To coincide with the government’s new minimum wage standards that took effect on Jan. 1 — with the hourly rate rising to NT$140 and the monthly minimum increasing to NT$22,000 — several enterprises have announced their own pay raises. According to a survey released by an online job bank last week, 40.2 percent of companies this year plan to hand out raises of 4.09 percent on average, both the highest figures in three years.
However, Taiwanese will not be satisfied with the pace of government wage hikes if they compare them with those in South Korea. South Korea’s minimum wage this year is to see its highest increase in 17 years to 7,530 won (US$7.13) per hour, which is the equivalent of about NT$210 per hour and 50 percent more than Taiwan’s. Certainly, there are mixed views in South Korea regarding its huge minimum wage hike, but there is no doubt that it is the envy of many Taiwanese.
Even with Taiwan’s average economic growth registering 2.7 percent annually over the past 10 years, wage levels each year have only increased by about 1.5 percent on average, far more sluggish than economists and policymakers expected.
The small portion of national GDP growth shared with employees has been an important factor leading to the nation’s stagnant wages.
Business profits accounted for about 30 percent of Taiwan’s GDP prior to 1990, and gradually climbed to reach 35 percent in 2016, data provided by the Directorate-General of Budget, Accounting and Statistics showed.
However, in the meantime, the part of the nation’s GDP allocated to employee salaries — dubbed the “labor share” by the International Labour Organization — declined after 1995, falling to a low of 43.8 percent in 2010. It was 43.81 percent in 2016.
There are many ways to respond when people ask why the nation has not seen more wage growth, but the big questions are whether companies could share their profits with their employees and whether they are willing to do so.
It seems that companies have tended to be more generous with shareholders than with employees, which explains why many employees do not amass any savings even though they work hard.
Apart from hapless attempts to morally persuade employers, the government said it would provide incentives to businesses with good salary structures, but what the incentives will be remains unclear. Discussions about stagnant wages have been going on for years. People need to see concrete measures set out by government agencies to address this problem.
While the political environment makes it hard to advance more progressive measures, there is one issue that should gain bipartisan support: keeping the economy growing on a broad basis.
This would allow local businesses to upgrade and give the nation’s economic structure, which is in a painful transition period, a chance to transform itself. Local businesses must move toward high-value-added business models. Creating added value in both manufacturing and service-oriented industries and improving labor productivity could spread wage gains throughout society.
During this period, the government needs to curb industrial relocation and attract new business investment. It must propose measures to help those who might be displaced by technological innovation and change in the business environment.
The government should also implement more stringent enforcement and heavier punishments for labor law violations, as the bargaining power of employees is weak because of low union membership.
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