Pension reform

As I start this post, the legislature has just passed the third reading of the civil servants pension bill. It now moves onto the bill for teachers, and the legislature has yet to take up the bill for military pensions. Nonetheless, now that the rules for civil servants have been rewritten, the others should follow along those basic lines. There is a lot of cleanup work still left for the legislature, but the basic fights have already been waged.

We all have a basic understanding that the current system needed some adjustment. There was too much money going out and too little coming in, and the system was going to go bankrupt in fairly short order. Even President Ma recognized the need for reform. (He quickly aborted his nascent reform in the face of a backlash from public servants, who constitute one of the KMT’s most important voting blocs.) The retirement benefits were simply too generous. Civil servants could often retire in their early fifties and collect monthly stipends nearly equal to their full salaries. Since benefits were based on their last month’s salary (ie: the highest they had collected in their entire career), that meant that the state was often paying people more in their retirement than it had while they were working AND their retirements might be as long as their working careers had been. This system may have been defensible when the GDP was growing by double digits every year, the birth rate was high, and civil servants earned a relatively low base salary. However, those conditions haven’t described Taiwan for two or three decades. Things had to change.

Pension reform was one of the three or four most important goals for Tsai Ing-wen’s first term; arguably it is the single most important domestic reform item on her agenda. Tsai has taken a lot of criticism over the past year. People who didn’t vote for her (predictably) think she is doing a terrible job, and they point to things like China’s more antagonistic stance toward Taiwan and the resulting drop in group tourism from China. They are also furious about the effort to nationalize the KMT’s ill-gotten party assets, which they see as a witch hunt (the “green terror”). Many people who did vote for Tsai are also somewhat disillusioned. Her support for marriage equality has been less than strident, her cabinet is full of old men (many of whom have ties to previous discredited administrations), some of the government’s economic policies have been presented and implemented clumsily (labor standards law, infrastructure package), the economy isn’t growing at 8% a year, transitional justice hasn’t been achieved yet, and the world isn’t perfect yet. Against this background, achieving pension reform should be a shining star on Tsai’s report card.

In fact, I’d argue that pension reform has almost perfectly embodied Tsai Ing-wen’s vision of consensus democracy. There were a lot of people who wanted the DPP to present their ideal bill and ram it through the legislature. After all, what is a majority for? Instead, Tsai took the process slowly and deliberately. Tsai’s cabinet included Minister Without Portfolio Lee Wan-yi, whose sole job was to oversee pension reform. The government held a national forum on pension reform, and Lee’s committee held several other hearings. These hearings were somewhat contentious and the opposition did not always participate in good faith. Still, most of the important political arguments were presented, and the committee was able to filter through them. One of Tsai’s stated goals at the outset was not to treat public servants as an enemy. As she put it, they were to be seen as partners in the reform rather than objects to be reformed. The Executive Yuan committee ultimately came out with a fairly moderate bill. At about the same time, the Examination Yuan came out with its own bill. The Examination Yuan members have fixed terms, and over half of them are still left over from the Ma era. As might be expected, the Examination Yuan bill was even more modest than the Executive Yuan bill. Transition periods were stretched out over more years and various formulas were adjusted to be somewhat more favorable to public servants. However, the two bills were surprisingly similar. By the time the Examination Yuan was ready to propose its bill it had become clear that some sort of reform was unavoidable, so the Examination Yuan proposed a substantive reform bill. During the first half of 2017, anti-reform forces were trying to arouse public opinion against Tsai. Various veterans, civil servants, and teachers groups held rallies, but these were generally not well attended. Surveys showed that public opinion was solidly in favor of reform, and this did not soften as a result of anti-reform activism. If anything, public opinion solidified in favor of a more aggressive reform. By the time the bills got to the legislature, the anti-reform movement was largely played out. In the legislature, the pro-reform forces took their turn trying to pass a more aggressive bill. Both the DPP and NPP caucuses demanded changes to various formulae and transition periods. They succeeded in some of these demands, and the law that eventually passed was somewhat more aggressive than the Executive Yuan bill. Nonetheless, Tsai stepped in to ensure that the most radical demands would not be adopted.

By the end of the process, the KMT found itself in a quandary. Public servants constitute a core constituency, and the KMT wanted to speak for them. However, public opinion was clearly against them, and the DPP caucus showed no signs of wavering. As the saying goes, there are two ways to resist in the legislature: civil and military (文、武). The “military” method involves physically occupying the speaker’s podium and disrupting the normal parliamentary procedures. The “civil” method involves using dilatory tactics such as introducing hundreds of amendments to stretch out proceedings as long as possible. In general, if you are sure of your position and your support in society, you go for the military option. If you are on shaky ground, the civil option is the best you can do. For months, I expected we were heading for a “military” showdown. However, the KMT will eventually crumbled. The KMT could not agree on an alternative bill, so the caucus was reduced to supporting various bills proposed by individual members. Instead of occupying the podium or offering hundreds of amendments, the KMT opted for a very weak battle plan. They would have several people speak on every clause, thus taking several days to pass the bills. The DPP was relatively happy to oblige, so the legislature has been engaged in marathon sessions all week. (A minor but telling point: When the DPP made a motion to extend yesterday’s meeting until midnight, it passed unanimously. If the KMT were really trying to resist, it would have opposed lengthening the meeting.) I’ve been sick this week, so I watched a fair amount of these debates on the LY channel. The KMT offered two main arguments against the reform. On the one hand, they suggested that the reform unfairly cut civil servants’ pensions too much. On the other hand, since the pension fund is forecast to go bankrupt in about 2049 (as opposed to in about 5-10 years under the current system), this reform doesn’t really solve the financial problem so there is no point in doing it. Note that those two positions are contradictory. If you want a reform that will be permanently sustainable, you are going to have to cut pensions even more.

In the end, Taiwan got a pension reform that both sides were a bit unhappy with, which is probably a pretty good indicator that it is a moderate compromise. Public discussion was allowed to percolate until some arguments were discredited and others emerged as superior. Opposition was marginalized, with the street protesters painting themselves into an ever smaller box. Instead of forming the vanguard of a public movement against reform, the anti-reformers demonstrated themselves to be merely selfishly interested in defending a system that unfairly privileged them. As they got smaller, their appeals got cruder and further discredited their moral position. (Example: a sign referring to President Tsai’s genitalia is not a smart way to make the case that civil servants are being unfairly discriminated against.)

If you had asked President Tsai after her inauguration when she expected to pass pension reform, I suspect she would have replied that it would take about a year. In fact, it has taken just over a year. One year to study the problem, hold public discussions, allow protesters to make their case, for supporters to reaffirm their insistence on this reform, and to pass a new law. Don’t expect the media to come out with glowing editorials praising President Tsai’s leadership. Democracy is messy, and we have been watching a messy and aggravating process unfold for nearly a year. Moreover, we ended up with something of a compromise, and no one loves a compromise. Nonetheless, I suspect this is exactly how President Tsai thinks democracy should work.

3 Responses to “Pension reform”

  1. Zla'od Says:

    Now write something on the aboriginal land issue!

  2. Michael Stainton Says:

    Thanks for this excellent and enlightening report!

  3. Daiwanlang Says:

    Love how you can take an issue that has been dragged through the mud countless times and make it so easy to understand. Thank you!

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