Taiwan’s ‘Grim Truth’: Vicious Low Wage, Low Productivity Cycle Crippling Workers and Companies

Taiwan’s ‘Grim Truth’: Vicious Low Wage, Low Productivity Cycle Crippling Workers and Companies
Photo Credit: 蔡英文 Tsai Ing-wen
Why you need to know

As Taiwanese businesses are unwilling to increase wages for the want to hold onto their profits, they are also complicit in causing themselves to lose demand, and therefore their business sustainability. The government needs to act.

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The Basic Wage Deliberation Committee has proposed to increase Taiwan’s minimum wage from NT$21,009 a month this year to only NT$22,000 (US$725) next year, after a meeting earlier this month.

The committee, which is made up of representatives from the government and businesses, as well as from the labor unions and academia, meets every year in the third quarter to discuss whether to raise the minimum wage for the following year. The committee comes under the Ministry of Labor (MOL).

The proposal to raise the minimum wage will now go to the Executive Yuan for its approval before going into effect.

Cheng Chih-yu (成之約), Professor of the Institute of Labor Research of National Chengchi University, said that this increase – which is only by 4.72 percent – is unlikely to improve Taiwan’s wage stagnation, Focus Taiwan reported him as saying.

The Taiwan Confederation of Trade Unions Chairman Chuang Chueh-an (莊爵安), who is a member of the committee, had said last Wednesday that a consensus was reached with the committee on raising the minimum wage to NT$27,711 (US$931).

However, the committee has since made an about turn.

Even so, business leaders felt the need once again to come out against the proposed increment – even as it is small. Corporate representatives simply walked out of the meeting halfway through it.

Republic of China General Chamber of Commerce Vice Chairman Hsu Shu-po (許舒博) wanted the increase to be only 2.14 percent. A director of the Chinese National Federation of Industries, Ho Yu (何語), even claimed that the proposed wage increase was a “political decision,” Focus Taiwan reported.

But how is it a political decision?

The increment to only NT$22,000 is a far cry from the NT$27,711 proposed by the labor groups – by more than NT$5,000 in be exact – and even then they were willing to compromise and accepted the decision, Head of the Confederation of Trade Unions in Hsinchu County Chen Fu-chun (陳福俊) said.

The business groups instead boycotted the meeting halfway through.

Taiwan’s minimum wage is only NT$21,009 this year. For many Taiwanese who had assumed that Taiwan’s minimum wage is NT$22,000, this might come as a shock that Taiwan’s minimum wage this year is actually below this level.

The Taiwanese are poorer than they had imagined. Taiwan’s minimum wage will only go up to NT$22,000 next year – if the proposal is approved.

And even then, the proposed increment is paltry.

However, businesses do not want to entertain any increase. They want the minimum wage to stay the same.

Hsu had claimed that, “if the government says economic growth is not good, then that must mean the country's businesses are not doing so well,” Focus Taiwan reported, and that therefore, “enterprises cannot shoulder heavier manpower costs.”

However, the labor unions countered and revealed that some of Taiwan’s corporations have seen their operating earnings grow by up to 30 percent, but this has not translated into correspondingly higher wages for Taiwan’s workers.

Instead, the minimum wage is proposed to go up by only 4.72 percent next year.

Moreover, Taiwan’s economy has been picking up. The fourth quarter growth last year was actually Taiwan's strongest growth in two years. Nasdaq also reported that Taiwan posted solid gross domestic product (GDP) growth in the second quarter of this year. According to the Directorate General of Budget, Accounting and Statistics (DGBAS), Taiwan's GDP growth in the coming year is expected to be the highest in four years.

There is thus a lot of room for wages to be adjusted upwards in Taiwan.

In April this year, Pxmart’s President Hsu Chung-jen (徐重仁) also derided Taiwanese youths for wanting higher salaries.

Hsu said: “Young people should not fuss over having lower salaries than other people.”

He also said that young people should "tolerate rather than complain about low pay" and that they were "spending too much money.”

Just a month later, it was reported that hypermarket chains in Taiwan are expecting to ring in sales of a new high of NT$200 billion (US$6.59 billion) this year, or an increase of 4.55 percent from last year.

The Ministry of Economic Affairs (MOEA) added that hypermarkets have been repeatedly breaking sales records for the past 30 years, and that their sales have been seeing a compound annual growth rate of 3.7 percent for the past 10 years.

In comparison, Taiwan’s minimum wage has only grown by an average of 2.16 percent over the past decade.

And in fact, prior to 2007, Taiwan’s minimum wage did not grow for 10 years.

Hsu was later forced to apologise, but he also added his personal experience and said that, when he first started working in 1977, he earned a starting wage of only NT$9,000.

But this might be seen as rubbing salt into the wounds of Taiwanese youths. Hsu earned NT$9,000 in 1977 but 12 years later – in 1989 – Taiwan’s minimum wage of NT$8,820 still did not grow to match that of Hsu’s starting wage.

In fact, where Hsu had earned NT$9,000 in 1977, Taiwan’s minimum wage at that time was only NT$600 – in other words, Hsu was already earning 15 times more than the minimum wage worker in 1977. It was only a year later that Taiwan’s minimum wage grew to NT$2,400, after remaining stagnant for 10 years, and even then Hsu was still earning almost four times higher than the minimum wage.

To his credit, Hsu also said in his apology: “Have I and the people of my generation been making simple judgments based on the experiences of our own generation, instead of putting ourselves in the shoes of the young to understand their situation and emotions?”

Hsu also said that he would work humbly to understand and learn from Taiwan’s youths.

Perhaps Taiwan’s business leaders should take heed and learn to eat the humble pie as well, and learn to “understand” the “situation” of Taiwanese youths. Hsu would be stepping down from Pxmart’s management next month.

Pxmart later announced in June that it planned to increase its annual sales from about NT$101 billion in 2016 to more than NT$200 billion this year – a nearly 100 percent increase.

In contrast, on the proposed minimum wage increase to NT$22,000, the Chinese National Federation of Industries Director Ho Yu lamented about how this increase will raise the costs of employers by nearly NT$30 billion a year.”

An estimated near-NT$30 billion a year in additional costs for all companies against a NT$100 billion increase in annual sales for just one company – and Ho is complaining because?

When seen from this perspective, NT$30 billion is peanuts when taken as a whole for all businesses in Taiwan.

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Photo Credit: 立法院議事轉播系統
Labor Minister Lin Mei-chu (林美珠).

With hypermarts seeing record-breaking sales, there should be no excuse for not increasing the minimum wages of Taiwan’s workers.

Businesses can very well afford to pay higher minimum wages and wages in general for Taiwan’s workers.

But it is not just the hypermarts which have been profiting heavily.

From 1992 to 2015, the profit share of Taiwan’s corporations, as a percentage of GDP, has kept growing, from 29.28 percent to 35.08 percent.

However, whereas the profits of Taiwan’s corporations have grown, the wage share of Taiwan’s workers has continuously dropped, from 51.04 percent to 43.97 percent. Compare this with the wage share of the G20 countries, which has remained roughly the same from 51 percent in 1992 to 49 percent in 2011 – the wage share of Taiwan’s workers has dropped much faster than that of the other advanced economies. In fact, in many advanced countries like Australia, Canada, the United Kingdom and Sweden, the wage share go above 60 percent. It is even higher at 65 percent in Japan and the Netherlands, two of the countries which Taiwan can learn from.

Moreover, the share of income that has gone to the richest 10 percent in Taiwan has grown from only 23.43 percent in 1980 to 36.39 percent in 2013, and 38.22 percent at its highest the year before. This puts Taiwan on par with the United Kingdom where the share of income that went to the richest 10 percent in 2014 was 39.99 percent. The United Kingdom is one of the most unequal developed countries in the world.

But according to the DGBAS, it is even worse – 31 percent of the income is actually concentrated in the top 5 percent with the top 1 percent raking in 13 percent of the country’s income.

This is not helped by the fact that Taiwan’s minimum wage did not grow from 1997 to 2007, and when wages then became depressed from 2008 for several years thereafter, when the Kuomintang (KMT)-led government introduced the ‘NT$22,000’ policy but where businesses followed by increasing prices by 10 to 20 percent even though costs did not increase by more than 5 percent.

In fact, Taiwan’s median wage even dropped last year.

The question can then be put back to the business leaders – why then did they not allow the wages of workers to catch up when their profits were growing – since 1992?

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Photo Credit: Reuters/達志影像
China Airlines flight attendants hold a rally as they go on strike against what they say is excessive working hours in their new labor rules, outside China Airlines' office in Taipei, Taiwan, June 23, 2016. The placard read, "Flight attendants strike will be successful" (C). REUTERS/Tyrone Siu - RTX2HT5H

And why did they depress the wages of workers from 2008 while increasing their own profits?

In fact, it was only last year that the average starting salary of university graduates finally caught up with the starting salary in 2000. In 2000, the average starting salary was NT$28,016, but it was only last year that the starting salary finally went above it - to NT$28,116, or only more than NT$100.

In effect, the starting salaries of university graduates have been stagnating for the past 16 years. And as Hu Meng-yu (胡孟瑀), head of the 95 Youth Labor Union noted, the “real starting salaries have fallen over the past 16 years”, as quoted by the Taipei Times.

On the other hand, for the richest one percent in Taiwan, by the end of 2011, their average household income grew to a record high of NT$10.77 million in that year, while for the rest of the 99 percent, their average household income was only NT$780,000. The top one percent was earning nearly 14 times more than the other 99 percent combined. The rich-poor gap would have worsened this year.

The question therefore that business leaders should ask is to themselves – why did they not increase the wages of workers when they should have, and chose not to, and therefore have to get the government and labor unions to step in now to do what is right for Taiwan’s workers? If business leaders had done the right thing for their workers then, would they feel that they would be compelled to have to do so now?

Wanting to protect their own profits is not a good reason to sacrifice the livelihoods of Taiwan’s workers, especially for those in the low- and middle-income.

As such, once again – there is a lot of room for Taiwan’s minimum wage to grow.

Businesses have no moral ground to want to block the increase in minimum wage. In fact, businesses have to spike up the minimum wage significantly, to make up for the workers’ lost wages for over the past more than a decade.

As one Taiwanese remarked to me – Taiwan’s businesses have been increasing their prices for the past decade, while the wages of Taiwan’s workers have remained stagnant, and if so, Taiwan’s businesses cannot say that they do not earn enough profits to pay workers higher wages. The fact of the matter is that many of Taiwan’s businesses would have accumulated vast profits by also depressing wages while continuously increasing prices, as evident by the increasing profit share of GDP since 1992.

It is more a case of Taiwan’s businesses exploiting the willingness of Taiwan’s workers to have a job, so as to pay them low wages

Perhaps both the Republic of China General Chamber of Commerce Vice Chairman Hsu (林伯豐) and Chinese National Association of Industry and Commerce Chairman Lin Po-feng have a fair point to make.

In a meeting with former Economics Minister Lee Chih-kung (李世光) and Labor Minister Lin Mei-chu (林美珠) last Monday, Hsu said: “If the government wants enterprises to increase wages, it should take the initiative to do so.”

Lin also said that the “wages for public servants, public school teachers and military personnel be raised first,” Focus Taiwan reported.

"We can catch up later," he said.

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Representatives hold Colombia, China and Chile's flags at the opening ceremony of 29th Summer Universiaden as a protest against the overhaul of the military and civil service pension funds blocks other participants from entering the venue, in Taipei, Taiwan, August 19, 2017. REUTERS/Eason Lam

But Hsu and Lin’s point would have been relevant, if not for the fact that public servants are already paid significantly higher salaries.

Public servants already earn a minimum salary of NT$ 29,345 – this is nearly NT$10,000 higher than Taiwan’s minimum wage of NT$21,009.

Hsu had pointed out how a proposal to raise the wages of public servants last year was put on hold. But seen in this context, it should be understandable why the government should do so – the disparity between public servants and the rest of Taiwan’s workers is huge.

Moreover, even after the pension reform this year, public servants are still guaranteed a minimum monthly pension payment of NT$32,160 and even though their income replacement ratio – the percentage of pre-retirement income they would receive – has been lowered, it will still be 60 percent.

Again, in contrast, the average monthly pension payment that private sector workers under the labor insurance scheme received was only NT$16,179 last year, and the monthly replacement ratio was only between 45 and 49 percent. Thus even after the pension reform public servants would still receive at least twice as much as what other Taiwan workers are able to receive in pension.

According to Minister Without Portfolio Lin Wan-I, retired public servants currently receive an average pension payment of NT$56,383 and public teachers receive NT$68,052. More than 42 percent of the retired public servants receive more than NT$60,000 per month and nearly 70 percent of retired public teachers are paid NT$60,000 to NT$80,000 per month, with nearly 8 percent paid more than NT$80,000.

In short, they are already receiving pension payments of more than two times the median wage of NT33,502 that Taiwan’s workers earned last year. And where more than 80 percent of Taiwan’s workers earn less than NT$50,000, the average pension payments that retired public servants earn are even higher than 80 percent of the rest of Taiwan’s workers.

An article in The China Post calculated the impact that the reforms would have on the pension payments of the public servants and showed that there would only be comparatively slight decreases. A “grade 7” non-executive government worker who has served for 35 years would see his or her pension drop from NT$63,441 before the reform to NT$58,635 from July 2018 to the end of 2019.

Public school teachers would see their pension payments decrease from NT$74,287 before the reform to NT$70,620 per month from July 2018 to the end of 2019.

For private sector workers, they are expected to see their pension payments drop by 6 to 7 percent, which would put their pension payments at NT$15,208, if basing it on this year’s average. But this would mean that public servants and public school teachers would still be earning three to five times more in pension payments that the other Taiwan workers.

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Pro-China supporters wave the Chinese flag before the opening of the 29th Summer Universiade, in Taipei, Taiwan August 19, 2017. REUTERS/Eason Lam

On top of that, retired public servants currently get to retire at an average age of 56 while retired public school teachers can retire at 54 – though a bill to increase it to 58 is being debated in the legislature – while the rest of Taiwan’s workers only retire at an average age of 61.

Thus on both counts – the wages of public servants and their pension payments – public servants earn more than the rest of Taiwan’s workers.

This was a point that Minister Lin made too in an interview with the Liberty Times.

He said: “Early on, civil servants had low salaries, but there were many increases over the years. Today, civil servants have higher average pay than public-sector workers and retirees are mostly concentrated among the highest earners. Pension contributions during employment are higher for civil servants in comparison with workers whose salaries are at the other end of the spectrum, so they can also withdraw more in retirement — there is no problem here.”

Indeed, it does not quite make sense why the public service pensioners are protesting so much when they would still be better off than the large swath of Taiwan’s workers.

The irony is that public servants are supposed to be working for the citizens, and to develop policies that would improve the lives of the citizens – which begs the question why private sector workers have worse off lives than the public servants – where do the priorities of the public servants lie?

This was a question I put to a public servant I had a chance to talk to. We were discussing about the pension reforms and he lamented that the government has failed the public servants.

But how so?

The DPP government is trying to bring parity to the system, by bringing about a fairer system. As it is, where the large majority of the Taiwanese population are earning lower wages and receiving lower pension payouts than the public servants, who are earning average wages and pension payments which are higher than both the median wage and the average pension payout for private sector workers, the inequality and unfairness is blatant.

Perplexingly, the public servant I was speaking to lamented that public servants would become worse off than private sector workers after the pension reform, but no matter how you look at it, private sector workers still have it worse off.

So I put to the public servant that it is the job for public servants to improve the lives of the Taiwanese people. I told him that if they – the public servants – had knew for many years that there would be a pension reform – which was stalled several times – and that their pension could be cut because of how extravagant their pension payments are in comparison with private sector workers, then in order to prevent the cut – what the retired public servant protestors are fighting for – the public servants could have proposed policies to increase the wages and pension payments of private sector workers in the past, so that if that of the latter had grown, public servants would have more credibility in their protests today – which they currently do not.

It does not help that the protestors took their personal grievances to the opening ceremony of the 2017 Taipei Universiade last Saturday – which was supposed to be Taiwan’s pride for hosting such a major world event for the first time, only to be disrupted by the protestors. As Tuan Yi-kang (段宜康), a Democratic Progressive Party (DPP) legislator, said, the protestors were willing to “sell everything for the sake of getting their own (pension) money,” while embarrassing Taiwan on the international stage.

It has been revealed that the protestors are some also insurgents instigated by Chinese elements to stir unrest in Taiwan, and if so it is quite despicable to use the pension funds and Taiwan's fiscal independence as a tool to fight for ulterior motives akin to treason against the people of Taiwan. If their aim is to use misinformation to sow discord, then arming ourselves with clear facts and statistics will guard against their wanton intrusion.

The public servants have to stop carrying with them a victim mentality from the 1950s and 1960s when their wages were indeed lower than private sector workers – public servants today have come out better than the majority of Taiwanese workers. It is time to help the rest of Taiwan’s workers, so that Taiwan can be uplifted together as a whole.

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Photo Credit: Reuters/達志影像
Protesters clash with police during a rally against the overhaul of the military and civil service pension fund in Taipei, Taiwan March 29, 2017.REUTERS/Tyrone Siu

The Taiwanese government has done well not to give in to their protests because the facts of the matter do not support the protesters' demands. However, on minimum wage, if the government is to once again give in to the business groups, then it is doing a disservice to the citizens of Taiwan which President Tsai Ing-wen has sworn to protect.

As President Tsai said in her inaugural speech, "Our social safety net is full of holes. Most importantly, and I must stress: our young people still suffer from low wages. Their lives are stuck, and they feel helpless and confused about the future.

"Young people's future is the government's responsibility. If unfriendly structures persist, the situation for young people will never improve, no matter how many elite talents we have.

"My self-expectation is that, within my term as President, I will tackle this country's problems step by step, starting with the basic structure," she said.

And increasing Taiwan's minimum wage is a key fundamental step to it.

Perhaps another way to look at it is that, if even after the pension reform public servants are still guaranteed a minimum pension payment of NT$32,160 but where they still see the need to protest against this, that if indeed even NT$32,160 can be seen as inadequate, then for the nearly 50 percent of Taiwanese private sector workers who were earning less than NT$33,502 last year, how tough their lives must be.

Thus applying Hsu and Lin’s logic to this, they are right – the minimum wage should be increased to at least match the level of Taiwan’s public servants.

As of now, public servants earn a minimum salary of NT$ 29,345, or nearly NT$10,000 higher than Taiwan’s minimum wage of NT$21,009. This would barely change even if the minimum wage were to be increased to NT$22,000 next year. The discrepancies between the minimum wages go to show how unequal and uneven Taiwan’s wage system is.

Since it was determined that NT$29,345 is the minimum that a public servant should earn to be adequately provided for, then the same logic should apply to the rest of Taiwan’s workers, should it not be? Unless Taiwan’s public servants are considered as more superior than the rest of Taiwan’s workers, but surely this cannot be.

As such, the labor groups’ proposed increment of Taiwan’s minimum wage to NT$27,711 would have been a step in the right direction, but alas it is not to be.

But not only that, as of the third quarter of last year, Taiwan’s housing price-to-income ratio has reached a record high of 9.4. Taipei’s ratio was 15.5 which is almost as high as Hong Kong’s ratio of 18.1 – in other words, Taipei is nearing that of the most expensive place in the world to buy a property, vis-à-vis wages. According to the Demographia International Housing Affordability Survey, a ratio above 3 is considered unaffordable and Taiwan’s ratio has already gone way above 3.

Detractors claim that increasing wages would lead to an increase in prices, negating any beneficial effect and leading to the upward spiral of prices, but this is unfounded. A discussion paper published by the Institute for the Study of Labor and which compared over 20 studies showed that, “most studies found that a 10% US minimum wage increase raises food prices by no more than 4% and overall prices by no more than 0.4%.”

“This is a small effect,” it said.

The paper concluded that, “The overall reading of the above evidence on price effects, together with the evidence in the literature on wages and employment effects is that the minimum wage increases the wages of the poor, does not destroy too many jobs, and does not raise prices by too much.”

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Taiwanese Presidential Office is seen through barbed wire fence during a rally against the overhaul of the military and civil service pension fund, in Taipei,Taiwan January 22, 2017. REUTERS/Tyrone Siu

Indeed, Taiwan’s minimum wage was increased by 5 percent to NT$21,009 at the start of this year, but as of June this year the local consumer price index (CPI) for increased by only 1 percent from a year earlier and food prices increased by only 2.20 percent. Taiwan’s experience is in line with the research findings.

The minimum wage increase could therefore go further.

In theory, a higher increase in real wages will also lead to higher disposable incomes and consumer spending, which will result in higher economic growth. A common refrain I have heard is that Taiwanese businesses complain about how they cannot increase the prices of their products due to stagnating consumer demand, and therefore that they cannot increase prices. However, the irony in this is that it is precisely because businesses do not want to increase wages, which is why demand cannot pick up, and therefore why businesses cannot increase prices.

The problem of Taiwan’s stagnating economy therefore has a lot to do with how wages have been kept stagnant. A Taiwanese woman who used to be a business owner selling furniture was enlightened enough and told me that when Taiwan’s wages was growing and the economy was doing well, her business was growing and she was earning money. However, her business started to falter as wages became stagnant and demand dropped. There could be other reasons at play as well but there can be no doubt that when Taiwan’s workers are not paid high enough salaries, they simply do not earn enough to help generate growth for Taiwan’s economy.

In fact, according to the Working Poor and Tax Policy Research Center convener Hung Ching-shu (洪敬舒), the stagnation of regular wages has led to most workers working longer hours and doing overtime, just so to earn higher wages. The Chinese National Association of Industry and Commerce Chairman Lin tried to block the increase to the minimum wage by coming out with the excuse that wages should not be adjusted until the new ‘one fixed day off and one flexible day off’ policy has been revised – the policy introduced a flexible day off every week where workers should be given higher overtime pay if they choose to work. But even though the DGBAS said that overtime pay has increased by 9.01 percent in the first four months of the year after the policy was introduced, the MOL revealed last Saturday that even as many Taiwanese are working overtime, their wages have not been raised for many years, and also the overtime work they are doing have been going unpaid. In fact, overtime pay might have increased but in general, the General Chamber of Commerce chairman Lai Cheng-i (賴正鎰) revealed last Thursday that average household income has dropped by NT$10,000 instead. This led National Chengchi University Institute of Labor Research professor Cheng Chih-yu (成之約) to say that workers may be willing to work overtime but the issue is that wages are generally low, Taipei Times quoted him as saying.

As it is, Taiwan's workers already work the fourth longest hours in the world, yet some DPP legislators proposed an amendment in May this year to reduce overtime pay and relax overtime rules. But even as the legislators proposed to increase the maximum monthly overtime hours allowed from 46 hours to 54 hours, businesses still do not think this is enough, and want the cap raised to between 60 and 72 hours. But where businesses are making workers work longer hours while getting away with not paying workers their overtime pay, such an increase in work hours cannot be tolerated – Taiwan’s workers already work one of the world’s longest hours.

Would it not make more sense to increase the worker’s minimum wage so that they would not be compelled to work longer hours for overtime pay simply because the basic wage they earn is not adequate? Increasing the workers' minimum wage to ensure that they are protected with a basic minimum is more effective and would go a longer way than half-hearted attempts such as the ‘one fixed day off and one flexible day off’ policy that do not go far enough to protect the workers, if employers are still able to circumvent that by asking workers to work longer hours but still not pay for the overtime work they are doing.

The minimum wage has to be increased to a level that ensures that workers are adequately provided for, without having to rely on overtime pay which is inconsistent and unreliable, and where the work that employees do can go unpaid and benefit employers at the expense of the workers. Working shorter hours on higher and fairer wages would improve the quality of life for Taiwan’s citizens and residents. This is a responsibility that Taiwan’s government must act upon.

Moreover, it is estimated that 2.07 million workers would be affected by the proposed increase in the minimum wage, out of the 8.75 million laborers who come under the Labor Standards Act (LSA), or a whooping one quarter of the labor workforce who are earning minimum wage or just above it. It is unacceptable that a quarter of Taiwan’s labor workforce have to work on wages that barely provide them with a basic standard of living. More has to be done to uplift their livelihoods.

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People prepare to throw smoke grenades during the annual Labour Day protest in front of Presidential Office in Taipei, Taiwan, May 1, 2015. Thousands of people marched to demand higher wages and labour rights. The head banner reads, "shorten working hours; no overfatigue." REUTERS/Patrick Lin

But increasing wages not only benefit workers, it gives businesses a leg up as well. An academic article by the London School of Economics and Political Science showed that increasing real wages have the effect of raising productivity and boosting demand.

“The grim truth is that we face low productivity and low real wages reinforcing one another in a vicious cycle that ultimately helps neither firms nor workers,” David Spencer, Professor of Economics and Political Economy, wrote, and this is exactly the situation that Taiwan is facing right now.

As businesses are unwilling to increase wages for the want to hold onto their profits, they are also complicit in causing themselves to lose demand, and therefore their business sustainability.

As Spencer wrote, “The pay-off to firms of paying workers more is higher productivity that could more than offset the higher wage costs incurred and induce higher demand for the extra output created.

“But this win-win scenario requires consensus between firms and workers.”

But on top of increasing productivity, a study by Tatiana Sandino, an Associate Professor at the Harvard Business School, showed that higher wages will also result in lower employee turnover, and happier, but more importantly for businesses, honest workers.

Thus will businesses have the courage to take this next step not only to help their workers, but themselves as well?

Several studies have now shown that poverty can stunt brain development. Studies in JAMA Paediatrics and Nature Neuroscience have shown how the brain surface areas and grey matter of children from low-income families become more diminished and how they would score lower on standardized tests, because people who have to spend too much time thinking about their money woes do not have enough brain power to spend on other areas of their lives that their cognitive function therefore become impaired, a group of researchers from the Harvard University, Princeton University and other North American universities, and Britain's University of Warwick, found. Importantly, a study in the American Journal of Preventative Medicine showed that the same also occurred among highly educated individuals when they fall into hardship, which proves that poverty and financial difficulty are the main impediments to well-functioning individuals.

Taiwan’s relative poverty rate currently stands at 7.12 percent, and the poorest 20 percent of households in Taiwan do not earn enough to cover their expenditure.

As such, poverty is a real issue that afflicts the Taiwanese society. Increasing the wages of Taiwan’s workers not only means uplifting their lives, it also means investing in the workforce and their education. For businesses, this means that there would be a more productive and capable workforce for them to draw on.

Indeed, several studies, such as one by the Duke University has shown how when families have more finances, their children are less likely to use alcohol or drugs, or commit crimes and that they are more likely to graduate from high school. Moreover, people with low incomes are also more likely to overuse emergency healthcare services as earning low incomes would cause them to seek out free or cheaper healthcare services. As such, it is important for the government to be cognizant of this and to understand how increasing the wages of Taiwan’s workers can also help to alleviate the stresses on some of Taiwan’s health and social care services.

The South Korean government has taken the bold step of increasing its country minimum wage by 16 percent to 7,530 won (US$6.60) per hour next year. Taiwan’s minimum wage is still only at NT$133 (US$4.38) per hour. With the proposed increase to NT$140 (US$4.62), Taiwan’s minimum wage will still be drastically lower than that of South Korea. To protect the rights and livelihoods of the Taiwanese, it is paramount that the Taiwanese government act courageously and take similar bold moves. At the very least, this is necessary to kick start Taiwan’s economy which has been hanging in a gridlock.

Taking South Korea as a model, labor groups had proposed a 55 percent increase in the minimum wage while business groups were only willing to give 2.4 percent. However, the South Korean government took a strong stance and increased the minimum wage by 16 percent. In Taiwan, labor groups proposed a 30 percent increase while Republic of China General Chamber of Commerce Vice Chairman Hsu representing businesses wanted only 2.14 percent. However, the Basic Wage Deliberation Committee seemed to still pander towards the businesses by proposing to only increase the minimum wage by 4.72 percent. But the Taiwanese government has to go further. It has to be bolder. Not taking stronger action will only result in Taiwan’s workforce and morale to continue to languish, while the continuous pampering of the businesses will only make them more complacent but without taking Taiwan out of the woods.

As Pxmart’s President Hsu said: “Have I and the people of my generation been making simple judgments based on the experiences of our own generation, instead of putting ourselves in the shoes of the young to understand their situation and emotions?”

Hsu and his counterparts, many of whom are today Taiwan’s business leaders, grew up in an era where the wealth of the Taiwanese grew and many became part of the middle-class, but today, Taiwan’s wages have remained stagnant for at least more than a decade, while prices have kept increasing, rendering many of Taiwan’s workers to live harsher lives.

Thus when young Taiwanese “complain about low pay” or “fuss over having lower salaries than other people,” these are real concerns.

Their pay is low.

Will Hsu or any of Taiwan’s business leaders in their good conscience be willing to live on only NT$21,009, or even just NT$22,000 with today’s prices?

Hsu and the other business leaders in Taiwan cannot claim that Taiwan’s youths are not working hard enough to earn higher salaries. The fact of the matter is that when Taiwan’s businesses set wages at a low level, workers cannot fight for higher wages or risk losing their jobs, and these business leaders know it. Putting the blame on workers when business leaders themselves want to protect their own profits is unconscionable.

If Taiwan’s youths are today “spending too much money,” it is because they do not have a choice – the poorest 20 percent have to spend more than what they earn just buying basic necessities.

Taiwan today is at a crossroads. Taiwan’s government and its business leaders have to do some soul-searching and ask themselves – do they want to keep protecting their own power and money at the expense of Taiwan’s citizens? Does Taiwan’s government – and political parties on all sides – want to keep pandering to big businesses while leaving citizens to increasingly live harder lives economically? Businesses themselves have to ask themselves – can they keep asking the government to improve the economy but by their own actions, also prevent the government from doing so? If businesses want to keep protecting their own profits and not increase wages, and in doing so, prevent Taiwan’s economy from moving, because workers do not earn enough to spur demand, then Taiwan’s businesses cannot demand for more but be satisfied with a status quo where things are not moving.

Taiwan’s businesses have a responsibility to Taiwan, not only as businesses but as citizens of their country – Taiwan. If Taiwan is to make it, businesses have to decide for themselves – how much more they want to take by making profits all the way, or if they want to decide to play a more socially responsible role to help Taiwan’s citizens grow, so as to help Taiwan grow.

So that each and every one of us – Taiwan’s citizens and its residents alike – will work to fight for Taiwan’s pride and work to defend Taiwan’s growth together.

In Taiwan’s next chapter, a lot depends on Taiwan’s government, businesses and workers alike recognising themselves as Taiwan’s citizens, and Taiwan’s co-creators who have a role in working together to bring Taiwan into the next era, to make Taiwan a place where we can all be proud of, where we know other countries will recognise us as such, and bring recognition to Taiwan because of the unity its people would fight for.

Because we remember that Taiwan is worth us fighting for together.

When the proposal to increase the minimum wage to NT$22,000 goes to the Executive Yuan for its approval, the Executive Yuan should do the right thing and demand the committee to revisit the increase and go for a higher increment.

Otherwise, Taiwan’s workers should protest.

Editor: Edward White

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