Whether pension reform is described as a top-down or bottom-up process is just a matter of formality. Those in charge of reform must look squarely at the issue at hand and answer: Why have public school teachers been falling over each other in a rush to retire in the past few years?
It is related to pension reform.
Welfare allowance for senior farmer, which is similar in function to the annual retirement pension, has already had the required insurance period extended from six months to 180 months. The Government Employee Insurance Act (公教保險), in reference to the Labor Insurance Act (勞工保險), has extended the basis for retirement payments from being based on the premium paid on the last month before retirement to the average premium paid over the 120 months up until, and including, the final month of payment.
One reason why this is easier said than done is that annual pension reform must differentiate between which part of the pension is part of the social insurance system, and which part is made up of payments by an employer and an employee within the contributory system. The two systems must not be mixed up. If money paid by an individual is mixed up with money paid by the public, those who have paid money would be unhappy, because that would be money that they had paid.
How can this be accomplished? The government can resolve the crisis of an aging population through three layers of guaranteed annual pension systems.
First, the foundation: This is the government’s responsibility and it guarantees basic social security. It is not intended to provide a good life during retirement, but rather to provide the ability to maintain a decent life. For this, social insurance is fine.
Second, the house: This is an employer’s responsibility and because it is of a different character, the Labor Standards Act requires that employees contribute 6 percent of an employee’s salary.
Third, interior design: This involves using voluntary commercial insurance, such as savings insurance, disability insurance or long-term care insurance, to provide economic guarantees in old age.
The first level includes several social insurances, such as labor insurance, government employee insurance, farmers’ insurance, military insurance and national pension insurance. These meet different standards. Just because a worker enters labor insurance does not mean that they will remain with labor insurance all their working lives, as people often switch between different insurances.
Why not take this opportunity to simply divide social insurances into labor insurance for those who work for a living and national pension insurance for those who do not.
The former would incorporate the government employee and farmers’ insurances into the labor insurance, including the years insured and the payments made into respective insurances.
At the next level, where employer and employee contributions are made, the employer of the workers engaged in public or educational jobs — referred to as government employees — is the Taiwanese public, the taxpayers. The appropriate way to resolve this would be to calculate how much the workers have paid during their working lives and then look at the economic situation and the nation’s finances. Based on this, a few concrete solutions would be proposed that would be handed to the employer — the public — who would then decide in a referendum. This would truly be a bottom-up process.
Cash Chang is the founding chairman of the Republic of China Labor Consultant Association.
Translated by Perry Svensson
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