In a bid to boost the economy, the administration of President Ma Ying-jeou (馬英九) announced in the middle of last month that it would distribute NT$3,600 in consumer vouchers to each Taiwanese citizen by raising NT$82.9 billion (US$2.5 billion) in loans.
Most people are likely to use this small amount to purchase necessities they would have bought anyway, which would not boost overall consumption. Lest this proposal be a complete waste of money, the government should consider raising the amount given to each individual. And to pay for this, it should consider canceling performance bonuses for civil servants this year.
Despite predictions in the West that Asian economies should escape the brunt of the global financial storm and fare relatively well this year, it cannot be denied that the downturn has affected Taiwan. Statistics released by the Directorate-General of Budget, Accounting and Statistics (DGBAS) showed that the nation’s GDP contracted 1.02 percent in the third quarter and real wages shrank 2.95 percent in the first three quarters.
The jobless rate rose to 4.37 percent in October, bringing the total number of unemployed to a five-year high of more than 476,000. About 21,000 of them were made redundant by company closures in October, a four-year high. Unemployment benefit claims also surged to more than 36,000, up 20 percent from the same period last year. Meanwhile, vacancies posted on the 104 Job Bank last month dropped by 30,000, or 14 percent, from the previous month.
In contrast to a faltering employment market in the private sector, workers in the public sector have not been affected at all. DGBAS figures show that civil servants enjoy an average monthly salary of NT$63,000, which is much higher than the NT$36,000 average in the private sector. While the general public is suffering from the economic downturn, civil servants do not have to worry about their jobs. They are also entitled to an annual bonus of one-and-a-half months’ salary, plus a performance bonus of half to one month’s salary. With the bonuses, their average annual income adds up to more than NT$900,000.
Apart from high pay and job security, every civil servant enjoys a NT$16,000 subsidy annually in the form of shopping discounts using their Citizen’s Travel Cards (國民旅遊卡). Funding for this originated from an annual holiday subsidy of NT$7.6 billion for public servants, which was created through an administrative order by former president Lee Teng-hui (李登輝) and often criticized as an attempt by Lee to curry favor with the public. Unfortunately, the former Democratic Progressive Party government continued the practice and even repackaged the subsidy into a travel card for civil servants’ exclusive use at designated shops. This is just like giving them consumer vouchers every year — what’s more, they are getting consumer vouchers just like everyone else. In effect, the government is borrowing money to reward its own employees.
When the economy is down, cutting civil servants’ pay is a reasonable move to match the general decline in real wages. As private companies reduce work hours or wages as a condition for keeping them on the payroll, civil servants who are paid by taxpayers should share the burden.
Cutting civil servants’ salaries is already an international trend. Singapore’s Public Service Division announced on Nov. 24 that key officials’ salaries would be cut by between 11 percent and 19 percent next year in line with the fall in private sector wages. Japan has been cutting civil servants’ salaries every year since 2003, with an average salary drop of 1.07 percent per annum. Hong Kong cut civil servants’ salaries by 6 percent for three years starting in 2002 in an attempt to lower their salaries to 1997 levels. The UK reduced public servants’ wages and increased their taxes last year, with salary cuts of up to £15,000 (US$22,000) in line with “equal pay agreements.” The money saved was used to subsidize low-income households. Authorities in China’s biggest city, Shanghai, have cut civil servants’ salaries by 14 percent since April. China’s Central People’s Government has also called on all government agencies to reduce their personnel budgets next year.
Civil servants form a vital part of the Chinese Nationalist Party’s (KMT) voting base, so a salary cut is certainly not on the government’s agenda. It would be reasonable, however, not to give them performance bonuses, because their performance should reflect the rise or fall in public welfare.
When the economy is down and public welfare suffers, civil servants’ performance should no longer be rewarded by bonuses. A good work attitude should be a matter of duty, not a reason to grant them bonuses. For example, considering the massive deficit over the past few years, the Bureau of National Health Insurance should stop its practice of granting workers performance bonuses on the ground that its total business volume is still growing.
According to the Ministry of Civil Service, the performance of 74 percent of civil servants was rated “excellent,” making them eligible for a performance bonus equal to one month’s salary. The performance of 25 percent was considered “good,” entitling them to half a month’s bonus.
Given that there are around 600,000 civil servants, their performance bonuses would add up to NT$33 billion each year. If we used this money to pay for more consumer vouchers, each citizen, including civil servants, could receive NT$5,000 in vouchers and possibly better stimulate consumption.
Liang Wen-chieh is the deputy director of New Society for Taiwan.
TRANSLATED BY EDDY CHANG
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