1. Social Pension Policy Fervour and Its Eventual Decline in Taiwan: Electoral competition, low tax regime and negative policy feedbacks Yei-Whei Lin Medical Sociology and Social Work, ChunShan Medical University, Taiwan

2. The structure of today’s presentation 1.The reasons why to study Taiwanese social pensions 2.Institutional analytical framework of social pensions 3.The politics of social pensions, including expansion and retrenchment in Taiwan since the 1990s 4.The implications of Taiwan’s case for East Asian pension development

3. 1. Why to study Taiwanese social pensions?  The social pension mainly refers to the type of pensions where the beneficiaries do not directly contribute to a fund or individual account monitored through payroll deductions, as these are funded through general taxation (World Bank, 2009).  Depending on programmatic design, an social pension can be means/resource tested or universal.

4.  By 2011, ten of eighteen East Asian economies introduced social pensions, because of their concerns about the rural and urban income divide and ineffectual contributory schemes to address this issue.

5.  The reasons why to discuss Taiwan’s case mainly come from two considerations: 1)Much longer implementation history than other countries in the region 2)Providing neighboring countries with necessary political lessons regarding policy provision

6. 2. Brief introduction to social pensions in Taiwan  Five social pensions introduced by the government since the early 1990s include: 1.Old-age Allowances (OAAs) : locally-run social pensions for the rural elderly in the early 1990s, but failed immediately after policy implementation. 2.Living Subsidy for Low Income Seniors Program (LSLIS) : a means-tested social pensions introduced by central government in 1994

7. 3.Aged Farmers Allowance (AFA) : the social pensions for aged farm workers established in 1995 4.Disability Living Allowance (DLA) : the disability scheme for the handicapped, including older members introduced in the mid 1990s 5.Old-aged Citizens Welfare Living Allowance (OACWLA) : the social pension system established in 2002 for those without pension cover

8. 6.Old-age Indigenes Welfare Living Allowance (OAIWLA) : the social pension system established in 2002 for older indigenes  Over the last two decades, social pensions have played a more important part in the pension regime in terms of coverage and funding received (See Figure 1 and Figure 2) than previously

9. Source: Bureau of Labour Insurance (2012); Ministry of Interior (2010)

10. Source: Ministry of Finance (2011)

11. 3. The proposal for institutional analysis to explain East Asian Social pension growth  Due to more contextual considerations contained in institutional treatment, an institutional perspective was proposed in East Asian pension studies  From extant regional studies with institutional perspective, they emphasised the following four factors with significant impacts on East Asian pension politics ：

12. a)Policy legacy (I): ineffectual (contributory) pension system b)Policy legacy(II): low taxation regime c)Political system: electoral system and party system d)Introduced policy feedbacks on subsequent social pension development

13. Figure 3. Institutional framework for analysing East Asian Social pension politics Pre-existing pension regime Low taxation regime Social pension provisions Political institutional systems Policy feedbacks

14. 4. Social pension politics in Taiwan since the 1990s  Based on the proposed analytical framework, the study of Taiwan’s case will focus on how and why different configurations of institutional factors led to transition of pension policy dynamics over last two decades.

15. 4-1. The politics of social pension expansion (from the 1990s to the mid-2000s)  During the expansion stage, a specific configuration of factors is found to have facilitated social pension growth: A.Policy legacy: Ineffectual pension insurance system unable to address pension needs of rural population and socially disadvantaged (e.g. the disabled) B.The opposition party committed itself to pro-rural party so as to challenge urban-based KMT

16. C.Particular electoral systems motivating politicians to embrace social pensions as pork-barrel provision (e.g. MMD/SNTV system for rural lawmakers). D.Electoral interests eventually circumvented government’s financial discipline.

17. Table 1. The causal mechanisms facilitating social pension growth OAAs & AFA (Rural pensions) The interplay of ineffectual pension insurance system, the pro-rural party and candidate-centered electoral system LSLIS Central government’s reactive response to the opposition party’s social pension policy challenge OACWLA & OAIWLA The interplay of ineffectual pension insurance system and the candidate- centered electoral system outside urban areas

18.  Consequences of social pension expansion: 1)Fragmentary social pension provision favouring special interests, thus leading to clientelistic pension politics 2)Clientelistic pension politics led to rapid expansion of social pensions 3)Up to the mid 2000s, social pension system covered about 70 % of older people

19. 4-2. The politics of social pension retrenchment (from the mid-2000s onwards)  Two major causal mechanisms transforming expansionary pension politics to retrenchment mode: A.Low taxation regime B.Crowding-out effects of social pensions on limited welfare resource allocation

20.  Regarding the first mechanism, it thwarted the universal social pensions put forward by civil progressive groups in 2004. In 2004, welfare progressive groups argued: 1)It was politically feasible to integrate diverse social pensions into a single system. 2)This system needed to extend its coverage to the remaining population and function as universal social pensions. However, the low taxation regime and its political supporters thwarted this reform plan

21.  As to the second causal mechanism leading to social pension retrenchment, it has operated under the following conditions: 1)Low taxation regime implying limited resources for welfare usage, including social pensions. 2)Population ageing and clientelistic pension politics led to the crowing-out effect of non-contributory pension provision on resource allocation. Welfare progressivists eventually shifted their support to contributory pensions

23.  Government’s recent retrenchment acts on social pensions: 1.In 2008, a new contributory basic pension was established with the aim to replace extant social pensions, but the retrenchment proposal was strongly opposed by recipient groups 2.Reduced clientelistic politics of social pensions by a clearer pension indexation system

24.  Currently, pension retrenchment acts have still faced recipient groups’ challenges

25. 5. Implication of Taiwan’s case for East Asian pension politics A.Contributory pension policy legacy B.The importance of political institutions (e.g. candidate-based electoral systems and pro-rural party) C.The nature of low-taxation regime

26. Conclusion  More recently, social pensions have gained much consideration in East Asian pension reforms. However, extant discussion on this issue is still limited by technical considerations  Taiwan’s case discussed here demonstrates the complicated political impacts this type of pension has on society, thus broadening our future debate of the role social pensions should play in pension arrangements in this region.