The Ministry of Labor’s Minimum Wage Review Committee on Oct. 8 proposed increasing the monthly minimum wage by 5.21 percent to NT$25,250 from NT$24,000 — the highest increase in 15 years. The committee also recommended that the hourly minimum wage be raised to NT$168 from NT$160. The proposals were approved by the Executive Yuan on Oct. 14 and are to take effect on Jan. 1.
This sixth annual increase since President Tsai Ing-wen (蔡英文) took office in 2016 would increase corporate costs by NT$23.4 billion annually, while benefiting 2.45 million domestic and foreign workers, the ministry has estimated.
A minimum wage review is mandated to be held in the third quarter of each year in lieu of a law that authorizes regular increases. The meeting ensures that workers — especially marginal workers, such as part-time workers, apprentices and unskilled workers — can earn enough money to adequately support themselves and their families.
The effects of a local COVID-19 outbreak in May postponed this year’s meeting until early this month, but negotiations were tough as usual among all parties, with labor rights advocates demanding increases of 6 to 8 percent and corporate executives favoring a rise of no more than 3 percent.
It is understandable why corporate executives were not satisfied with the committee’s proposals, as the rising costs of materials and labor are squeezing their profit margins. Their caution toward the wage hikes also reflects a growth imbalance between large corporations and small and medium enterprises, as well as between firms exporting to overseas markets and those focused on the domestic market, amid the COVID-19 pandemic.
Raising the minimum wage is not enough to tackle the problem of stagnant wages in Taiwan, where about 53.4 percent of salaried workers have not had a raise in more than three years, a survey conducted by the 1111 Job Bank showed. While the wage increases would affect 2.45 million workers, salaried workers who earn above the minimum wage would not benefit from the hikes.
A change of mindset is needed in the corporate world, which has over many years suppressed growth in white-collar and blue-collar wages.
Mainstream economics says that raising the minimum wage triggers layoffs and prompts companies to pass the higher costs on to consumers, thus pushing up prices and sparking inflation.
However, David Card’s research into minimum wages and the effect of immigration on labor costs — which won him a Nobel Prize in Economics along with two other economists this year — suggests that a minimum wage hike does not necessarily cost jobs.
In a 1993 paper coauthored with Alan Krueger, titled Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania, Card showed that raising the minimum wage did not increase layoffs, reduce the rate at which new businesses appeared or significantly affect prices. Although mainstream economists have yet to fully accept the findings because they seem to contradict the law of supply and demand, Card’s research suggests that businesses have more leeway in employee salary decisions before sacrificing profitability.
Past studies have shown that many variables are at play in the labor market: GDP growth, private consumption, consumer prices, investment confidence and people’s expectations affect jobs and wages.
This shows how hard it is for researchers to get at the underlying truth, but it also shows that all stockholders in the salary question can afford greater flexibility and openness when it comes to negotiating the minimum wage — and tackling the problem of stagnant wages.
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