Mon, Jun 11, 2007 page8

• Editorial: The problem with popularity contests

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  There is no doubt that two economic measures approved last week by the Cabinet and the legislature respectively were driven by politics rather than hard numbers. It's not surprising for politicians to take such steps in an election year, but you have to wonder about the long-term effects of their decisions.

  On Wednesday, the Cabinet announced it would raise the nation's minimum wage for the first time in almost 10 years effective next month, with the minimum monthly wage increasing 9.09 percent to NT$17,280 (US$524) and the minimum hourly wage rising 44 percent to NT$95.

  To help small and mid-sized businesses cope with higher wage requirements, the Cabinet agreed to offer counterbalancing measures and provide subsidies to those in need, mainly in the service industries.

  But subsidies, such as a provision of NT$10 per hour per employee for part-time workers, will not be on offer forever. Affected firms might obtain short-term relief, but they will still be subject to the market dynamic that determines their long-term competitiveness.

  After all, the wage hike is an extra cost imposed on companies and workers may very well be fired if their employers struggle to stay afloat.

  Yet, to argue that subsidies -- coming as they do from state coffers -- equate to using taxpayers' money to pay off businesses that might otherwise be upset by the increase misses the point entirely.

  The problem with the wage hike has nothing to do with subsidies, but with whether the increase will provide an incentive for low-wage earners to improve their job skills.

  With elections approaching, it is undeniable that raising minimum wages is a politically popular move, while raising taxes is not. But this measure will only be of use if it helps low-wage earners move above the poverty line. Otherwise, it might simply put people out of work.

  Just as the Cabinet hailed its success on the minimum wage hike, lawmakers flexed their muscles on Friday by pushing through the consumer debt clearance regulations (消費者債務清理條例), otherwise known as the personal bankruptcy bill, for a third reading.

  The bill represents new legislation that would extend bankruptcy protection to individuals. In particular, credit and cash cardholders deemed incapable of paying back unsecured debts of less than NT$12 million (US$364,000) would be entitled to apply for bankruptcy.

  While the final draft of the bill has modified or even removed several controversial clauses to greatly mitigate any negative impact it would otherwise have had on banks and the real estate sector, two key problems remain.

  The first is that although the bill includes a nine-month sunrise clause, which means many of its provisions would only go into effect nine months after its passage, this is hardly enough time for the government and the courts to prepare to handle a likely deluge of personal bankruptcy cases.

  Not surprisingly, there is a lack of judges with expertise in personal bankruptcy. At the same time, our courts are already well-occupied with a large number of other cases.

  Secondly, while the bill allows debtors to apply for bankruptcy only after failing to negotiate a repayment and rehabilitation plan with creditor banks and mandates certain limitations on the lifestyles of the bankrupt, it could still be seen as an all-too-tempting get-out-of-jail card for debtors.

  If the government and consumer rights advocacy groups do not act to educate cardholders on how to spend wisely and responsibly, then what is to stop all and sundry from tucking into a free lunch?
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