Pension Reform: Equal Wealth, not Equal Poverty
China Times editorial (Taipei, Taiwan, ROC)
January 29, 2013
Summary: The government is about to announce its pension reform plan. Debate has centered on salaries and benefits for retired civil servants. It has centered on how they can be made equal with those of most of the work force. It has had an poweful emotional effect on 800,000 civil servants. The backlash is felt everywhere. It has enabled DPP legislators to propose amending the law. The situation is complex. Any reform faces a high degree of difficulty. Reforms might do much harm before they do much good.
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The government is about to announce its pension reform plan. Debate has centered on salaries and benefits for retired civil servants. It has centered on how they can be made equal with those of most of the work force. It has had an poweful emotional effect on 800,000 civil servants. The backlash is felt everywhere. It has enabled DPP legislators to propose amending the law. The situation is complex. Any reform faces a high degree of difficulty. Reforms might do much harm before they do much good.
In any discussion of pension reform, a few points must first be made clear. First of all, fiscal constraints are all too real. This phenomenon is not unique to the ROC. Governments the world over are cutting back on expenditures. The fiscal burden is not limited to civil service pensions. It also includes labour. If the problem remains unresolved, the burden will inevitably fall on the shoulders of the next generation. Pension reform affects generational justice. Laborers are not the only ones who have offspring. So do civil servants. This is something our generation must confront.
Secondly, pension reform for labor could lead to bankruptcies. This could include excessively high public sector retirement benefits and welfare. This could lead to conflicts between the government and the public. But public officials and private citizens have always been separate groups. One may try, but one can never make them completely the same. Private enterprise valiues results. Its evaluations are harsh. Performance levels are clearly reflected in income levels. Labor exploits any opportunity to demand high pay. But labor also risk being laid off or dismissed for poor performance. Civil servants are in a different boat altogether. No matter how hard they work, their salaries and benefits are fixed according to the system. Their annual salaries increase according to seniority. They do not receive annual bonuses. No matter how effective their department's performance might be, they will not receive bonuses. These life choices are made the moment one enters the workplace. During the course of one's career, one has many opportunities to change occupations. Whether one changes occupations depends on one's personal choices, personal values, and personal ambitions. As a civil servant, one must be psychologically prepared to do a good job even if one has job security and no chance to strike it rich. Making money should not be a priority for civil servants.
Thirdly, civil servants receive a preferential 18% interest rate on their savings. This has remained controversial for many years, and has undergone several adjustments. Those who entered the civil service after 1992 do not qualify for the special 18% interest rate. Their benefits have been reduced. Yet they remain targets during the current pension reforms. The reason why is simple. When the preferential 18% interest rate was set years ago, bank interest rates were 12% to 13%. Today bank interest rates have fallen sharply, to a mere 2% to 3%. This is clearly inconsistent with market level interest rates. Civil servants who chose early retirement have already benefitted from the 18% interest rate. They have already received ten to twenty years of preferential interest. They have not been mistreated by the government. Others retired late. Some retired after 1978. Taiwan's economy was then making a quantum leap. By then, civil service pay levels were already caught up with those in the private sector. Current salaries in the public sector are about the same as those in the private sector. Therefore there is no need to retain the 18% interest rate. Why make civil servants suffer such long-term humiliation?
To be fair, ROC civil servants are required to pass national exams before being hired. The standards are comparable to those in advanced countries. This is especially true for the Department of Household Registration and the Department of Civil Affairs. These civil servants stand on the front lines. They deal with the public. They are trained to be cordial and patient. Now consider the matter from another perspective. What's the difference between the civil service and private enterprise? In the civil service, the employer is the government. The government is the manager authorized by the public. In short, the boss of the civil service is every tax-paying citizen. In any agency, their job is to serve the people. Those who lack a sense of mission serving the public, cannot be good public servants. Consider government administration from the perspective of corporate governance. When government revenue shrinks, how can one make government sustainable? This is the shared responsibility of every civil servant. So why has pension reform provoked such a backlash?
Outgoing CLA Comprehensive Planning Director Lee Lai-hsi is being removed as manager. His labor pension reform called for employers to increase their contribution from six percent to eight percent. This may improve the labor retirement income replacement rate. So why is it necessary to cut civil service pensions? He also appealed to civil servants. "Raise your pens, use your keyboards, get the message out, show your strength." Lee Lai-hsi's removal suggests that he is being punished for criticizing his superiors. CLA chairman Pan Shi-wei tried to explain this away. Pan said. "Lee Lai-hsi's was a director. He was made an advisor. His salary is the same. How is this punishment?" Lee Lai-hsi's advocacy on behalf of civil servants is worth considering. Isn't the Council of Labor Affairs (CLA) supposed to serve labor? Isn't it supposed to negotiate labor disputes. Isn't it supposed to put labor interests first? Government is a unified entity. The pension program controversy has just begun. Those responsible for labor matters must not allow themselves to descend into total chaos.
The CLA is responsible for civil servants from the central to local government level. Civil servants must be clear in their understanding of the situation. They must be resolute in their purpose. Making money is a laudable goal in life, but not for civil servants. Once one enters public service, the most one can expect to enjoy is adequate safeguards and a modicum of security. One may feel a sense of accomplishment, but it will never be the result of personal achievements. They will be the result of serving the people as a whole. They will be the result of giving the people the opportunity to enjoy the fruits of their labor. The vast majority of civil servants, including Lee Lai-hsi, will be happy if most laborers are happy. The purpsoe of pension reform is equal wealth, not equal poverty. The people will respect and appreciate civil servants willing to sacrifice their own vested interests.