Taiwan presidential candidate Hou Yu-ih from the Kuomintang party has thrown down the gauntlet, and has proposed raising Taiwan’s minimum wage to NT$33,000 a month. To date, he is the only candidate who has proposed a target to raise the minimum wage, but he never mentions when this would be achieved, except to say it will be done in his term, if he is elected.

In response to Hou’s proposal, the Democratic Progressive Party presidential candidate Lai Ching-te mocked Hou and said that his target minimum wage increase would result in minimum wage increasing by only 20%, while has increased by 37.3% under Tsai since 2016.

In this article, I will examine the validity of Lai’s claim and also look at how Hou’s proposal compares with the current minimum wage, and that of other countries. Assuming that Hou means to raise the minimum wage to NT$33,000 by the end of his four-year term, this would see the minimum wage grow much faster than during the reign of current president Tsai Ing-wen. 

Data source: Taiwan Ministry of Labor

It becomes clearer when comparing using trendlines – Hou’s proposal would enable the minimum wage to grow faster (pink dashed line) than under Tsai’s rule (green dashed line).

In fact, Hou’s NT$33,000 target would see the minimum wage grow faster than any of Taiwan's past and current presidents.

Again, when using trendlines for comparison, we can see Hou’s proposed minimum wage growth line (pink dashed line) being steeper than the minimum wage growths under the various presidents, which indicate faster growth.

His proposal would be even faster than the actual minimum wage growth under President Lee Teng-hui from 1998 to 1996, when Taiwan’s minimum wage grew the fastest thus far.

If Hou is to raise the minimum wage to NT$33,000 by 2028, this would see the minimum wage grow by an average of NT$1,383 a year (pink bars in chart below).

There have only been three other years where Taiwan’s minimum wage grew faster, in 1978, 1983 and 2007 (dark red bars). 1978 and 2007’s growths were high to compensate for the lack of growth in the preceding years. Both times, the minimum wage did not grow for nine years prior. In 1983, the minimum wage did not grow for two years prior.

Hou’s minimum wage proposal would also see the expected average increases over four years (pink bars in chart below) be higher than any of Tsai’s minimum wage growth in the last eight years (green bars).

Hou's proposal would see Taiwan’s minimum wage grow the fastest in a term, as compared to any past elected president – by over NT$5,500 as compared to the about NT$3,700 that Tsai mustered in each of her two terms.

In response to Hou’s proposal, the Democratic Progressive Party presidential candidate Lai Ching-te mocked Hou and said that his target minimum wage increase would result in minimum wage increasing by only 20%, while has increased by 37.3% under Tsai since 2016.

However, to be more specific, Tsai only raised the minimum wage by 19.0% in her first term, and 15.4% in her second. If Hou raises minimum wage to NT$33,000 in one term, it would be raised by 20.1%, which will be higher than Tsai in each of her terms.
And in dollar terms, Hou would be raising it by over NT$5,000, but Tsai did not even raise it by more than NT$4,000 in each of her terms.

However, all these assumes that Hou would raise the minimum wage to NT$33,000 within four years.

Tsai promised to raise the minimum wage to NT$30,000 in her first presidential term, and even at the end of her second term, this target has not been met.

If Hou is to only raise the minimum wage to NT$33,000 by the end of the second term (if he is elected and then re-elected), then the minimum wage would grow even slower than under Tsai (see the pink dashed line being flatter than the green dashed line in the chart below).

Voters should demand Hou to provide a specific timeline as to when he intends to raise the minimum wage to NT$33,000.

Due to Taiwan's minimum wage stagnating for the last 25 years, this has resulted in Taiwan's minimum wage being inadequate for basic living needs.

Based on Taiwan’s cost of living, I calculated that the minimum wage would need to be minimally NT$37,360 to afford a basic standard of living in Kaohsiung, accounting for housing mortgage (it would be NT$65,069 in Taipei).

Accounting for Numbeo’s latest data however, the minimum wage needed in Kaohsiung would be over NT$40,000 today.

As such, Hou’s proposal to raise the minimum wage to NT$33,000 would still not be enough. At the very least, the minimum wage should be raised to NT$40,000 by 2028.  

Compared with South Korea, a minimum wage increase to NT$33,000 will still not enable Taiwan’s minimum wage to catch up with South Korea.

An increase to NT$40,000 by 2028 will at least enable Taiwan to grow on par.

South Korea’s minimum wage used to be even lower than Taiwan but it overtook Taiwan in 2004, after it decided to grow its minimum wage rapidly. In 1988, South Korea’s minimum wage was only about half that of Taiwan. Today, it is close to twice as high.

Data source: Taiwan, South Korea

In the last few years, the minimum wage of Singapore’s cleaning workers was at a similar level to Taiwan’s minimum wage.

In 2021, Singapore’s government recognized that the country’s income inequality was intolerable and introduced six-year plans to grow the minimum wage in various sectors much more rapidly. The minimum wage in the cleaning sector would grow by NT$29,011, from NT$28,350 in 2022 to NT$57,360 in 2028.

By 2027, assuming Hou’s minimum wage would be raised at a consistent level, the minimum wage in Singapore’s cleaning sector will increase to 1.7 times higher than Taiwan’s minimum wage. Taiwan would be unable to catch up.

Again, raising the minimum wage to NT$40,000 will at least enable Taiwan to grow on par as Singapore.

Data source: Taiwan, Singapore

In 1992, Taiwan’s minimum wage had grown to close to New Zealand’s level. Since then, New Zealand’ minimum wage however kept growing to being almost on par with Australia today.

However, Taiwan’s minimum wage remained stagnant. In 1992, New Zealand’s minimum wage was NT$14,381 and Taiwan’s was NT$12,365. Today, New Zealand’s minimum wage is NT$72,353, or 2.7 times that of Taiwan’s NT$26,400.

An increase to NT$33,000 will still be far short of the level needed to catch up.

In all cases, we see that Taiwan’s minimum wage used to be on par with other countries it used to be at a similar level of economic development with, but their minimum wage and economies have since far surpassed that of Taiwan’s.

If we were to compare with the cost of living, I’ve written before that New Zealand’s minimum wage is close to the optimal level needed for a basic standard of living in the country, and South Korea’s minimum wage is far more adequate than Taiwan.

Taiwan’s minimum wage however is one of the least adequate among the advanced countries.

Data source: Taiwan, other countries

Emerging economies in Eastern Europe used to have much lower minimum wages and per capita GDP than Taiwan but their minimum wages have since caught up with Taiwan, and are surpassing Taiwan. In 1993, Estonia’s minimum wage was only 3% of Taiwan’s. Today, it is on par.

Furthermore, Estonia just announced a four-year plan to raise its minimum wage, which could see it growing from by over 50%, from about NT$24,264 this year to NT$36,814 in 2027. In contrast, Tsai Ing-wen raised the minimum wage by only 37.3% in eight years.

Hou’s minimum wage target of NT$33,000 will however still be far short of Estonia’s expected wage growth. If Taiwan’s minimum wage grows to NT$40,000 by 2028, then it can grow as fast Estonia.

Lithuania has also announced that its minimum wage will grow from about NT$28,113 to NT$30,924 next year. Like Estonia, Lithuania’s minimum wage has seen rapid growth in recent years, and is likely to continue.

A target of NT$33,000 will not be fast enough to let Taiwan catch up with Lithuania. But a NT$40,000 target would enable Taiwan to grow almost as fast as Lithuania.

Poland similarly announced that its minimum wage would grow from about NT$26,340 this year to about NT$31,462 next year.

At this rate, Estonia, Lithuania and Poland would likely see their minimum wage grow to NT$33,000 in two years, by 2026. Under Hou’s proposal, it might instead take four years.

Raising Taiwan’s minimum wage at a faster rate to NT$40,000 by 2028 would enable Taiwan to catch up and grow as fast as these countries.

Singapore and Estonia both have multi-year plans to raise their minimum wages, and while Hou Yu-ih’s proposed minimum wage growth would see Taiwan’s minimum wage grow faster than Tsai and other elected presidents, the expected increase of NT$5,530 over four years will still be lower than Singapore and Estonia’s plans over the same four-year period.

However, if Taiwan’s minimum wage were to grow to NT$40,000 based on the cost of living needs, it would at least grow as quickly as Estonia.

Comparing using dollar-terms, we can see why Taiwan’s minimum wage has been growing so slowly.

Taiwan’s minimum wage used to grow as fast as Australia, New Zealand and South Korea in the late-1980s to mid-1990s, as can be seen in the chart below, where their lines are at the same level of growth during that time. The chart below uses a 7-year rolling average to broadly illustrate the general trend.

However, since the late-1990s, Taiwan’s minimum wage has been growing much more slowly (see the pink line drop to the bottom of the chart).

When comparing with the Eastern European emerging economies, we can see that Taiwan’s minimum wage used to grow much faster, but since the late-1990s, its minimum wage has grown slower than theirs.

In fact, Taiwan’s minimum wage since the 2000s have been growing as slowly as developing countries like China and Thailand, except in recent years (see the same level of their lines from the 2000s).

Data source: Taiwan, China,  Thailand (1), (2), (3)

Minimum wage growth is a driver of economic growth, and Taiwan’s economy thus stagnated as compared to Australia, New Zealand and South Korea, because its minimum wage has been growing too slowly.

In fact, every US$1 dollar growth in the minimum wage can enable Taiwan’s per capita GDP to grow at about twice the level of minimum wage growth, and profits by half its level. Raising Taiwan’s minimum wage faster will therefore enable its economy to grow faster, and possibly catch up with other advanced countries like France.

As such, the minimum wage can act as an economic multiplier to expand Taiwan’s economy and profits. Growing the minimum wage faster can enable Taiwan’s economy to regain its former level of growth.

Hou Yu-ih’s proposal to raise the minimum wage to NT$33,000 is a step in the right direction, and given that no other candidates have proposed any target for the minimum wage, is already commendable.

When asked about Hou’s target, Lai Ching-te instead said that his priority would be to enact the minimum wage law. But it should be noted that President Tsai had proposed enacting the minimum wage law seven years ago, and Lai was both premier and vice-president under Tsai, but the minimum wage law has still not been passed. As the New Power Party’s Lin Yi-ying asked, have voters given the Democratic Progressive Party (DPP) a blank cheque? New Power Party’s chairperson Claire Wang also said that with the DPP’s majority in legislature, there is no  need to wait to be president to pass the law, and reminded Lai to not make false promises.

Moreover, while Lai did not propose a minimum wage target, the final minimum wage figure of NT$27,470 under Tsai’s leadership is an indication of the level the DPP is willing to raise minimum wage to. And it falls far short of Tsai’s promise of NT$30,000.

However, Hou’s target still falls short as it continues to be inadequate for a basic standard of living today, let alone in four year’s time.

In order for the minimum wage growth to be meaningful, a minimum income for a basic standard of living needs to first be calculated, and the minimum wage raised to that level. Based on Numbeo, a minimum wage of NT$40,000 could be minimally acceptable. But a more accurate way of estimating the minimum income needed would be to conduct a survey with local workers to calculate the amount needed.

READ NEXT: Taiwan’s New Minimum Wage Proposal Is Insufficient to Foster Economic Growth

TNL Editor: Kim Chan (@thenewslensintl)

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