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Taiwan’s Pension Crisis
With the emergence of democratisation in Taiwan, political parties compete over social welfare and pension benefits to please voters. Voters want substantial increases in social welfare and pension benefits but are fiercely resistant to tax increases. Taiwan’s government debt has continued to accumulate considerably. The Ministry of Civil Service estimates that many of the pension systems will go broke soon. Taiwan’s pension system is rather complicated; it is being restructured. Without a sustainable pension system, future generations of taxpayers will shoulder the pension spending on current generations. Ending Taiwan’s low economic growth is a prerequisite for a sustainable pension system.
The author is especially grateful to the anonymous referee for providing useful comments and suggestions.
Democratisation has sown the seeds of Taiwan’s pension problems, with political parties competing over social welfare and pension benefits to please voters. Government employees and other workers are covered under different pension schemes. Taiwan’s generous pension system will not be affordable when its economy is growing at a low growth rate. Furthermore, a rapidly ageing population became a pressing demographic issue in Taiwan in the 1990s due to industrial transformation, family planning, and urbanisation in the 1970s and 1980s. An enlarging ageing population has turned out to be a politically strong force to be reckoned with during elections. Both the burgeoning retired population and the age of retirement will place an extremely heavy financial burden on the government.
Taiwan’s complicated pension system is under restructuring. In 2013, the ruling Kuomintang (KMT) proposed that it would embark on pension reforms, but did not make much progress, as many pensioners are strong KMT supporters. In 2016, the Democratic Progressive Party (DPP) came to power and began radical pension reform, but it led to discontent among military personnel, civil servants, and public school teachers. Pension reform has given rise to class antagonism between different classes and generations, and it has adversely affected politics. On 24 November 2018, the ruling DPP won only six of the 22 city mayor and county commissioner seats in local elections. The opposition KMT gained a substantial 15 seats. Future generations of taxpayers will shoulder the pension spending on current generations if the pension system is not made sustainable, for which a prerequisite is an end to low economic growth.
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