After the government confirmed that it would act as guarantor of last resort for state pensions, the controversy over the Labor Insurance Fund seems to have come to a temporary halt. During the past few weeks many have agreed that the low contribution rate of 6 percent of monthly salary is the main cause for the Labor Insurance Fund’s near-bankruptcy, but few people have looked into who benefits from this low rate.
Those who share in the benefits of Taiwan’s economy can be divided into four groups: The disadvantaged group at the lowest level is made up of private-sector workers. The next level up are military personnel, civil servants, and public school teachers, who are relatively better protected than private-sector workers. The third level consists of business owners and the top level consists of the government itself. Since military personnel, civil servants and public school teachers are all employed by the government, the state has been making up for their low contribution rate. This is also the main reason the government’s liability for its employees’ pensions was made mandatory in the Civil Servant and Teacher Insurance Act (公教人員保險法).
Since private-sector workers are employed by businesses, it is only be reasonable that these businesses should shoulder the responsibility for the pension fund’s shortfall caused by such low contributions. However, the Labor Insurance Fund adopts a system of relative contributions. When a worker’s contribution rate is 6 percent of their monthly salary, the employer’s contribution rate is also 6 percent. The lower the worker’s contribution rate, the lesser the employer’s responsibility. So far, no demands have been made that employers be made responsible for the shortfall in pension funds. Therefore, it is worth thinking about whether employers are taking advantage of this system.
In the face of this kind of problem, the government — which for years has been paying greater attention to the interests of businesses — has never told big business to take the responsibility it should have. Instead, it has encouraged “class confrontation,” saying that private-sector workers are jealous of government employees and that they are trying to defame them.
The government is thus inciting conflict as a way to escape from the dispute over pension funds. A further analysis of the government’s actions shows that they are made based on electoral considerations, because it is easier for the ruling party to obtain political donations if it takes care of the interests of employers. It is also easier for the govenment to consolidate its rule by threatening voters with unfavorable economic measures.
As for the votes of private-sector workers, the government will do just fine as long as it includes a promise that it will take responsibility for retirement pensions under the Labor Insurance Act (勞工保險條例). By paying for the Labor Insurance Fund’s shortfalls, the government will be seen to be taking care of private-sector workers’ interests. However, the extra expenditure will have to be paid for through tax revenues. In other words, all taxpayers will have to pay for the shortfalls.
Since the nation’s tax revenues mostly come from wage earners, workers will end up paying for their own pensions, while their employers, who should be paying an equal amount, will not have to do anything, and this situation is unfair.
As a result of the controversy, the year-end bonuses for many retired public servants have been cut. This was purely a by-product of the situation and the government will do just fine if it can manage to put the blame for the crisis on the opposition.
Lai Chen-chang is the president of the National Taipei College of Business.
Translated by Eddy Chang