Fri, Dec 07, 2012 - Page 8 News List

Reform the public sector benefits

By Lin Terng-yaw 林騰鷂

The excessive salaries and other benefits paid to government employees — military personnel, civil servants and public-school teachers — have given rise to a number of social and psychological phenomena that warn of fiscal, economic and social disaster.

The first such phenomenon is that hidden government debt has reached NT$22 trillion (US$757 billion) and this has led the average person to lose confidence in the government’s finances. In October, there was a rush to withdraw money from the Labor Insurance Fund, as more than 15,000 workers chose to receive their pensions in a lump sum. Withdrawals from the labor insurance fund totaled NT$20.5 billion in October — more than 2.4 times the NT$8.4 billion taken out in September.

The next point is that the number of people taking part in the senior and junior civil service entry examinations hit a 17-year high this year of more than 156,000 applicants. This social phenomenon of huge numbers of people trying to get government jobs, tempted by the preferential pay and benefits given government employees, makes it hard for the private sector to retain people. Since industrial and commercial companies cannot find all the workers they need, they have come to rely on foreign migrant workers to fill the gap.

Third, the Directorate-General of Budget, Accounting and Statistics predicted in September that gross national savings in Taiwan would keep growing and that the excess savings rate could top 9.3 percent. Excess savings are likely to reach NT$1.354 trillion, making this the fourth year in a row that they have been over the NT$1 trillion mark. National savings are forecast to rise to NT$4.27 trillion, with the gross national savings rate reaching more than 29 percent, which is higher than most other countries.

A consumer confidence index survey for September published by the National Central University’s Research Center for Taiwan Economic Development shows that, while commodity prices keep climbing, the nation’s exports are performing poorly. The survey found that this has had an obvious impact on consumer confidence, which in turn has led to a social trend of putting a lot of money into savings.

Meanwhile, military personnel, civil servants and public-school teachers enjoy excessive pay and benefits. For example, retired government employees receive an 18 percent subsidized preferential interest rate on their pension deposits, while employees of state-run financial institutions enjoy a subsidized interest rate of 13 percent on their bank deposits. These subsidies add up to NT$100 billion each year, and the trend is for this figure to keep going up. The cost of these subsidies has saddled all levels of government with nearly NT$8 trillion in hidden debt associated with the old and new state pension schemes.

In addition, the “year-end relief payments” given to retired government employees, which have no basis in law, cost another NT$20 billion. When you add on the approximately NT$70 billion in subsidies given to current government employees for travel, cultural activities, fitness programs and birthdays, plus subsidies for their children’s education, which also have no legal basis, and other welfare spending, the total cost exceeds next year’s NT$170 billion budget for economic construction by several tens of billions of New Taiwan dollars.

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