Wed, Jan 12, 2011 - Page 8 News List

EDITORIAL: Pay raises come with consequences

We have addressed the subject of the special treatment and welfare provisions for public servants in several editorials recently. Following objections to the restoration of the 18 percent preferential interest rate for retired military personnel, public servants and teachers, legislators quickly abolished the income-tax immunity military personnel and some categories of teachers had enjoyed for decades. However, the government also moved to pacify enraged ex-servicemen and teachers by introducing subsidies elsewhere, effectively canceling out any gains in tax revenue. Now the government is advocating salary increases for these same groups, but this only risks widening the divide between the way public servants and the rest of the work force are treated.

The majority of the nation’s economic indicators are looking quite encouraging at the moment. However, for regular men and women, still plagued by high unemployment rates and all-but--stagnant salaries, rumors of a recovery seem to be greatly exaggerated. These people aren’t going to be too happy if the government hikes salaries for servicemen and teachers, especially since many industries are still smarting from the global economic crisis two years ago.

They will be looking at these public servants, sitting pretty with their iron rice bowls, oblivious to the economic vicissitudes rocking the rest of the work force, with envy. If the salary adjustments proposed by the government do not stimulate salary increases elsewhere, distributing the benefits of the recovery to the other segments of the population, many people are going to start feeling left out.

This is not to say that the issue of public servants’ salaries should be ignored, as they haven’t seen any increase in many years. It’s just that the government should also consider how this will be perceived by the wider society and maybe rethink the timing.

Take the 18 percent preferential rate, for example. This was based on the principle of trust — making good on a promise the government made to these groups beforehand — which is fine, except that the rate is about 20 times higher than most people can expect from their own bank accounts. If the government goes ahead with the salary adjustment, it will be making life difficult for itself. It may well consider the issue to be separate from the economic fortunes of the rest of the workforce, but that doesn’t mean other people will share its assessment.

The problem is that many people are not feeling the benefit of the economic upturn. The indicators are good and employees in some companies and industries are looking forward to prodigious year-end bonuses, but most people are not seeing any improvements in their circumstances. Rosy economic indicators and news of other people’s fortune come as little consolation when one cannot see any concrete evidence of prosperity in one’s own circumstances.

The government might well be pressuring bosses to raise salaries, but this presents problems now that it has signed the Economic Cooperation Framework Agreement (ECFA) with China. Increased local salaries mean higher production costs, which damages the competitiveness of Taiwanese exports. Then there is the increase in the exchange rate of the New Taiwan dollar which, coupled with increased salaries, will mean that domestic firms can kiss many orders from abroad goodbye. Either that, or they will have to outsource to other countries where the labor costs are lower, such as China or Southeast Asia. Raising salaries for workers will also mean that many others end up losing their jobs.

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