On Wednesday last week, President Ma Ying-jeou (馬英九), accompanied by Premier Sean Chen (陳冲), Legislative Speaker Wang Jin-pyng (王金平) and Examination Yuan President John Kuan (關中), stepped up to the firing line to announce the government’s proposed pension system reforms, which will affect the lives of private-sector workers throughout the nation.
The Cabinet proposes raising the legally defined maximum labor insurance premium rate from 12 percent to 19.5 percent for private-sector workers, while cutting their benefit payment rates.
The Cabinet proposed two alternative plans for annuity benefit payments. Under plan A, the monthly benefit payment rate for the first eight years of retirement would remain at 1.55 percent of the recipient’s average insured monthly salary, after which it would be cut to 70 percent of the initial rate.
Under plan B, the monthly benefit payment rate for retirees with insured monthly salaries between NT$30,000 (US$1,014) and NT$43,900 would be cut to 1.3 percent. The insured monthly salary would be changed from the average of the highest 60 months on which premiums were paid to the average of the highest 180 months.
Simply, workers will pay more while they are working and get less back when they retire. There is no way of knowing whether reforms in this direction will be able to save the Labor Pension Fund from bankruptcy, but for workers it will get harder to get through their retirement years.
Labor insurance should be a form of social insurance, as opposed to a commercial insurance plan. However, the Cabinet’s response to the threat of bankruptcy hanging over the Labor Pension Fund is to follow the logic of commercial insurance by raising premiums, cutting benefits and raising the minimum pensionable age. The message to the nation’s workers is clear: Survival in old age is your own responsibility.
The most important feature of social insurance is social mutual aid, meaning that those who have money should help those who have less. Social insurance is supposed to be a means of redistributing society’s wealth and the rationale for this is that social wealth is created by the efforts of all members of society.
However, under the present capitalist system the distribution of social wealth is unfair. The social wealth that has been created through several decades of economic development is excessively concentrated in the hands of a minority, and the gap between rich and poor is too wide.
Under such circumstances, besides using taxation to redistribute social wealth, social insurance should be used as another corrective mechanism for achieving the same purpose.
Workers are the people who make the greatest contribution to the wealth of the nation, so it is natural that the cost of supporting them in old age should be borne by society as a whole.
However, the existing labour insurance annuity system is set up only as mutual aid among different generations of the working class. It is a mutual aid scheme among poor people and it does not redistribute social wealth in the slightest.
Most forms of social insurance in Taiwan are divided into occupational status-based insurances that depend on the occupation of the insured, such as workers, farmers, military personnel, government functionaries and public school teachers.
As a result, people belonging to different occupational categories are treated differently according to their social and economic status.
This kind of arrangement is not unacceptable in itself, on condition there is a further layer of a basic pension underlying the various occupational pensions, in other words a national pension scheme. This basic pension should be paid for out of national tax revenues and every citizen should be able to collect this basic pension.
However, the national pension has been turned into something quite different — another kind of occupational-status-based insurance scheme.
The situation we have now is that people who have jobs join the labor insurance system, while those who do not join the national insurance system. Thus, the national pension system has become an insurance scheme of mutual aid between generations of jobless people.
What the nation needs is to establish a pension system that redistributes income, so we will have to think hard about how to do it. One way would be to integrate the various forms of pension insurance for different categories of people into a single pension scheme for everyone, with mandatory participation for all citizens.
Such a scheme would be financed by setting premiums based on total household income, so that rich people would pay more and poor people would pay less. It would work in a way similar to the National Health Insurance system, which is based on the idea that healthcare is a basic right and should be enjoyed by all citizens, no matter what their occupation.
The right to security in old age should be seen in the same light.
Another approach would be to refer to Sweden’s three-layered pension system. For the first layer, the existing national pension system would be changed into a basic pension guaranteed to all citizens and would be funded through taxes levied by the government on the rich. The second layer would retain the features of the existing insurance schemes for people belonging to the various occupational categories and the third layer would consist of commercial insurance plans.
This system would involve making the rich pay more tax, as that is the only way to bring about the redistribution of social wealth and solve the problem of pensions for workers.
The key point of these two suggested reforms, whether they are funded through insurance premiums or taxation, is that rich people would pay more and serve to redistribute wealth. The unfortunate thing is that, despite the changes in government, successive Chinese Nationalist Party (KMT) and Democratic Progressive Party (DPP) administrations have failed to make serious proposals for a pension system that redistributes income. The same is true of the two press conferences that were held on Wednesday last week.
The proposals set forth by Ma and DPP Chairman Su Tseng-chang (蘇貞昌) had one thing in common: Neither of them was designed to redistribute income. Worse still, both sides are using conflicts of interest between public and private-sector workers to conceal the question that they are so keen to avoid — the question of wealth redistribution.
Huang Shiao-ling is a member of Raging Citizens Act Now and secretary-general of the Taiwan Association for Victims of Occupational Injuries.
Translated by Julian Clegg