Economic growth in Taiwan is driven by three major motives — exports, private investment and private consumption. Among these, private consumption’s contribution to the economy is more than 60 percent. In other words, any expansion in domestic demand will be clearly reflected in the rate of economic growth.
The latest economic forecast published by the Directorate-General of Budget, Accounting and Statistics predicts that the economic growth rate will reach 3.37 percent next year, while growth in private consumption will remain below 2 percent. This problem arises from the fact that workers’ wages have been stagnating for a long time and domestic demand is therefore rather weak.
The basic wage is one of the few policy instruments that the government can use to directly intervene in wages and prices, reduce the gap between rich and poor and stimulate demand in the domestic market. It allows the government to effectively reconcile the ever-present contradiction between justice and growth. However, it is an option that the present government tends not to favor, as can be seen from the way it has kept adding technical barriers to the basic wage adjustment procedure.
The government’s record on this issue stands in marked contrast to South Korea, where the minimum wage has been adjusted every year, and by a substantial amount. In July, Seoul announced that the minimum wage would be raised by 7.2 percent next year. Taiwan should learn from South Korea’s example and stop regarding low wages as a normal state of affairs.
Liou You-syue is a doctoral student and Lue Jen-der an associate professor in National Chung Cheng University’s Institute of Social Welfare.
Translated by Julian Clegg