves forced to relocate in the medium or long term and this will mean that workers lose their jobs altogether.
There’s nothing wrong with increasing people’s salaries, but there’s no sense in robbing Peter to pay Paul. If the government wants to raise salaries, it needs to balance its books first and spend money on things like improving infrastructure or increasing welfare expenditure to redistribute wealth to low-income earners and do something to reduce the wealth disparity. If the government wants to lavish attention on public servants, it should also look out for the rest of the populace, as is only fair and just. If only a minority gets to reap the economic rewards and these are not passed on to the majority, or to more vulnerable groups, it is likely to cause a sense of relative deprivation. The policy is flawed as a piece of electioneering — it is true that it will secure the vote of those who will get raises, but it will also alienate many more voters.
The proposed salary increases are too selective. Why not increase the tax exemption level and put money in everyone’s pockets? Another option would be to follow the example of Hong Kong and distribute cash handouts.
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