Compared with other countries, the IRR of 80 percent or above enjoyed by retired government employees in Taiwan is higher than the Organisation for Economic Co-operation and Development’s average of 58 percent, and lower only than that of Greece and Spain, both of which are currently embroiled in sovereign debt crises.
Taiwan is gradually going the way of Greece and Spain. According to estimates, the military personnel’s retirement fund will be bankrupt by 2019, the fund for teachers and the Labor Insurance Fund will go bankrupt by 2027 and the civil servants fund will be bankrupt by 2031. Yet, consider this: Unless something changes, the Labor Insurance Fund and the retirement pensions fund will both go bankrupt, but with a glaring difference. The retirement pensions for government employees will be guaranteed by the government — as it is clearly documented that the government will act as guarantor of last resort for these pensions — whereas more than 9 million private-sector workers will have to take government officials’ word for it that their labor insurance payments will be made.
However, there is not too much trust in the government at the moment and it will have trouble convincing the workers that their futures are safe unless it enshrines this liability into law.
The case could be made that as all the pension funds face bankruptcy and since the government employees’ fund is in the most dire situation, reform should start from there. However, reform must address all of the funds, and should be applied across the board in a rational fashion — emotions and favoritism have no place here. People should not be treated differently or have different rules applied to them because of their job or role in society.
Reform should also rebalance contributions and payments, and defer receipt of payments. Contributions should be increased, the IRR should be lowered and the retirement age should be increased.
Only when this is done will Taiwan have a sustainable social insurance system.
Policies that disregard the government’s current financial situation in favor of catering to a specific section of the electorate will only serve to move a set of burdens elsewhere and leave this generation’s problems to the next generation. This not only causes conflict between different areas of society, but also creates tension between generations. This is the wrong way to go.
Worryingly, it is already abundantly clear what needs to be done to reform the retirement insurance system, but the government, in what it says, what it does and in its very mindset, is firmly on the side of pensions for retired public servants. It is only prepared to take the knife to the Labor Insurance Fund.
From what the government is doing now, it is not just the 18 percent preferential rate or the annual bonus payments, none of which make sense, are fair, or have any basis in law: All of the proposed reforms are targeting private-sector workers and do not in any way involve military personnel, state school teachers or civil servants, and this is something that the more than 9 million private-sector workers in this country will find completely unacceptable.
Chiang Kai-shek (蔣介石) and his successor Chiang Ching-kuo (蔣經國) relied on government employees to consolidate their power base in Taiwan when they came over from China with the Chinese Nationalist Party (KMT) in tow. This is the historical reason for the KMT’s favoritism toward that group. However, times have changed and Taiwan is now a democracy. Whatever the historical reasons, there is no excuse for maintaining the existence of an unreasonable system.