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82 Taiwan Development Perspectives 2009
Introduction
Taiwan has tried to establish a sound social welfare
system since 1950. A safety net has been provided
for most of the people but some of them – housewives,
the unemployed, mature students and some retirees –
were left out. Many lacked support after retirement, in
particular. A national pension scheme was needed.
That scheme was finally set in place in the year 2008.
The national pension system was established.
This paper discusses issues of income security of
the aged. It reviews important developments of the social
welfare system in Taiwan and its fast aging society.
Efforts are made to explain why and how the national
pension system came into being. Attempts are also
made to probe the future of that system.
History of the Development of Welfare and
Pension Systems in Taiwan
Taiwan took the first significant social welfare
measure in the year 1958. It was a golden year, which
witnessed the legislation of the Factories Act, the Factory
Inspection Act, the Minimum Wages Act, the Labor
Contract Act, the Workers’ Welfare Benefits Rules,
and the Labor Dispute Solution Act. (See Table A.)
Also, a labor insurance scheme was officially started,
providing protection for workers ever since. Benefits
include payments for injury, disability, childbirth, death
and old age. Taiwan’s labor insurance, started 75 years
after Germany, ushered in a new era of social insurance.
Another important year is 1980. A series of laws
were adopted. They included the Old Age Welfare Act,
the Handicapped Welfare Act, the Social Assistance
Act, and the Private School Staff Insurance Rules. They
paved the way for many laws to come. For instance, the
Old Age Welfare Act provided the basic protection for
the elderly when Taiwan became an aging society in the
late 1990s. The Handicapped Welfare Act evolved into
a Disabled People Protection Act. The Social Assistance
Act has been invoked to provide emergency aid
and service for the poor.
Still another important year is 1994. Taiwan
launched national health insurance. It is Taiwan’s first
general and mandatory social insurance.
The fourth, and probably the most, important year
is 2008 which saw the inauguration of national pension
insurance (NPI). Started on October 1, NPI provides an
“annuity” for the people of Taiwan. (The NPI Act was
adopted in 2007.) NPI is different from a pension system
in other countries. In Taiwan, NPI is neither universal
nor fully mandatory. It now only shields people
who are not participants in employment-related insurance,
in particular the labor insurance coverage. These
people include housewives, students, and the unemployed
who are apparently not employed by anyone
under any circumstances and definitely have no stable
or sustainable income at all. The government shares the
finical burden in a much higher ratio than the employment-related
insurance. In addition, on August 13, the
Labor Insurance Act was amended to end lump-sum
payment in favor of an old age pension system. It is
believed that the latter provides more and better economic
security for participants.
As Taiwan is aging fast, poverty of the elderly is a
problem that needs to be addressed. Western European
countries have continued their pension reform. Some
have reduced public spending for pension, encouraging
people to sign up for private annuities. Others have
raised the mandatory retirement age.
Taiwan falls far behind the Western countries in
the protection of its elderly population. A basic universal
pension system that can provide for all retirees has
not yet been established. And the risk of aged people
falling below the poverty line is increasing because of
the economic slowdown in Taiwan, while the pressure
of inflation grows. The elderly account for more than
10 percent of Taiwan’s population. At the same time,
because retirees increase in number, its workforce is
shrinking rapidly. The burden of the working population
to care for the aged will become heavier as years
go by.