Some things seem to be perfectly reasonable from a purely theoretical point of view, but fail in practice. The way the pension reform committee has been set up is just one such example.
Theoretically speaking, with its 37 committee members composed of interest groups’ representatives, government officials and experts, it fulfils the criteria of transparency and fairness, and of giving voice to a range of opinions. Who is to say that draft pension reform legislation cannot be agreed upon and sent to the legislature within a year, as Minister Without Portfolio Lin Wan-i (林萬億), who has been charged with making sure pension reform moves forward, has promised?
Nevertheless, it can be reasonably predicted that one year from now, some of these interest groups will throw a fit and pull out, and will refuse to accept a draft that has been passed, continuing instead to protest from outside the system. If a proposal for pension reform is not submitted to the legislature within the next year, all manner of social tensions and rifts will come to the fore, and there will be hell to pay for the government.
There are all kinds of misconceptions floating around concerning pension reform, and these will only hamper the progress of reform and widen existing rifts. If the government does not do something to right these misconceptions, trouble is likely to ensue.
Reform takes more than a reliance on ideals and a moral stance. Pension reform involves promises made to a great many people about their lives after they retire: It is not just some abstract idea of being in the national interest. The national interest must be connected in some way to the actual lives of the majority of Taiwanese, otherwise, it just becomes some empty appeal to some ideal, such as “without reform, we go the way of Greece.”
The most pernicious of the ideas floating around is that of a lower income replacement rate (IRR). Both the media and the government keep saying what the IRR is in advanced economies such as the US, the UK, Germany and France, and then comparing these with the IRR for pensions for retired public sector employees, that is, military personnel, public school teachers and civil servants.
The size of someone’s pension has a direct impact on that person’s post-retirement life. If government finances allowed it, everybody would be able to enjoy an IRR of 100 percent: What would be so bad about that? While the IRR in countries like Germany is low compared with that in Taiwan, the size of the welfare state in these countries must be taken into consideration, along with how much assistance the population can expect from the government. The government has to consider how it can best guarantee citizens a good quality of life in their retirement, not how best it can push down a metric such as the IRR.
The point of pension reform is how to achieve a balance in the revenue and outlays to pension accounts in the future, say in 20 years. For this reason, any reform should emphasize how best to guarantee a good standard of retirement for citizens. On the other hand, it should avoid, at all costs, fomenting tensions between private and public employees. The government must bear in mind that it is not the case that private employees’ pensions and retirement will be improved simply by using them as a stick with which to beat state employees. Successful reform will not come from exploiting existing tensions and antagonisms between the two sectors.
The government should take the pension needs of the population as a whole as the core of its pension reform plans. Only when the nation moves forward as one can reform be successful.
Allen Houng is a professor at National Yang-Ming University’s Institute of Philosophy of Mind and Cognition.
Translated by Paul Cooper
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