Mon, Jun 03, 2013 - Page 8 News List

Businesses must share gains with employees

By Chen Chien-yin 陳建印

According to statistics released by the Directorate-General of Budget, Accounting and Statistics on May 22, the average monthly salary in the first quarter of the year was NT$54,897 and the “real” average monthly earning was NT$53,689, a return to the level of 1997. If we exclude all non-regular earnings, such as bonuses, the figures are likely to decline even further.

In mid-April, Premier Jiang Yi-huah (江宜樺) said that Taiwan’s economy has stagnated. He said that the main reasons for the weak economy were low private consumption and weak exports. In particular, the government had been concerned with the low private consumption, which caused economic growth to decline in the first quarter of the year.

The economic system consists of households, businesses and the government, and its performance depends on the interaction between these three parties. It is only when businesses are willing to share their profits with households that private consumption will increase, at the same time increasing government tax revenues.

As the government uses its tax revenue to improve the industrial environment, it will create an external effect that adds value to businesses. It is only through this kind of positive relationship that Taiwan will be able to boost its economy.

It is a pity that this kind of positive cycle does not exist in Taiwan at the moment. Judging from the stagnation of salaries in recent years, the growth of real regular wages has not matched that of real GDP.

Looking at the figures for 1991 for example, the growth of real regular wages in the industrial and service sectors was about 7 percent, which was about the same as real GDP, which also increased by about 7 percent over the same period.

However, in 1994, real regular salary growth in the industrial and service sectors was below 2 percent, while real GDP grew by more than 6 percent. In other words, businesses have failed to share the fruits of economic development with their employees in recent years. Perhaps this is why the public has a stronger sense of economic stagnation than entrepreneurs.

During an interview with the Nihon Keizai Shimbun early last month, Harvard Business School dean Nitin Nohria said that when businesses become greedy, society will be unable to benefit from them. People will then demand that the government put pressure on businesses, with the result that the government might implement certain restrictions on businesses.

This is a destructive relationship in which the three parties — households, businesses and government — attack one another. Once such an atmosphere develops, the economy is likely to enter a vicious cycle.

Judging from the current atmosphere in Taiwan, it seems that we are moving toward this dead end.

Fortunately, some businesses have started to pay attention to the problems facing salaried employees recently, calling on enterprises to give our young people more opportunities.

If their call can bring interaction among households, businesses and government to a positive cycle, there would be light at the end of the tunnel for Taiwan’s economy.

If that does not happen, any new policies will be affected by the current destructive relationship and the result will be that we will have to work twice as hard for half the benefit.

Chen Chien-yin is a researcher at the Industrial Technology Research Institute’s Center of Knowledge-based Economy and Competitiveness.

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