Tue, Mar 17, 2015 - Page 8 News List

EDITORIAL: Pay raise proposals take wrong tack

To oblige corporations to shoulder their social responsibilities, the government should push to implement the spirit of industrial democracy by improving three basic labor rights — the right to organize, collective bargaining and collection action — instead of the Chinese Nationalist Party’s (KMT) bid to amend the “four laws for pay raises.”

The effort to amend the Company Act (公司法), Factory Act (工廠法), the Small and Medium Enterprises Development Act (中小企業發展條例) and the Labor Standards Act (勞動基準法) is aimed at addressing the long-term problems of low wages and wage stagnation.

The proposed amendments stipulate that a fixed percentage of a company’s profits should be allocated to employees in the form of bonuses or dividends, with companies that fail to comply risking fines ranging from NT$500,000 to NT$5 million (US$15,770 to US$157,700). Small and medium enterprises would be able to deduct 130 percent of the pay raises as expenses.

Given that a majority of Taiwanese entrepreneurs believe that their labor force is no different from any other production input, the idea behind the four amendments — that employees are entitled to a fair share of a corporation’s profits — is a positive one.

Taiwan’s development model has been stuck with razor-thin profit margins and has not yet matured into a value-added economy. That is why — along with economic factors — real salaries in this nation have retreated to the level of 16 years ago even while corporate profits have exceeded GDP growth.

The concept of treating labor as a marketable object means that people in management view wage determination as their prerogative.

Business leaders have spoken out against proposals to make dividend payouts to workers compulsory, just as they have every time the government has proposed raising the minimum wage, because such intervention seems to them to be a brake on what they see as beneficial market mechanisms.

No matter how well-intentioned the amendment, it is vital to recognize that it would not be much help in winning pay raises or altering the situation that workers find themselves in as labor market commodities.

It is difficult to ensure that companies dole out earnings to employees when they turn a profit, especially non-listed firms whose employees are mostly low-wage earners.

If passed, the amendments could lead to a change in salary structure, with base salaries being reduced because companies need to offset the profits shared with their employees, thus subjecting workers to unstable incomes.

The tax credit proposal has come under criticism, for given the low corporate income tax rate, the money companies would save in taxes might not be enough of an incentive for them to raise wages. The legitimacy of using taxpayers’ money to help boost wages and the potential for tax fraud are both issues of concern.

Taiwan’s workers would be better served by the government amending three deeply flawed laws covering unions: the Labor Union Act (工會法), the Collective Agreement Act (團體協約法) and the Settlement of Labor Disputes Act (勞資爭議處理法). These laws need to be changed if workers and trade unions are to have an equal playing field in negotiations with management.

There are too many restrictions that have hampered the implementation of union and labor rights. The Labor Union Act stipulates that unions must be established with at least 30 workers, but it does not make it mandatory for workers to join a union. Collective bargaining has not been widely used in Taiwan.

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