Minimum Wage Increases Are Not Just About Low-Income Workers. Here’s Why.

Minimum Wage Increases Are Not Just About Low-Income Workers. Here’s Why.
Photo Credit: Reuters / TPG Images

What you need to know

The minimum wage in Taiwan matters to workers across all wage levels.

After Taiwan’s government announced an increase of the minimum wage in October, a survey of Taiwanese workers found that nearly half (48.4%) of respondents believed the measure would have little or no impact on their lives. According to media reports, some Taiwanese workers echoed the sentiment, claiming they don’t “feel a benefit” from the increase.

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Before the policy was announced, the General Chamber of Commerce, a group representing Taiwanese businesses, had claimed that the minimum wage would not affect the average Taiwanese worker. Migrant workers would be the “biggest beneficiaries of the increase,” he said, and that the government should not be so “generous.” 

The comments are discriminatory. They are also incorrect. Such a raise would affect the “average worker.” 

First, the number of workers set to directly benefit from the increase is not small -- about 15% of Taiwan’s workers in the industry and service sector earn less than NT$30,000 every month. An increase will help many of these workers who are earning the minimum wage, which is set to rise from NT24,000 to NT$25,250.

What about the workers earning more than the minimum wage? There’s some evidence that would appear to show that they won’t benefit as much. The Ministry of Labor conducted a confidential study in 2018, which concluded that there is little or no correlation between the increase of the minimum wage and regular average wage (not inclusive of bonuses or overtime pay). With the minimum wage increasing by 5.21% next year, the government said that based on past experience, the regular salary will grow by between 0.02% and 1.4%. A survey by the 104 Job Bank also found that 39.3% of businesses intend to increase wages by an average of only 3.1% next year.

Based on the above, it may look like the average worker will not benefit at a similar level of the minimum wage increases of 5.21%. 

But this disparity appears because we are comparing percentage increases. The chart below reveals that the median wage trend generally follows that of the minimum wage. (Data of the median wage is only available from 2012, and the data used here is the total median wage inclusive of bonuses and overtime pay.)

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It is misleading to look at percentage change. The growth of the median wage is generally slower than that of the minimum wage. From 2017 to 2019, minimum wage grew by about 5% annually, but the median wage grew by 1.63% to 3.38%.

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But the two move in tandem, maintaining a roughly consistent relationship as they rise. This trend is clearer in terms of the change in dollar value. Since 2012, the median wage has hovered at about NT$18,000 and NT$19,000 above that of minimum wage.

The purple shaded area shows the minimum wage over the years, while the orange area shows the difference between the minimum wage and the median wage. 

In other words, the median wage has generally stayed at about the same level above the minimum wage since 2012.

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A similar trend emerges for average wage. The chart below shows that since 2000, the regular average wage has also tracked closely with the minimum wage. (This chart shows the regular average wage not inclusive of bonuses and overtime pay, and data is available over a longer term.)

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The regular average wage has also hovered at about NT$18,000 to NT$19,000 above minimum wage since 2000.

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Across the various industry and service sectors, a similar trend appears. The average wages in many of these sectors have stayed at a similar level above minimum wage since 2000. (The red line in the chart below shows the average wage across all industry and service sectors.)

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Taiwan’s workers have been told that increasing the minimum wage would have little impact on workers at other wage levels. In reality, the median and average wage have been increasing at a consistent level in relation to the minimum wage.

Taiwan’s business groups claim that the increase of the minimum wage would mainly benefit migrant workers. But in reality it will improve the wages of workers across all wage levels.

Surely, Taiwan’s business groups are aware of this, having hired workers at various wage levels. Why do they keep perpetuating the myth that the minimum wage should not be increased on the basis that most workers, who are not earning the exact amount of the minimum wage, would not benefit?

As the chart below shows, there is a strong correlation between the minimum wage and total median wage. This should not come as a surprise as the median wage has been hovering at a similar level above minimum wage.

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Similarly, there is a strong correlation between minimum wage and regular average wage (not inclusive of bonuses and overtime pay).

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What all these data points suggest is that minimum wage matters to the worker earning an average wage. Whether the median and average wage grows in Taiwan depends strongly on whether the minimum wage grows.

The minimum wage has a real and major impact on the wages of workers across all wage levels. They should be concerned about whether the minimum wage is increased.

Most of them are aware that they cannot afford the cost of living in Taiwan. Due to decades of wage stagnation in Taiwan during the Chen Shui-bian (2000-2008) and Ma Ying-jeou (2008-2016) administrations, Taiwan’s wages are falling way behind the growth of living expenses.

Compared with countries with a similar GDP per capita (of between US$20,000 and US$50,000), Taiwan’s minimum wage (red dot in the chart below) is only adequate for living in countries where consumer prices are only 70% to 80% that of Taiwan’s, and grocery prices are only half that of Taiwan’s.

Instead of NT$24,000 a month, Taiwan’s minimum wage should be at about NT$40,000 for workers to afford living expenses. But it is instead the amount of the total median wage (purple dot), indicating that half of industry and service sector workers earn less than what they should be making.

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If NT$40,000 is the minimum wage required for a basic standard of living, half of Taiwan’s industry and service sector workers are earning poverty wages.

But in fact, things are worse than one might expect. According to national statistics, 62.62% of Taiwan’s workers earn less than NT$40,000, meaning that more than 60% could be living in poverty.

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The chart below shows that Taiwan’s total average wage is as low as in countries with consumer prices 20% to 30% lower, and grocery prices that are 50% lower.

For Taiwan’s total average wage to be commensurate with its cost of living at the level of other countries, then it should be about NT$85,000 instead of the NT$54,160 it is today, an increase of about 60%.

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We see in the chart below that while Taiwan’s cost of living is closer to countries like Spain and Italy, Taiwan’s workers (thick red line) are earning wages at the level of Eastern European countries where the cost of living is lower.

Taiwan’s wage distribution should be closer to that of Italy’s (thick green line). 

In other words, the wages of Taiwan’s workers across the board are being depressed, and they are only earning half the salary that they should be earning if pegged to the cost of living in Taiwan.

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Because Taiwan’s minimum wage stagnated during the Chen and Ma years, it would take 13 years — until 2034 — for Taiwan’s minimum wage to grow to NT$40,000 based on the current growth rate. 

Over the last three years, the total average wage in Taiwan has hovered at about NT$30,375 more than the minimum wage. 

If the average wage continues to grow at this level above minimum wage, it would take until 2040 to reach NT$80,000. Keep in mind that this is the average wage that Taiwan’s workers should be earning to be commensurate with the cost of living at the level of other similarly wealthy countries today (as illustrated above).

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To put things succinctly: the minimum wage in Taiwan matters to workers across all wage levels. Taiwan’s government and residents should take note. A potential increase is not an act of charity for the lowest earners, but a benefit for workers at all income levels.


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

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