NT$25,250 Is Still Not Enough for a Basic Standard of Living in Taiwan

NT$25,250 Is Still Not Enough for a Basic Standard of Living in Taiwan
Photo Credit: CNA

What you need to know

President Tsai increased the minimum wage by a larger percentage in six years than her predecessors in their full eight-year terms, but this is not good enough.

Taiwan decided to increase its minimum wage to NT$25,250 a month in 2022, but this does not go far enough. This amount is still not enough for a basic standard of living in Taiwan.

In this year’s minimum wage review meeting, labor groups advocated for an increase of between 8% to 10% while business groups proposed limiting the increase to 3%. The Minimum Wage Review Committee eventually settled for an increase of 5.21%. 

While the Chinese National Federation of Industries, citing a survey, initially insisted that the majority of businesses would not accept increases of more than 3%, other business leaders such as Wong Chao-tung, president of the Taiwan Steel and Iron Industries Association, and Edward Huang, senior vice president of Taiwan Cement, have come out to say that the 5.21% increase is acceptable and will have little impact on their operations.

Labor groups had called for minimum wage to be increased by between 8% and 10% in view of Taiwan’s economic growth of 3.11%, one of the best globally in 2020, and the projected growth of 5.88% this year — which would be the highest the country would see in 11 years. Given that the minimum wage grew by only 0.84% this year, labor groups have called for a hike next year to take into account the economic performance in both years. 

To give credit where credit is due, the increase of 5.21% is the highest Taiwan has seen in the last 14 years.

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Under President Tsai Ing-wen, Taiwan’s minimum wage increases have also grown faster than during the administrations of her two predecessors. Under her administration, the monthly minimum wage has increased by 26.2%, as compared to the 9.09% and 15.79% that Chen Shui-bian and Ma Ying-jeou only managed to achieve, respectively. President Tsai increased the minimum wage by a larger percentage in six years than her predecessors in their full eight-year terms.

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Based on a six-year moving average from the mid-1990s, one can see that under President Tsai, the minimum wage has also grown the fastest cumulatively in the last six years.

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Even so, the minimum wage of NT$25,250 is inadequate for the cost of living in Taiwan.

Of 47,500 respondents to a survey on this year’s minimum wage adjustment, most believe that the minimum wage still needs to be higher — 45.6% of respondents said that minimum wage could have been raised. Only 17.2% said it has been adjusted to the right level, and 17.5% preferred it to be maintained at NT$24,000.

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Indeed, Taiwan’s minimum wage is grossly inadequate compared to the cost of living, the chart below shows.Among high-income countries with a similar GDP per capita (of between US$25,000 and $50,000), Taiwan has seen its minimum wage falling the most from the trend line (red dot).

According to Numbeo’s Cost of Living Index, Taiwan’s minimum wage is as low as countries with consumer prices 20% to 30% lower, including Portugal, Estonia, and the Czech Republic. The grocery and housing prices in Taiwan are also one of the highest in the world.

If Taiwan’s government adjusts the minimum wage based on cost of living, it should be about NT$40,000 (green dot).

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In the survey mentioned above, nearly half the respondents (48.4%) said that this year’s minimum wage increase has no or little impact on their livelihoods, while 42.8% said that the minimum wage would have major or some impact on them.

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Calling for an adjustment to NT$40,000, however, would be based on the assumption that the minimum wages in the other countries are set at a level to be minimally required for a basic standard of living. Half of the workers in Taiwan’s private sector are not earning this amount every month.

In fact, 62.62% of Taiwan’s full-time workers are earning less than NT$40,000 — or below the level needed for a basic standard of living in Taiwan.

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Increases in the minimum wage do have an impact on the majority of Taiwan’s workers. As long as it is kept at a low and inadequate level, workers across all wage levels would continue to see their wages depressed.

Taiwan’s minimum wage has been kept low for decades, under President Chen (2000-2008) and Ma (2008-2016).. Chen did not raise it in seven out of the eight years of his presidency, and Ma likewise did not raise the minimum wage in two years of his eight-year term. It was not until Tsai’s presidency that the country saw its minimum wage grow every year post-democratization.

The minimum wage should have grown by an average of 4.11% every year since 1997 to reach the optimal level of NT$40,000. However, minimum wage grew by far lower levels under Chen and Ma (comparing the potential increases that should have been achieved under the pink dotted line for Chen and the blue dotted line for Ma, against the actual increase in the thick yellow line). 

Only President Tsai had raised the minimum wage at the level expected based on this projection trend (comparing the dotted red line against the thick yellow line). 

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Even so, this is still not good enough.

Because of how Taiwan’s minimum wage had been depressed under the two former presidents, it needs to be increased dramatically to catch up with the cost of living in Taiwan. The government needs to implement a clear plan to bring the wage to NT$40,000.

Labor groups have called on President Tsai to increase the minimum wage to at least NT$30,000 by the end of her presidency to fulfill the promise during her election campaign.

Accordingly, they proposed increasing it to NT$30,233 by 2024. The New Power Party (NPP) has also called for a hike to NT$31,039 in the same year. Based on their proposals, this would entail increasing the minimum wage by 8% or 9.27% every year for the next three years, or by only NT$2,000 to NT$3,000 a year — a small amount given the average salary increment of NT$5,000 that Taiwan’s workers received last year.

In comparison, under President Tsai, minimum wage has grown by an average of only 3.95% every year since 2017. At this rate, it would be 2027, three years after she steps down, when it hits NT$30,000. To reach NT40,000, it would be 2034, 12 years from now.

Based on the proposals of the NPP and labor groups, Taiwan’s minimum wage would be able to get to NT$30,000 in three years.  In 2027, it would grow to NT$40,844 at NPP’s proposed rate of growth. The rate of growth proposed by labor groups would push the minimum wage over NT$40,000 to NT$41,132in 2028, or seven years from now.

Though a step in the right direction, it must be noted that NT$40,000 is the amount that meets the cost of living in Taiwan in 2021. In 12 years, a much higher minimum wage would be needed to account for expected inflation.

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Taiwan’s minimum wage bill, which introduces a mechanism to adjust the minimum wage, has been sitting in the Executive Yuan since 2018. But the labor minister Hsu Ming-chun said, “due to differences between business and labor groups about the reference data and indicators that need to be incorporated into the bill, feedback is still being solicited to identify the relevant data.”

Minister Hsu also said that the Minimum Wage Review Committee insisted that the minimum wage bill should have lesser restrictions and greater flexibility, but agreed that they should take the consumer price index into account. 

There are already established methods developed globally for the calculation of minimum wage based on the cost of living, such as the Minimum Income Standard developed by the Loughborough University’s Centre for Research in Social Policy (CRSP), which details the method for the calculation of the minimum wage if determined based on the minimum income required for a basic standard of living.

Taiwan’s government does not have to reinvent the wheel, and delaying the passing of the bill will only prolong the pain for Taiwan’s workers who have struggled to get by on inadequate wages due to the politicking of Taiwan’s business groups and politicians.

While the minimum wage for next year might already be set in stone, the discussion starts today to think about a truly adequate minimum wage required for a basic standard of living in Taiwan, not one decided on the whims of politicians and business leaders. 

This discussion needs to be grounded on data, to ensure that all workers can earn enough for a basic standard of living in Taiwan. 

READ NEXT: Taiwan’s Minimum Wage Is Not Catching Up With Consumer Prices

TNL Editor: Bryan Chou, Nicholas Haggerty (@thenewslensintl)

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