Inflation continues to take a large bite out of workers’ wages. According to the latest government statistics released on Friday, the average regular monthly wages were NT$45,427 (US$1,404) in the first nine months of this year — an annual rise of 2.5 percent. Including overtime pay, performance-based rewards, perks and bonuses, the average total wages were NT$60,186 per month over the first nine months — an increase of 1.57 percent from the same period last year.
Yet once inflation is considered — with consumer prices rising 2.36 percent year-on-year in the first nine months, the picture is not so pretty. Real regular wages rose just 0.14 percent from a year ago during the first nine months, while real total wages fell by 0.78 percent over the same period and marked the first contraction for the period in seven years. The Directorate-General of Budget, Accounting and Statistics (DGBAS) placed the blame on persistent inflation and other factors, such as lower bonuses amid an economic slowdown.
Data compiled by the DGBAS showed that the gains in nominal wages had continued to fail to match the rises in consumer prices as of September this year, and the increasing cost of living has had the greatest impact on lower-income earners and their families, as they tend to spend most of their disposable income on essential goods and services, which generally experience greater price increases than non-essential items.
It remains to be seen whether the negative real wage growth is likely to ease off in the final quarter of this year. This is because there has been no sign of significant trend changes for nominal wage growth and inflation in the short term, given that exports last month continued to register an annual decline and weighed on wage growth, while the inflation rate was still above 3 percent last month, casting a shadow on consumers’ spending power.
The good news is that overtime hours in the manufacturing sector, which is closely related to the nation’s economic climate, had increased for three consecutive months as of September, thanks to a low base of comparison last year, DGBAS data showed. Nevertheless, it requires further observation if the sequential increases in overtime hours are positive signs of a recovery in the export-oriented manufacturing sector.
In addition, the uneven development of different industries in the economy is also a key factor behind the decline in real wages in Taiwan. The fallout from the COVID-19 pandemic and US-China trade tensions have seen Taiwan’s industrial development become increasingly M-shaped, with income distribution worsening faster than expected. For instance, wages in industries such as shipping, semiconductors, information, communications and technology have increased markedly in recent years, outranking most firms in the service sector like hoteliers and restaurants, as well as several non-tech manufacturers such as machinery and chemicals.
An M-shaped development in local industries has enabled high-tech firms to easily attract talent with high salaries, while companies in the non-tech and service-focused industries face a disadvantage in attracting new blood, as they cannot afford to offer higher paychecks.
The government has worked hard to increase wages, implementing pay raises for public-sector workers in the hope of encouraging the private sector to follow suit. However, it must also work hard to curb inflation to safeguard people’s purchasing power, and to spare no effort to unwind the M-shaped industrial landscape. This would include introducing high-tech applications into non-tech and service firms, deregulating the service sector and providing more incentives for firms to upgrade their services. Only in this way could we create more high-paying jobs and facilitate overall wage increases.
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