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Commercial Times: Will business tax incentives work in pay hike plan?

Commercial Times: Will business tax incentives work in pay hike plan?

The legislative caucus of the ruling Kuomintang (KMT) has been pushing for a series of law revisions that would offer tax incentives to enterprises to raise wages and increase employment. The party is proposing amendments to the Labor Standards Act, the Company Act, the Factory Act, and the Small and Medium Enterprises (SMEs) Development Act. The main opposition Democratic Progressive Party (DPP) has suggested that the pay increases should be achieved by raising the minimum wage and it has also expressed support for the law revision proposal. It said, however, that the Small and Medium Enterprises Development Act should be excluded because offering tax cuts to SMEs in exchange for employee pay hikes may erode the country's revenue base. The efforts by the KMT and DPP to prioritize a wage increase signal their intention to pander to grassroots voters ahead of the 2016 presidential and legislative elections. We believe that increasing employment and encouraging enterprises to raise pay are major tasks for the government. We would be happy to see relevant law amendments, as long as they would not affect the normal development of industries. We are concerned, however, that the salary increase proposals put forward by lawmakers of the two main parties would not address the root causes of wage stagnation in Taiwan. We have doubts about whether their proposals, and the Ministry of Labor's plan to raise the minimum monthly wage by 3.18 percent to NT$20,008 by July, would actually produce an increase in people's take home pay. The global economic structure has changed dramatically, due in part to increased productivity amid rapid development of mobile technology. In this environment, traditional industries are facing stagnant growth because of overcapacity, and only big innovative companies like Apple can remain afloat in the market. The wealth gap is widening globally and it is forecast that the combined wealth of the richest 1 percent will exceed that of the other 99 percent in 2016 unless the current trend of inequality is halted. If the Taiwan government continues to adhere to its old wage policies, it would not be able to adapt to the changing economic environment. Some international studies show that in this Internet era, many middle-class and mid-income workers are losing their jobs. Only grassroots workers and a few top-end, high-pay professionals who can keep abreast of Internet technology trends will remain employed, the studies indicate. A large number of middle-aged and older mid-level managers now comprise a floating population in the labor market, which is one of the root causes of the salary stagnation in the less-skilled category. In their efforts to bring about a wage increase in Taiwan, the executive and legislative branches of government should encourage businesses to share their profits with their employees. (Editorial abstract -- March 12, 2015) (By Evelyn Kao)


Updated : 2021-09-26 00:40 GMT+08:00