It is time to reassess whether public sector workers are becoming an intolerable burden on the national coffers amid growing public dissatisfaction about their lavish pay. The government can only hope to recoup some of this expense through new taxes, as the current tax base is eroding during the economic downturn. To sort out the problem, innovative thinking is needed to prevent new policies from weakening an already fragile economy. The implementation of austerity measures can often be a double-edged sword.
The government also has to take into consideration that the payroll of those working in the public sector includes numerous benefits and a retirement package, which accounted for 66 percent of the its overall budget in 2011.
The latest in a slew of nonstop calls to reduce the drainage on public funds is to scrap the practice of issuing credit cards that are tailored-made for the nation’s 480,000 public sector workers, including public school teachers and government agency staff.
The special credit card, first issued in 2003, was originally aimed at boosting the nation’s tourism sector and encouraging government employees to take holidays instead of receiving pay for untaken leave.
This policy is seen as a travel subsidy program and costs the government about NT$7 billion (US$242 million) a year because employees are given an allowance of NT$16,000 per person per year, through using the credit card at designated stores nationwide.
The program did help to boost domestic consumption and spending, especially at hotels and restaurants, in the first few years of its implementation and the impact was particularly marked during the SARS epidemic in 2003, when the tourism sector went through a rough time.
However, the effect on the tourism sector has gradually diminished, with statistics from the Council of Economic Planning and Development showing that only 40 percent of the NT$40 billion spent on domestic tourism was attributed to the credit card last year.
Despite this, the council said that the NT$7 billion program has stimulated domestic demand and boosted private consumption which, in turn, has helped the economy grow. The program has also saved the government NT$14 billion in payments that would have been made for untaken leave, the council added.
The program may well help drive Taiwan’s GDP growth, as private consumption has evolved into a major factor influencing Taiwan’s GDP and is becoming more important in supporting economic growth as overseas demand dwindles.
However, the program has been in place for a decade and adjustments both in policy and scale are needed. First, it should be disconnected from development in the tourism sector, which is now significantly supported by Chinese tourists rather than local travelers.
The government should also stop paying public sector staff for untaken annual leave and consider using their budget to give a travel subsidy instead. This is a policy commonly used in the private sector in Taiwan –– public sector employees should not enjoy preferential treatment.
In addition, NT$16,000 a year for travel is substantial compared with other travel subsidies offered, usually about NT$3,000. The government should reduce the amount to a more reasonable one.
This is probably just wishful thinking and an over-simplification of the issue, given the complicated government police-making process, involving interwoven political interests. However, to reduce public anger, the government needs to work out new plans that make fair use of public funds. After all, hardworking taxpayers need to know their money is being spent on the right things.