Thu, Dec 13, 2012 - Page 8 News List

The facts about wage stagnation

By Huang Tien-lin 黃天麟

A survey published recently by the Directorate-General of Budget, Accounting and Statistics revealed that, as of May this year, 42 percent of employees in Taiwan earned monthly salaries of less than NT$30,000. The true situation may be even worse, because the term “employees” includes several tens of thousands of Taiwanese who work in China — whose monthly salaries tend to be higher than those in Taiwan — so the proportion of working poor among people employed in Taiwan is probably much higher than 42 percent.

The question is: Why are there so many “working poor”?

“Because of the effects of the global financial crisis” — this is the stock response from government officials. However, the situation is not so grim in neighboring countries, although they were all hit by the same financial tsunami. Taiwan’s opposition parties and media commentators all blame the incompetence of President Ma Ying-jeou (馬英九) and his administration, but it was not during Ma’s presidency that salaries stopped growing — they have been at a standstill since 2000. It is just that the problem has become even worse under the Ma government. If you are looking for the real reasons for this, the following figures are to provide an answer.

The first point is that, whereas Taiwanese manufacturers did 12.24 percent of their manufacturing overseas in 1999, that figure grew to 46.23 percent by 2007, with 90.9 percent of offshore production done in China. By last year, the figure had climbed to 50.52 percent, with 92.7 percent of production abroad concentrated in China. After Taiwan’s first handover of government power from the Chinese Nationalist Party (KMT) to the Democratic Progressive Party (DPP) in 2000, the administration of then-DPP president Chen Shui-bian (陳水扁) abandoned his KMT predecessor, former president Lee Teng-hui’s (李登輝) “no haste, be patient” policy with regard to investment in China, allowing Taiwanese manufacturers to quickly move their operations across the Taiwan Strait. This relaxation of Taiwan’s cross-strait policies led to an exodus of manufacturers on a scale that no other country has ever seen.

Second, it is true that moving production lines overseas got Taiwanese manufacturers out of a tight spot as regards competitiveness. This is confirmed by operating profits for listed Taiwanese companies growing 200 percent between 1998 and last year, while their net profits after tax shot up 400 percent. However, the threat of factory closures locally left workers with no choice but to put up with a situation in which their real wages fell and their employers could demand anything they wanted of them. From that time on, workers’ share of GDP has been falling steadily, from about 50 percent of GDP 10 years ago to a record low of 44.5 percent in 2010. Ironically, Taiwan’s low wages are one of the reasons why the country is listed among the world’s most competitive economies in the International Institute for Management Development’s world competitiveness rankings.

The third point is that while Taiwanese manufacturers have spent more than a decade chasing cheap labor in China, they have paid scant attention to research, development and innovation. The overall value-added rate for the Taiwanese manufacturing industry as a whole slid from 26.3 percent in 2000 to 21.3 percent in 2010 — the biggest drop in Asia. This has canceled out any competitive edge arising from the low wages paid to workers in Taiwan and as companies’ competitiveness falls, wages cannot go up.

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