China Times: Introduce living wage to drive wage growth

Minister of Labor Pan Shih-wei said May 7 that his ministry had drafted a plan that would allow counties and cities to set their own minimum wages, a proposal that drew criticisms from several local government chiefs and labor groups. Two days later, Pan clarified that his ministry would keep the national minimum wage system intact and allow counties and cities to set different living wage levels based on the cost of living in their respective areas. Average wages in Taiwan have been stagnant for 16 years, a situation that has spurred calls from some sectors of the society for a wage increase.
The key to solving the problem is to devise the right policies and change the social climate. It is necessary to set minimum wages and living wages, as the former allows workers to earn the minimum income to meet basic needs. But local governments should be allowed to set different living wage levels, calculated on regional prices of goods, which would help boost the weak domestic economy. Setting lower living wage levels for rural areas in southern Taiwan, for example, would not tag the area as poor but would reflect the fact that people could live a more leisurely life in the south, while higher living wage levels in Taipei and New Taipei would reflect the high prices of goods and a more capricious lifestyle in the two northern cities. With the suggested region-based living wage levels, local governments could ask companies receiving government subsidies and contractors on public works projects to pay higher living wages than the national minimum wage. In addition, local governments could try to attract more businesses and raise income tax in order to pay higher subsidies to their employees, which would drive wage growth in the private sector as companies try to match those salaries. We also suggest that the government revise its tax system for companies by linking it to staff recruitment and wages, making it a crucial indicator of corporate social responsibility. (Editorial abstract -- May 14, 2014) (By Jeffrey Wu)