The Directorate-General of Budget, Accounting and Statistics reported recently that real average wages in Taiwan between January and November last year regressed to what they were 15 years ago.
Meanwhile, in the legislature, the Chinese Nationalist Party (KMT) is blocking the Democratic Progressive Party’s proposal to remove the 18 percent preferential interest rate for military personnel, civil servants and public school teachers, educational subsidies for the children of retired civil servants, the year-end bonus for retired public-sector employees, as well as water and electricity subsidies for retired military personnel.
It shows that despite its defeats in last year’s nine-in-one local elections, the KMT is still incapable of self-reflection and remains indifferent to the unjust distribution of social welfare. Once again, the KMT is just paying lip service to reform.
People generally think that the reasons for the KMT’s losses in last year’s elections are the widening wealth gap, collusion between politicians and businesses, unjust distribution of welfare and large increases in commodity and housing prices. What causes the most resentment among a large part of the public is that the distribution of national resources for a long time has favored military personnel, civil servants and public school teachers, while forsaking the rights and interests of private-sector workers, and their resentment was reflected in the election results.
Therefore, if the KMT is serious about correcting its mistakes, it should re-examine the social welfare and social security systems, and completely reform the unjust pension system, thereby rescuing the party from continuing to fall apart, while mending gaps to create a fairer society.
Unfortunately, the KMT has clearly misinterpreted the reason for its losses. It thought it was because the party’s most loyal supporters had begun to waver and were reluctant to come out to vote. Its supporters began to waver because of the decreased retirement benefits for military personnel, civil servants and public school teachers, such as the termination of the year-end bonus for some retired government employees. This angered these groups and cost the KMT a lot of votes.
Amazingly, the conclusion drawn by the KMT ran counter to public opinion, as the KMT decided that not only should it stop reforming pensions for military personnel, civil servants and public school teachers, it should reinforce the protection of these benefits. Therefore it decided to lower the threshold for the year-end bonus for these public-sector workers.
The idea that these groups make up the pan-blue camp’s diehard supporters is a myth. Most of them are not so corrupt that they would become a voting machine for the KMT just to receive exceptional benefits. The only people really benefiting from this idea are the few elected representatives with a military background. They take advantage of this myth to hijack the KMT and prevent it from reforming itself into a party that is fair. This myth is similar to the party assets myth. The ultimate resolution and destinies for both will be basically the same.
The KMT came to Taiwan empty-handed. Its accumulated party assets are the result of assets taken over from Japan when it left Taiwan in 1945, appropriating or seizing private property, controlling the legislature to pass laws transferring assets as gifts to the party, turning the national treasury into the KMT treasury and running monopolies. Some of these means might be “legal,” but they are not legitimate. However silver-tongued the party is, one day its assets will be returned to the public.
The retirement benefits of military personnel, civil servants and public school teachers require such urgent reform because the year-end bonus for retired employees, the 18 percent preferential interest rate and the income replacement ratio which stands at nearly 100 percent, are all unreasonably high, which gravely harms national finances.
To increase government revenue, the Ministry of Finance in recent years has increased taxes in the name of tax justice, with good results. The prospect of increased tax revenue for last year could surpass NT$100 billion (US$3.16 billion), but tax revenue is only one part of healthy national finances and cannot be maintained with unreasonable government spending. The most important objective to keep government spending at reasonable levels is to remove the unreasonably high retirement benefits for public-sector workers.
The gap between the retirement benefits of these groups and everyone else is outrageous. In the past, when the Taiwanese economy just started growing, businesses were prospering and the nation was getting rich. Revenues were high in the private sector, beyond the reach of public-sector workers. Hence the government allocated benefits and subsidies to make up for the low incomes of civil servants.
Today, however, things have changed drastically. Taiwan is now stuck in a difficult situation in which GDP is growing, but the real wages of workers are dropping. In contrast, wages of military personnel, civil servants and public school teachers continue to rise; they become the most secure jobs and the envy of everyone. Many outstanding students take part in national examinations, and people are proud to be civil servants. In a depressed economy, the reversal in income for public-sector workers can be a significant burden on national finances. Hence, the longer the nation waits for reform, the riskier it is for the national finances.
In addition, when there is a fiscal deficit, a nation can only borrow money to invest in public construction, but the government has almost reached the legal debt ceiling, which means that the possibilities to borrow money are limited. On the other hand, public spending can revive the domestic economy.
Without public spending, there will not be enough momentum for economic growth. However, not only is there insufficient public investment in Taiwan, private investment is also unsatisfactory. Taiwanese businesspeople in China claim that they have reinvested NT$240 billion in Taiwan, but the real number is just NT$80 billion.
Taiwanese are also spending a large amount of money on foreign stocks, bonds and other financial products, while lacking interest in investing domestically. Hence, the pension system for military personnel, civil servants and public school teachers must be fully addressed so that government finances can stay strong and are sufficient for investing in public construction to drive economic growth.
The cause of the potential bankruptcy facing Taiwan is the imbalance between revenue and spending. To cut expenditures and address the injustice of money distribution, the reform of the pension scheme in the public sector is urgent. Without this, all other reforms would be meaningless.
However, the KMT has not only failed to come up with a reform plan for the pension scheme, it also lacks the drive and determination to do so. Instead, in order to win elections, the KMT chooses to maintain and safeguard an unreasonable situation. This is the misfortune of the nation, but it will also force the KMT to reform. When that happens, the KMT will be voted out of office.
Translated by Ethan Zhan
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