Tuesday, February 1, 2011

Talk of Raises on New Years Eve

Talk of Raises on New Years Eve
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
February 1, 2011

Today is Lunar New Years Eve. We hope businesses have a prosperous New Year. We hope every employee receives a raise.

Should civil service employees receive a pay raise? Nearly two months have passed since last year's five cities elections. But we still have no clear answer. Proponents say a civil service pay raise would encourage private sector pay raises. Opponents say a civil service pay raise would increase the national deficit. Premier Wu Den-yih meanwhile, spoke of "five conditions," and whetted everyone's appetite. He appeared to be waiting for the right time to fill in the amount. Civil service pay raises are supposed to be political decisions. They are supposed to be made by the the premier. He is supposed to assume responsibility. Why must he complicate the matter? As for the long-term, the civil service salary structure must undergo thorough reform. Indiscriminate feeding at the government trough must be eliminated.

Current proponents of a civil service pay raise argue that civil service employees have not received a pay raise in five years. They need a boost to their morale. They should share in last year's record high economic growth, which established a new 21 year high. A civil service pay raise would set an example for the private sector, proponents argue. It would promote private sector consumption. The fact that civil servants have not received a pay raise in five years is a valid argument for a pay raise now. The other three justifications however, are specious. Last year the economic growth rate exceeded 10% only because the year before we were in a depression. If we combine the two, we discover that the real gross domestic product (GDP) has not increased that much. Now consider the argument that civil service pay raises would set an example for the private sector. Consider the recent results of a private poll. Most companies adjust their salaries independently. Government pay raises would have limited impact. Now consider the argument that civil service pay raises would promote private sector consumption. A civil service pay raise means an increase in government spending. If overall government expenditures are increased, this amounts to a hidden tax increase. Any increase in consumption would be offset by tax increases on the public. Tax increases on the public would force them to reduce consumption. Therefore making the public foot the bill for a civil service pay raise, merely because they have experienced a recovery, in the hope that it will promote consumption, inverts cause and effect. The return will not justify the investment.

At the same time, the arguments against a civil service pay raise are equally far-fetched. The most common argument is that the government has been running a deficit year after year. The government is deep in debt, the argument goes. Where is it going to get the money for a pay raise? If this argument holds, must we wait until the government pays off its debt or balances the budget before giving civil servants a pay raise? If so, civil servants would never get a pay raise. Therefore, whether civil servants should receive a pay raise, has little relationship with the government's fiscal circumstances. It may not require an increase in the government's annual expenditures. It may involve juggling the government limited financial resources. This power belongs to the premier. It is his decision. It is his responsibility. He must allocate government spending in accordance with his policy goals. A civil service pay raise would of course be one of his many policy options.

Premier Wu's "five conditions" rhetoric was clearly superfluous. Premier Wu Den-yih has confronted the issue of civil service pay raises many times recently. His standard answer is that he must consider fourth quarter exports, the economic growth rate, this year's tax revenues, the overall price situation, private sector profits, and year-end bonuses. Premier Wu cited specific criteria. But he never cited a specific pay raise threshold. Therefore any civil service pay raise would ultimately depend on Premier Wu's policy priorities, i.e., his whims. His decision may depend on first quarter tax revenues.

Therefore, the civil service pay issue will continue to simmer. It may become next year's presidential election hot potato. It will be difficult not to politicize it. Therefore the Executive Yuan should explain its position on second half civil service pay raises. We urge a timely and appropriate decision. This will avoid excessive speculation and too many irrelevancies. This will minimize the political impact. Failure to do so could increase social frictions, incite confrontations, and make the final decision even more difficult.

The Executive Yuan and the Examination Yuan can also take advantage of the civil service pay raise issue. They can conduct a comprehensive review of civil service salary levels, structures, and their connection to civil service employee effectiveness. Civil service salaries have long been considered lower than employee salaries in general. In fact, lower level civil service salaries are higher than lower level employee salaries in general. Higher level civil service salaries are lower than salaries for upper management. The question is how to change this wage structure. How can the government widen the gap between low level civil service employees and high level civil service employees? How can the government compete with the private sector, and attract more people into government service?

Civil service employees are often paid the same amount regardless of their job performance. How can the government address this problem? Salaries must be linked to job performance. The government must attempt to create such links. Such reforms will surely provoke a backlash. But they should receive the support of dedicated civil servants. We have experienced a recovery. We have undergone a cabinet reshuffle. Therefore we should implement reforms. We must engage in creative destruction, create a new generation civil service salary appraisal system, thereby enabling the government to enrich its talent pool.

【聯合報╱社論】 2011.02.01









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