Minimum Wage rise is welcome, but workers and the economy demand more

Minimum wage increase is a step in the right direction, but higher wages are needed to help Taiwanese workers and boost the country’s economy

Taiwanese 1,000 notes. (123rf.com)

A day after handing in his resignation, but before formally standing down, one of the final acts of outgoing Taiwan Premier Lin Chuan’s tenure was to sign off proposals for an increase in the minimum wage.

By doing so, Lin is undoubtedly leaving office on a high note. His confirmation of the Ministry of Labor’s (MOL) annual Minimum Wage Review Committee proposal will leave minimum wage workers in Taiwan almost NT$12,000 a year better off.

But nevertheless, there is still a slightly bitter taste after it was earlier suggested that the MOL Committee had proposed a much larger increase, with a monthly minimum of NT$27,711 on the table. As it is, the figure goes up to NT$22,000, which is considerably lower than that.

Of course, any increase is to be welcomed, but there is still a sense that this review was an opportunity missed.

Wages and working conditions

A huge proportion of Taiwan’s working population continues to be classified as low-income. Around 40% of the workforce earns less than NT$30,000 a month. By comparison, the proportion of the workforce that earns more than NT$50,000 a month is just 18%.

This second figure is particularly telling, because NT$50,000 is the amount most people acknowledge as the minimum income required to maintain a basic standard of living. This cannot be emphasised strongly enough. Less than a fifth of the Taiwanese earns enough to live to even a basic standard.

What this means in practice is that they cannot afford to buy a home, buy a car, or save for their future. Even with minimum wage workers being exempted from income tax, they are still barely earning enough to survive. In a sense, they are the modern-day equivalent of subsistence farmers.

There are other factors to consider alongside this too. In return for this low remuneration, Taiwanese workers also work the third longest hours of any country in the world after Mexico and Costa Rica. And they are entitled to a minimum of just 7 days paid annual leave a year, one of the lowest figures in the world too.

Recent changes to the labor laws have introduced mandatory holiday and rest days, but many employees are opting out of this, either because they cannot afford the resulting drop in income, or because they are pressured to do so by their employer.

Equally, penalties of up to NT$1 million are little deterrent to employers who choose to break labor laws, even if these laws were enforced which they rarely are.

What this amounts to is a perfect storm of low wages, long working hours and little annual leave. Little wonder that many Taiwanese workers are demoralised and even depressed with their working lives and their future prospects.

Wider economic impact

All this is aso having a hugely damaging impact on the Taiwanese economy, at a time when it can least afford it.

Experts agree that a demoralised workforce is less efficient and productive than a happy one. It is just common sense. If you have to worry about how to pay the next bill or even how to afford to put food on the table, you cannot be fully focused on your work. This is even more true if the reason for these worries is your employer, and you resent them for it.

Paying low wages to staff sends them the message that they are not important. Offering them little hope of earning higher wages in the near future reemphasises this. It is therefore little wonder if low paid staff are not giving their all for that same company.

But it is not just low productivity and poor performance that is a direct result of low wages. If such a high proportion of the population is on low wages, that means that there are a large number of people not spending money.

Economies grow when people spend money. Spending drives product sales and service usage, which in turn sees more people being employed and higher taxes being paid to the government. It is a simple economic cycle which most developing countries follow.

By keeping pay low, Taiwan is therefore holding back its economic potential. At a time of acute economic uncertainty, this is something it can ill afford to do.

Long term vision

Significant wage rises will always be opposed by employers who worry about the financial impact it will have on their business. And there will always be some short-term pain. Some jobs will be lost. Some business may not be able to afford the rises and go bust.

But the Government and the business community have to look at the long-term impact. Ultimately, businesses will benefit from increased trade, great productivity and a stronger economic environment.

But more importantly, the lives of the Taiwanese workforce will improve too. Instead of living with their parents, resenting their jobs, and living on the breadline, they will be able to get on the property ladder, enjoy a social life, eat out a bit more, and generally have a better work-life balance.

There is an old saying that we should ‘work to live, not live to work.’ That is not the case in Taiwan at the moment, but even a relatively modest increase in wages could seed an entire culture shift.

Let’s therefore hope that the new Taiwan Premier, Lai Ching-te (賴清德), has the opportunity to mark his first year in office by signing off a proposal for a much higher wage rise from next year’s annual Wage Review Committee proposal. And that regular incremental rises can be introduced to gradually rebalance the economy and close the gap between how much people earn and how much they actually need to live.