Taiwan's Low and Inadequate Wages Have Exacerbated Its Social Problems

In recent months, government data shows that Taiwan’s road traffic deaths and suicide deaths have been rising in recent years, while Taiwan’s fertility rate has dropped to its lowest ever.

Low and inadequate wages can exacerbate social problems, and in this article, we compare Taiwan with other advanced countries, to see how so.

In the first half of this article, I calculate the wage adequacy of the minimum wage in each country, and in the second half, I compare their minimum wage adequacies with a set of social problems, to see how Taiwan compares.

Taiwan’s minimum wage is not adequate for its cost of living

Next year, Taiwan’s minimum wage will grow to NT$27,470 a month, but this is one of the lowest minimum wages among the advanced countries. At the rate the minimum wages in other countries are growing, Taiwan will likely have the lowest minimum wage by 2025.

To calculate wage adequacy, I used Numbeo’s Cost of Living Index. Taiwan’s minimum wage is one of the lowest among the advanced countries, but its cost of living is actually higher, as can be seen in the chart below.

Taiwan’s cost of living is higher than Slovenia and Spain, but Slovenia and Spain’s minimum wages are higher than Taiwan’s – by about 60%.

The cost of living of the Netherlands, Germany, Belgium, the United Kingdom and Sweden are about 20% to 25% higher than Taiwan’s, but their minimum wages are an even higher 145% to 170% than Taiwan’s.

Australia and Luxembourg’s cost of living are about a third to 40% higher than Taiwan’s, but their minimum wages are triple that of Taiwan. Switzerland’s cost of living is 120% higher, but its minimum wage is more than quadrupled that of Taiwan’s.

In other words, the purchasing powers of most other advanced countries are much higher than Taiwan because even though their cost of living do not vastly differ from Taiwan’s, their wages are much, much higher than Taiwan.

Taiwan’s minimum wage is therefore highly inadequate for its cost of living.

There are questions about the validity of using Numbeo’s cost of living index, so I also compared it with the price level indexes that the European Union compiles of its member countries.

As can be seen in the chart below, Numbeo’s cost of living index corresponds to the European Union’s price level index.

For the purposes of this article, I use Numbeo’s index for comparison, as the European Union’s index does not include data of most other advanced countries outside of the European Union.

Generally speaking, a country’s minimum wage can be considered adequate for the basic standard of living in the country if its minimum wage (in New Taiwan Dollars) is 1,000 times higher than its cost of living index as measured by Numbeo.

Accordingly, Luxembourg’s minimum wage, at 1,023 times its cost of living, is considered the most adequate, followed by the other Benelux countries (Luxembourg, the Netherlands and Belgium), the Nordic countries, Australia, New Zealand and Switzerland. (Note that I’ve also included the estimated taxes and social security that needs to be paid into the cost of living estimates.)

Taiwan’s minimum wage is one of the least inadequate, and is only 495 times the cost of living.

For added measure, I compared this “optimal minimum wage” with the living wage benchmarks in some countries. The living wage is a concept that is being adopted in some countries, to identify the minimum income needed for a basic standard of living, based on conducting research with local respondents to identify a corresponding basket of goods and services, and their price levels.

Accordingly, the “optimal minimum wage” derived from Numbeo’s cost of living index is broadly similar to the living wage calculated in these countries, as can be seen in the chart below.

Given that Numbeo’s cost of living index corresponds to the living index in the European Union, and the “optimal minimum wage” calculated using Numbeo’s cost of living index is also similar to the living wage calculated using research methodologies in several countries, I then estimated the wage adequacy of each country’s minimum wage accordingly.

The chart below depicts the adequacy of each country’s minimum wage, which is derived by calculating how much of the optimal minimum wage the actual minimum wage covers.

Luxembourg’s actual minimum wage is the most adequate, and is 102.3% of its optimal minimum wage. Taiwan’s actual minimum wage is only 49.5% of the optimal minimum wage needed for a basic standard of living in the country.

Countries with less adequate minimum wages have more social problems

For the next half of this article, we compare wage inadequacy with a series of social problems, to look at how countries with less adequate wages also experience more social problems, and also explore the reasons why.

There are few studies comparing wage adequacies with social problems. However, the issue with Taiwan’s wage adequacy is also related to how income is unequally distributed, with businesses retaining too much profits for themselves and leaving workers with low and inadequate wages. In fact, as of last year, the richest 10% in Taiwan owned one of the largest income shares among the advanced countries — of 48.12% of Taiwan’s incomes — which corresponds to Taiwan’s workers earning one of the least adequate minimum wages.

Taiwan also has one of the largest income inequalities among the advanced countries, when comparing the disposable household income gap between the richest and poorest 20% of households.

As such, studies relating to income inequality and disparity provide useful reference to understand the social phenomena in Taiwan, vis-à-vis its inadequate wages.

In the chart below, we can see that among countries with more adequate minimum wages, they have fewer road traffic deaths per 100,000 people. Taiwan has one of the least adequate minimum wages among the advanced countries, and it also has the highest road traffic death rate among the advanced countries; even higher than the United States’ 11.14 deaths per 100,000 people.

In a study of 79 countries from 1970 to 2000, researchers explained that income inequality increases the heterogeneity of road users and competition for roadways between pedestrians, bicyclists, motorcyclists and four-wheeled motor vehicles, and where more affluent members of society are able to purchase more expensive larger and heavier vehicles which offer greater levels of safety equipment and better protections. Pedestrians, bicyclists and motorcyclists tend to be in more vulnerable positions when accidents occur, and less affluent members of society who are relatively poor with limited incomes tend to purchase less expensive and smaller vehicles, and they therefore bear a disproportionate brunt of road traffic deaths.

Indeed, researchers found that in more unequal countries where the rich develops a “higher social-class standing”, they develop “increased entitlement and narcissism”, and become disengaged from caring about other members in society. On the roads, what this means is that “motorists with more expensive vehicles were far less likely to come to a complete stop, even if pedestrians were in the crosswalk. Wealthy drivers were simply less compelled to follow the rules, even if it meant putting someone else’s life at risk.” Men who drive high-status cars are also more likely to speed, tailgate, drive pass another vehicle without signaling and generally drive more aggressively. Benjamin Waddell explained that when individuals are given an unfair advantage in an unequal society, they become more and more unethical in their behavior and actions. And this can be seen on Taiwan’s roads where drivers are less willing to give way.

Other research also points to how lobbying by the rich also leads to tax cuts and less government revenue available to maintain roads and highways, leading to roads becoming more dangerous and stressful to drive on, such as when faded traffic lines that create driver confusion.

Researchers also explained that countries with higher GDP per capita also tend to have “more extensive required training and greater experience of drivers, improvements in attitudes towards road safety, more fully developed roadway infrastructures, safety-related regulations, vehicle crash prevention activities, traffic-calming interventions, and traffic law enforcement – all of which serve to reduce the traffic fatality rate.”

As I’ve written before, countries with higher and more adequate minimum wages also have higher GDP per capita. The high level of Taiwan’s road traffic deaths is therefore associated with its low and inadequate wages.

Advanced countries with one of the most adequate minimum wages also have lower air pollution death rates. Taiwan has one of the most inadequate minimum wages, and one of the highest air pollution death rates.

A study of 30 developed and developing countries explained that among countries which are economically unequal, the population has weaker economic and political leverage, and therefore their ability to push for the government to implement policies to reduce air pollution deaths is therefore also weaker.

The schizophrenia rate is also lower among countries with higher minimum wage adequacy. Taiwan’s minimum wage adequacy is among the lowest, and its schizophrenia rate is one of the highest.

In a study of 26 developed and developing countries, researchers found that countries with higher rich-poor gaps have higher risks of schizophrenia as economic disparity results in members in society engaging in unhealthy comparisons of their social positions, leading to a loss of social cohesion and individuals becoming vulnerable to chronic stress, and making them more vulnerable to mental disorders like schizophrenia.

Broadly, countries with higher minimum wage adequacy also have a lower homicide rate. Taiwan has a comparatively high homicide rate.

In a study of 33 rich and middle-income countries, Frank Elgar and Nicole Aitken pointed out that when wealth in a society is more unequally distributed, this creates wider class differences and rigid social hierarchies which increase the social distance between individuals, and leads to lower levels of trust between members in society. These result in heightened feelings of bullying, hostility and retaliation, which raises the likelihood of violence and homicides in communities. A Danish study also explained that the less affluent families are, the higher the risks of children falling into violent crimes and self-harm in adulthood (Taiwan also has one of the highest suicide rates among the advanced countries, as well shall see later).

Elgar and Aitken were thus careful to note that interventions to reduce homicide should not focus solely on individual acts of violence, as the key to reducing homicides is by tackling income inequality. They emphasized: “if 64% of the variance in homicide rates is attributed to income inequality, then crime reduction policies that ignore income inequality relinquish much of their potential impact on reducing homicide.” In another study of 16 countries, researchers surmised that the government should increase social expenditures on education and health, in order to reduce the cycle of poverty, as well as to ensure fairer income distribution, so as to reduce violence and crime.

A study of 39 developed and developing countries also found that when the Gini income inequality is permanently reduced by 2.4 percentage points, the intentional homicide rate will decrease by 3.7% in the short run and 20% in the long run. They also found that a 2% reduction in the income ratio between the first and fifth quintiles also leads to a 2% decline in the intention homicide rate in the short run and a 16.2% fall in the long run. Reducing inequalities can also permanently reduce the robbery rate.

Countries with more adequate minimum wages also have lower suicide death rates. Taiwan’s minimum wage is less adequate and its suicide death rate is also one of the highest among advanced countries.

In a study conducted across 432 neighborhoods in Taipei, the researchers found that that higher suicide mortality is associated with socioeconomic deprivation: “there was a 1.8-fold difference in suicide rates between neighborhood quintiles with the lowest and the highest median household income.” In another study of 33 countries in the Americas, it was found that suicide rates were higher and increased more rapidly in rural than in large metropolitan areas in the United States, as rural areas could be more sensitive to the impact of social deprivation. Unemployment is another factor for higher suicide mortality. The researchers also indicated that increasing health expenditure per capita helps to reduce male suicide mortality and a higher number of doctors per 10,000 population helps to reduce female suicide mortality.

As we will see below, suicide rates are also higher in more unequal societies because parents in lower-income families have less time for their children, and might adopt more corporal punishment on their children, which leads to suicidal tendencies in their children in their adulthood.

Countries with more adequate minimum wages have lower imprisonment rates. Taiwan has one of the least adequate minimum wages among the advanced countries, and its imprisonment rate is the second highest among the advanced countries, second only to the United States.

Taiwan’s high imprisonment rate is in large part due to its high rate of recidivism. As of the February of 2017, the recidivism rate of prisoners was 83.9%. According to physician Lu Ching-wen, up to 90% of the prisoners she visited in prison had been in and out of prison of drug offences, and “due to lack of resources, prisons often cannot offer effective rehabilitation assistance to help inmates avoid re-offending after they reintegrate back into society.” Then-Agency of Corrections Director-General Wu Shyan-chang remarked similarly in 2012.

There are parallels in the Unted States where the imprisonment rate is the highest among the advanced countries – 76.9% of drug offenders are likely to be arrested for a new crime within 5 years of release. However, a report published by the London School of Economics and Political Science quoted crime and punishment scholar and philosopher Foucault, who explained that the institution of prisons does not diminish the crime rate, but causes recidivism, as it stigmatizes offenders and condemns them and their families to living in poverty.

The report further explained: “Having a criminal record then places these individuals at an even greater risk of economic disadvantage in the future due to its impact on employment prospects, putting them at high risk of poverty and no doubt contributing to high rates of recidivism.”

Broadly speaking, countries with more adequate wages have lower child mortality. Taiwan’s child mortality is one of the highest among the advanced countries.

A study conducted by Professor Tung-Liang Chiang found that between 1976 and 1995, the higher mortality among children under five in Taiwan is associated with its widening income distribution. In explaining the link between the two, he said that, “psychosocial stress from relative deprivation, disrupted social cohesion, disinvestment in social capital, and under investment in human resources all have been suggested as pathways through which income inequality affects population health.”

As a consequence of Taiwan’s high road traffic death rates and homicide rates, etc., arising from the above social issues, Taiwan life expectancy is also comparatively low, when comparing with other advanced countries.

In the United States, which also has among the lowest life expectancies among the advanced countries, it was found that road traffic deaths, firearm-related injuries and drug poisonings are the three causes of injury deaths and the lower life expectancy in the country.

Studies of the 21 wealthiest countries globally also found that higher income inequality is correlated with lower life expectancy, because individuals lack resources and do not have adequate access to good quality food, education and healthcare, and this can negatively impact their life expectancy.

As such, it is clear that Taiwan’s low and inadequate wages are playing a significant role in the exacerbation of Taiwan’s social problems, leading to a high level of injury deaths and contributing to Taiwan’s relatively low life expectancy.

In the words of Inequality.org’s co-editor Sam Pizzigati’s, “a deeply unequal society will always be unsafe.”

In order to reduce such deaths, various researchers have highlighted the need to reduce income inequalities, and in Taiwan’s case where wages are highly inadequate, Taiwan’s government needs to grow its minimum wage much faster in order to spur the growth of wages at other wage levels. But successive governments have shown little political will in doing so.

But Taiwan’s low and inadequate wages, and its accompanying social problems, can exert stress and unhappiness on Taiwanese, leading to become more distrustful and self-centered. In the second part of this article, we look at how Taiwan’s inadequate wages are leading to more dissatisfied and engaged citizens.

READ NEXT: Low Government Medical Expenditure Are Exploiting Taiwan’s Doctors and Nurses

TNL Editor: Kim Chan (@thenewslensintl)

If you enjoyed this article and want to receive more story updates in your news feed, please be sure to follow our Facebook.

Taiwan's Low and Inadequate Wages Have Exacerbated Its Social Problems

Roy Ngerng

What you need to know

Taiwan’s minimum wage is not adequate for its cost of living

Countries with less adequate minimum wages have more social problems

Latest Updates