Premier Mao Chi-kuo (毛治國) has called for the amendment of four laws, the Company Act (公司法), the Labor Standards Act (勞動基準法), the Small and Medium Enterprises Development Act (中小企業發展條例) and the Factory Act (工廠法), which are known collectively as the “four laws for pay raises.” These acts necessitate enterprises to allocate part of their profits to their employees as pay raises and bonuses.
Taiwan’s realized GDP growth rose by 71 percent from 2001 to last year, but realized wages decreased by 2.6 percent over the same period.
Such a discrepancy begs the question: “Does economic growth not positively correlate with wage growth?” A common answer is that businesses’ profits are not doled out to employees; however, the truth is more complicated than this.
Generally speaking, Taiwan’s low wage problem is caused by globalization and offshoring — work being sent to other countries where a workforce charges less for the same thing — especially in the manufacturing industry. According to Ministry of Labor statistics, the salaries of employees in the manufacturing industry grew year by year before the financial crisis began in 2008, but the manufacturing industry accounts for only 27 percent of total labor in Taiwan. It would therefore appear that this industry is not the main one that is depressing wages.
The number of workers in the service industry accounts for 60 percent of labor in the nation, and the industry’s gross profit accounts for 70 percent of Taiwan’s gross profit. That implies that the service industry is the key group influencing Taiwan’s realized salary standard. Therefore, service industry profits allocated to employees or shareholders are critical in deciding the realized salary standard in the nation.
Salaries in the service industry began to decline as early as 2002 and dropped by 5.9 percent between 2001 to last year, while manufacturing industry salaries have seen growth. The increasing demand for low wage jobs, such as security, day care and domestic helpers, is due to the nation’s social development, which indirectly drags down on salary growth.
Between 2001 and last year, the largest decrease in salary growth was 15.2 percent and could be found in the support services sector; in real estate it was 12.3 percent; in transportation and storage 10 percent; and in wholesale and retail the fall was 3.5 percent.
Salary growth in the wholesale and retail sector did not drop as much as other areas, but these two sectors have a powerful impact on the whole service industry’s salary standard, as they consist of the majority of labor in the industry.
Hiring lots of “standby” employees instead of permanent workers in the wholesale and retail sector is the main driver behind the falling salary standard. However, the hiring of temporary workers is not completely a bad thing, as it can provide opportunities for students and housewives. However, it can also compress the opportunities and salaries for full-time job hunters.
The revenue for a well-known convenience store in Taiwan exceeded NT$10 billion (US$315.6 million), or NT$10 in earnings per share. This was a record high for the firm with about 8,000 full-time employees and 30,000 part-timers on hourly salaries. However, the surplus was only allocated to board members, shareholders, full-time workers and perhaps a few groups of part-time workers.
The government should spend time on overall industrial structural reform issues before, or while, implementing amendments to the four laws to raise salaries or to stop the falling salary standard in the service sector.
Gary Chen is a public relations officer at the Taiwan Institute of Economic Research.
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