Taiwan’s social security system is at a critical juncture. The legislature is set to review an amendment to the National Pension Act (國民年金法) aimed at detaching the insurance program for farmers from the national pension system. The Chinese Nationalist Party (KMT) caucus is reportedly planning to complete the review during the present session.
If the amendment passes, the original, ill-designed economic security system for senior citizens will be distorted further while a factor of uncertainty would be introduced into the development of the welfare system overall. Being a program of lasting importance, the government must be cautious when dealing with the national pension system.
Three major types of economic security scheme for senior farmers are in use around the world. In the first, the farmers’ insurance program is incorporated into the national pension system, as in the UK, Switzerland and the Scandinavian countries. Second, schemes are designed based on different professional categories, and the farmers’ insurance program is handled separately from those of other professions, such as in Germany, France and Italy. Third, in addition to the national pension system, a supplementary pension system for farmers is implemented, as in Japan. Taiwan’s earlier farmers’ pension system belonged to the second category, while the scheme the government is aiming for now belongs to the third.
The current pension system is the most undesirable and also the most regressive. Not only has it been mishandled, but it has also misled the general public and financial authorities on how the social welfare system actually complies with principles of justice. The pension system for senior citizens stems from a government attitude of unwillingness to face up to the problems of civic policy, and this attitude has been strengthened as a result of party competition brought about by democratization. A possible consequence is that the system will slip into a financial black hole.
We should follow a universal scheme similar to the systems adopted by the Scandinavian countries, in which farmers are not considered a special group but treated like other people based on the concept of universal civil rights. Financially speaking, although payments would take the form of social insurance premiums, the government would be able to provide insurance subsidies for disadvantaged farmers. Moreover, the basic principles of the system should be based on integration and covering all citizens.
The reason such a scheme is more desirable is that it combines the interests of the disadvantaged and those of mainstream society. In addition to avoiding perceived humiliation by the disadvantaged, more importantly, this combination protects the interests of the underinsured when the country is facing financial difficulties and must cut back on social welfare. For this strategy to be successful, it must stress that the right to receiving social welfare benefits is based on citizenship, rather than belonging to a particular profession, sex or group.
Simply put, universal welfare programs are designed on the basis of civil rights that transcend social differences. The National Health Insurance, which was implemented in 1995, eradicated the professional differences in the previous Civil Servant’s Insurance, Farmers’ Insurance and Labor Insurance systems, and also incorporated groups that had been excluded from the insurance system, such as housewives, seniors, children and individuals without a fixed employer, into a joint scheme in which risk is shared.
This reflects the fundamental spirit of the system and also lays a basis for solidarity throughout Taiwanese society. Its achievement surpasses the social insurance system based on different professional categories in Japan and Germany. Even South Korea has tried to learn from this experience.
Sixteen years after the national pension system was implemented, the Old-age Citizens’ Welfare Living Allowance program is expected to end, while welfare subsidies for senior farmers will stop being offered in 22 to 25 years. The government’s financial burden will also gradually ease after 14 to 15 years. This scheme would prevent the government from falling into a financial black hole caused by the continuous payment of subsidies to the rapidly growing number of senior citizens and from leaving the debt to future generations.
On the contrary, if the government adopts the KMT caucus’ proposal — wherein those who have already joined the farmers’ health insurance program should be able to freely choose whether to switch to the national pension system or stay in the old pension system — then the Welfare Pension of Senior Farmers will still be applicable, and it will not be possible to end the subsidy system for senior farmers in time through the incorporation of pensions.
This would increase the government’s financial burden to NT$2.16 trillion (US$71 billion) within the next 40 years and worsen the situation. Most importantly, such a move would be tantamount to establishing another group eligible for special welfare benefits similar to military, civil and teaching personnel, which violates the basic spirit of the national pension system as a fundamental pension scheme and distorts the principle of equality on which the social welfare system is based.
Compared with European countries, the main factor behind the low poverty rate among Taiwan’s seniors in the past was that parents lived with their children. However, a changing household structure is gradually ending this practice. As the poverty rate among seniors is generally higher than among other demographic groups, the favored way to effectively lower the poverty rate among senior citizens in advanced countries is to design an appropriate pension system. At the same time, regardless of whether the payment method is a “pay as you go” system or a “partially funded” system, it is more beneficial for the government to start to establish a retirement pension system when the population structure is still relatively young.
However, whatever pension scheme the government adopts, the most damaging to the nation’s financial system would be to implement a pension system designated for a specific group of people, or even one reflecting a policy of social significance.
The KMT legislative caucus should therefore withdraw its plans to detach the farmers’ insurance program from the national pension system for the good of future generations and to avoid undermining the foundation of the pension system.
Lue Jen-der is general secretary of the Social Welfare Association of Taiwan and a professor at National Chung Cheng University’s Department of Social Welfare.
Translated by Ted Yang
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