Sun, Jul 31, 2016 - Page 6 News List

Pension reform key for economy

By Li Kuan-long 李坤隆

Since President Tsai Ing-wen (蔡英文) and her government took office and began preparing to reform the pension system, the role of government employees — military personnel, civil servants and public school teachers — has become an important factor. It is natural that these groups would work hard to protect their own interests; there is nothing wrong with that.

However, as they protect these interests, it is impossible not to ask the following question: The government has done a lot for these groups, but what have they done for the nation in return?

First, they are talking an awful lot about the principle of legitimate expectation, when what people should be doing is looking at the historical background behind their benefits. In the past, the wages of military personnel, civil servants and public school teachers were relatively low, while the nation’s economy was growing steadily.

However, while these groups were given large wage increases, the economic situation has been in a constant state of decline.

If, given this situation, they continue to insist on the principle of legitimate expectation, are they really doing right by the nation?

Second, Ministry of Civil Service data showed that there are 135,224 retired government employees and they receive a monthly pension of NT$56,383 (US$1,766) on average, which includes an 18 percent preferential savings interest rate. That is about NT$20,000 more than the regular monthly pension that a private-sector employee receives.

In addition, the 18 percent preferential interest rate alone sets the government back NT$82.4 billion every year.

Furthermore, over the past 20 years, the average retirement age of civil servants has moved in the opposite direction of the retirement age in other nations: It has been falling. In 1996, the average retirement age for these groups in Taiwan was 61.14, but by last year, it had dropped to 55.72.

Based on the average life expectancy in Taiwan — 79.84 — such retirees would receive a pension for 24 years. Rewarding these groups by putting the cart before the horse clearly eats into the resources of the working public at large.

In particular, now that mid-level management is slowly shrinking, it makes one wonder if those government employees that are still working, but wish to go into retirement do not feel a sense of shame.

There is more: The public has a lot to say about government employees and their performance, in particular as people can see how the nation’s competitiveness is declining instead of improving; the armed forces’ image problem; administrative inefficiency in the government bureaucracy; and ineffectual educational reform.

If government employees continue to talk about the principle of legitimate expectations when this is the impression they are giving the general public, there is a risk that the only result would be an even stronger backlash against them.

No one is opposing the idea that government employees should be given reasonable protection and guarantees, but the current system clearly provides excessive protection and it is also distorting the way national resources are distributed.

While people are professionally active, it makes sense that they should be able to guarantee the livelihood of a family, but after retirement, it should be enough to provide resources that are sufficient to guarantee the livelihood of one person. Is it reasonable to demand that people be able to raise a whole family upon retirement?

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