The Determinants of Income for the Elderly in Taiwan

Article excerpt

The elderly population in Taiwan is increasing in number extremely fast. The following statistics are estimates of how long it will take for each country's elderly population ratio to grow from 7% to 14%: France, 125 years; USA, 65 years; and the United Kingdom and Germany, 45 years. However, Taiwan's elderly population ratio is estimated to require only 25 years to reach this level. To cope with the challenges of this rapidly increasing number of older people in the population, Taiwan must restructure its social security system in different ways to other countries. The maintenance of income in old age plays a crucial role in the allocation of social security benefits in a modern economic society. In the current mode of production in Taiwan, the majority of people are employed in capitalist enterprises. Retirement is, therefore, an event that Taiwanese people are compelled to face in later life, and the accompanying loss of income has a strong impact on people's lives. In particular, the relative economic position of women may cause vulnerability at this time in their lives because of dependence (Gee et al., 2002). Savings and family support might compensate for this lack of income. On the other hand, social security benefits such as pensions and government allowance are developing as a consequence of the need for income in retirement.

Ryder (1988) divided sources of retirement income into three categories: family transfer, life cycle transfer, and social transfer. For example, a family transfer occurs when a young household member transfers resources to his/ her parents; the parents have raised their children in the expectation of being looked after when they grew old. A life cycle transfer begins with savings and investments in an early life stage for use later in life. A social transfer is the transfer of resources such as retirement pensions, annuities, and government allowances from groups of younger workers to groups of retired seniors through the insurance and tax systems. Davis and van den Oever (1981) analyzed the sources of income for American seniors and pointed out that social transfer was a major source of their income, followed by life cycle transfer, with family transfer being the least valuable resource.

According to existing research and anecdotal evidence, the elderly in Taiwan have usually received financial support from younger family members. By contrast, the elderly in some Western countries rely mainly on social transfer. According to data from 1989 to 2000 from the Comptroller of Executive Yuan, family financial support was still the major source of income for the elderly in Taiwan, especially for females. The data also revealed that in 2004, 26% of the elderly (aged 70 and older) depended on themselves and their spouses for financial income (Ministry of the Interior and Statistics Department, 2004), and in 1989, this statistic was 22.8%. During the same period, the percentage of the elderly who lived on social security increased from 1.3% to 16%.

Because of the limitations in the survey data, no direct comparison between Taiwan and America can be made based on the above dataset. Nevertheless, the data showed that income structures were considerably different between the two countries, which would indicate that the two countries have different economic, social security, and familial systems (DeNavas-Walt & Cleveland, 2002). Western countries have tried to improve care for the disabled, the unemployed, the sick, and the aged through social security and, in the twentieth century, through the social insurance system. However, social security benefits in Taiwan have been limited to special groups such as servicemen, public school teachers, and government employees. Since the 1980s, the public has looked forward to the establishment of a national pension program. In the 1990s, the public required more resources from the government to set up a social security program for the elderly (Wang, 2006). …