Why Taiwan’s Minimum Wage Situation Is Still Worse Than Japan and South Korea

Why Taiwan’s Minimum Wage Situation Is Still Worse Than Japan and South Korea
Photo Credit: Reuters / TPG Images. Members of the workers' union of Toyota Motor Corp. at a rally for the annual "shunto" wage negotiations at the company headquarters in Toyota, central Japan, March 7, 2017.

What you need to know

By any measure, South Korea and Japan are far ahead of Taiwan in minimum wage levels.

Taiwan’s businesses have claimed that the country doesn’t need to significantly increase the minimum wage. But it’s a tactic that only serves to allow themselves to continue profiting from the system.

National Federation of Industries director Ho Yu suggested that behind the decision by the government to increase the minimum wage by 5.21% this year is a desire “to beat South Korea’s increase of 5.1%.” Based on their survey, he said that most businesses preferred a 3% increase as in Japan, “if there has to be one at all.” 

But with the current minimum wage — or the one after the increase, Taiwan’s workers cannot afford the cost of living. This is worse than what’s happening in Japan and South Korea.

In 2022, Taiwan’s monthly minimum wage will be increased by 5.21%, despite complaints by businesses. In South Korea and Japan, the increase will be 5.05% and 3.10%, respectively.

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But the minimum wages of South Korea and Japan are nearly twice as high as Taiwan’s, the important but missing context in these discussions.

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The business groups’ attempt to center on percentage change is arbitrary. A more meaningful way to compare Taiwan’s minimum wage with that of South Korea and Japan is to compare it with the cost of living.

And this comparison shows that the cost of living in Taiwan is lower than in South Korea and in Japan. 

As the chart below shows, consumer prices are lower than in South Korea and Japan by 13.29% and 19.35%, respectively. Grocery prices are also lower by 13.96% and 5.44%, while housing prices are lower by 22.38% and 5.12%. 

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Given that Taiwan’s prices are about 5% to 20% lower than these two countries, it is reasonable to imagine its minimum wage might be set at a level 5% to 20% lower.

But the chart below shows that Taiwan’s minimum wage is about 40% to 50% lower than that of South Korea and Japan. This suggests that it is vastly inadequate for workers in Taiwan.

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For Taiwan’s workers to afford the cost of living as their counterparts in South Korea and Japan, the minimum wage should be lifted to about NT$35,000 to NT$40,000.

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But it is going to increase to just NT$25,250 next year, about 60% to 70% of what it should be.

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For the minimum wage to be on par with the cost of living in South Korea and Japan, Taiwan needs to increase it by a percentage between 40% and 70%.

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While a minimum wage of around NT$40,000 is required in Taiwan, only about half the workers in the industry and service sector are earning this amount. A whopping 62.62% of full-time workers are earning less than they need.

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In other words, 50% to 60% of the workers in Taiwan can be considered to be living in poverty, not earning enough to afford the cost of living.

Taiwan’s plan to increase the minimum wage next year isn’t ambitious enough. It has been stagnating for the last two to three decades. 

Given the low wage situation, Taiwan’s business groups are trying to deprive workers of a fair wage.

If business groups think that Taiwan's minimum wage growth should follow that of our East Asian counterparts, then why did they not suggest doing so over the last two to three decades?

Prior to the economic crisis in 1997, Taiwan’s minimum wage was increasing at a pace similar to South Korea’s.

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If Taiwan’s minimum wage had grown as quickly as South Korea’s after the economic crisis, it would be over NT$100,000 today.

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Taiwan’s minimum wage today is only about a quarter of this amount, signifying how wages have been depressed. Taiwan used to have a minimum wage twice as high as South Korea’s in the early 1990s, but it’s now only half that. Workers have lost their buying power all in a short span of two to three decades, while businesses have been profiting immensely by stealing their wages (or what is known as wage theft). 

Taiwan’s business groups have been campaigning against a large increase in minimum wage, claiming that it leads to a rise in unemployment rate..

But this is untrue. South Korea’s minimum wage has risen dramatically by as much as much as 10% to 17% in some years since 2000, but its unemployment rate has remained at a similarly low level as Taiwan.

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As the minimum wage (and wages across the board) stagnates and falls behind that of other high-income countries, Taiwan’s consumer prices have continued to escalate.

Taiwan’s grocery prices rank among the top 10 most expensive in the world. The chart below gives a general sense of Taiwan’s place in the world rankings.

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Taiwan’s housing prices are also among the top 10 most expensive globally.

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Taiwan’s minimum wage is also one of the lowest among high-income countries with a similar cost of living.

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For Taiwan’s minimum wage to be at the level that is commensurate with the cost of living, taking South Korea and Japan as a gauge, the minimum wage would need to be about NT$40,000.

After forming a new government last month, Germany decided to increase its minimum wage by 25% next year, from €9.60 to €12, in light of years of slow growth in the minimum wage.

If Taiwan were to follow Germany, then the minimum wage would be increased to NT$30,000 next year, which is the level President Tsai said is optimal.

And if the minimum wage grew by another 25% in the subsequent year, it would grow to close to NT$40,000 in 2023.

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When the minimum wage increase was being negotiated in October, labor groups and the New Power Party had also called for the minimum wage to be increased to NT$30,000 by 2024. Based on their rates of increase, the minimum wage would be able to reach NT$40,000 by 2027 or 2028. But under the current rate of increase, it would take until 2027 to reach NT$30,000 and 2034 to reach NT$40,000.

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Modest increases in the minimum wage won’t be enough. Business groups are committing virtual wage theft by blocking minimum wage increases and depriving Taiwan’s workers of what they are owed. Taiwan’s politicians who abet this are therefore complicit in the exploitation and oppression of workers. 

Taiwan’s government cannot only be using democracy to promote Taiwan’s participation in international bodies. It has to meaningfully implement democracy for Taiwan’s society, and start ensuring that the democratic labor rights of Taiwan’s workers are properly enshrined. A fair minimum wage needs to be implemented now!


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

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

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