Sun, Jul 07, 2013 - Page 8 News List

Taiwanese employees losing out

By Chu Yun-han 朱雲漢

This has made them so-called “hidden champions.” However, these hidden champions do not need to pay their employees the same as South Korean workers.

Second, if big South Korean conglomerates such as Hyundai Motor Co, Samsung and POSCO had the chance to continue to decrease pay like Taiwan’s hidden champions, they would also freeze salaries, allow the price of their company’s shares to increase, increase stockholder dividends and give out higher bonuses to their managerial staff.

The key point is that these South Korean conglomerates do not have this option.

On the other hand, Taiwanese capitalists always win out against their employees: First, they generally do not have to face strong labor unions since the unions that did possess strong collective bargaining power collapsed following the privatization of Taiwan’s state-owned enterprises.

Second, Taiwanese capitalists generally have the option of moving their operations to China, which allows them to use cheap Chinese labor as leverage to force local workers into accepting pay freezes. It also helps them put pressure on the government not to increase the basic wage.

A comparison between South Korea and Taiwan shows that well-known South Korean conglomerates such as Hyundai Motor, Samsung and POSCO do not have the option of moving large parts of their operations to China, but South Korea’s labor unions can rely on strikes and collective bargaining mechanisms to force these conglomerates into increasing pay with earnings.

Such pay increases cause other large businesses and governmental departments to follow in their footsteps. This then spreads to other parts of the economy, which has had the effect of spurring continual growth in South Korean pay levels.

In the end, Jung and I came to the conclusion that since there is not much the Taiwanese government can do to close the salary gap, it will be difficult to stem the trend of highly-skilled workers leaving Taiwan.

Second, the average future Taiwanese wage level will be decided by the pace of wage increases in China’s coastal regions — Taiwanese workers will have to wait until salary levels in China’s more developed parts catch up to Taiwan’s salary levels before they will be given an opportunity to push for salary increases.

Before this happens, the fruits of Taiwan’s economic growth will be split between business leaders and their stockholders, senior management and landowners.

After hearing me explain that Taiwan’s corporate income tax rate is only 17 percent and that the real tax rate is less than 12 percent, that business leaders do not have to pay capital gains tax when the value of their shares go up, that rich people with lots of real estate only have to pay a symbolic land value increment tax and that government revenue here mainly comes from individual income tax paid by income earners, Jung could not help but exclaim: “Taiwan really is a capitalist’s paradise!”

Chu Yun-han is a professor of political science at National Taiwan University.

Translated by Drew Cameron

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