Japan’s model approach to crisis

By Tsai Zheng-jia 蔡增家  / 

Sun, Nov 18, 2012 - Page 8

Recently, 20 legislators have been petitioning the legislature to keep the year-end bonuses for retired military personnel, civil servants and public school teachers, payments that the government has previously said it plans to cut. The proposal attracted strong protests from labor groups. At the same time, groups of retired military personnel have announced that they do not rule out taking to the streets in protest if these year-end bonuses are scrapped.

The question of whether these bonuses should be cut or kept is increasingly causing opposition between government employees on the one hand and private-sector workers on the other. The issue has also caused a standoff between the ruling and opposition parties, who have taken delight in trying to reduce each other’s salaries. A straightforward issue of budgets and cutting expenses is slowly being turned into a more complex issue of class and politics.

Nobody wants to see their income cut. This is only natural. However, nobody wants to see their nation go bankrupt and end up like Greece either. When a nation’s finances are in serious trouble, the decision about where to make cuts and which social class is most affected should be an economic one.

However, no political party is willing to lose votes from its core supporters by cutting their benefits. This is a purely political calculation.

The most important question here is whether there is any possibility for a balance to be struck between different social classes when making personal choices and those of wider social import.

At a time when politicians and voters are arguing over how to go about cutting year-end bonuses for retired military personnel, civil servants and public school teachers, as well as cutting the special allowance funds of government leaders, it would be a good idea to see if there are any other countries that could be learned from, and whose experiences could be used as a basis for drawing up policies.

Japan recently passed a law that will cut the pensions of its civil servants by 15 percent. The way in which the Japanese government took a systemic and legal approach to decreasing the salary gap between government officials and the public, while giving consideration to fairness and justice, could serve as a valuable lesson for Taiwan.

At 225 percent of its overall GDP per year, Japan probably has the highest proportion of financial deficit in the world. Starting in 1990, Japan’s economy fell into a long period of depression and average salaries at private companies remained stagnant. However, due to policies that adjusted the pay of civil servants each year, their pay kept increasing, and by 2000, the average yearly salary of civil servants was approximately ¥1 million (US$12,312) higher than that of private-sector workers.

By 2010, the average salary for a civil servant was 1.5 times more than that of private-sector workers, and their retirement benefits were worth at least ¥4 million more than private-sector workers.

The obvious difference in salaries between civil servants and private-sector workers has become a social issue in Japan that everyone is paying attention to, and how to shrink this gap has become a vitally important matter.

After last year’s earthquake and tsunami, the Japanese government had to secure funds to cover reconstruction costs. This gave Japanese Prime Minister Yoshihiko Noda’s Cabinet a legitimate reason to shrink the salary gap between government officials and civilians.

First, the Japanese government decided to cut the salaries of civil servants by 7.8 percent within two years, and also suggested that their retirement benefits be slashed by 15 percent, a figure equivalent to approximately ¥4 million.

The ruling Democratic Party of Japan also expressed their belief that since the salaries of civil servants were being cut, politicians should set an example with their actions during these tough times. As a result it was decided that the annual allowances of each member of the Diet should be cut by ¥3 million, which is equivalent to a 14 percent decrease in each member’s yearly income.

From Japan, we can see how, in the face of a worsening deficit and huge post-disaster reconstruction fees, the government considered the issue of the overall salary structure of society, and cut the higher salaries enjoyed by civil servants, members of the Diet and government leaders. They also avoided putting too much of an economic burden on disadvantaged groups.

This not only effectively lowered the government’s deficit; it also helped the Japanese government reach its goal of decreasing the salary gap between governments employees and the public. Of course, while this policy was being carried out, the Japanese government came up with strong reasons for it, as well as data to show why such moves were necessary, consistently explaining these things to the public.

This allowed all of Japan’s civil servants to understand the reasons behind the reductions in their salaries, while also allowing the government to meet public expectations about social fairness and justice, and making it easier to gain the support of the opposition political party.

Perhaps Japan’s experience is inextricably linked to its own special time, place and political factors, and cannot be totally replicated in Taiwan. However, adopting Japan’s approach could allow those in Taiwan who believe they were exploited to regain a sense of fairness, while also allowing the ruling and opposition parties to find a balance between their widely divergent views.

It would surely be worthwhile to look into whether Taiwan can achieve something similar to Japan.

Tsai Zheng-jia is a research fellow and division head of the Second Research Division at the Institute of International Relations at National Chengchi University.

Translated by Drew Cameron