Tue, Jan 23, 2018 - Page 8 News List

Pay raises alone cannot solve low wages

By Chang Wen-po 張溫波

Since 2000, for 17 years, wages in the real economy have been in decline. This has created the abnormal situation where everyone has to work harder and harder just to make ends meet.

According to government data, last year, a total of 8.985 million Taiwanese were in employment; an increase of 79,000 or 0.89 percent on the 2016 figure. This demonstrates that job creation as a result of the present economic recovery is fairly limited.

Further, last year, 395,000 Taiwanese earned a monthly salary of less than NT$20,000, while 2.656 million Taiwanese earned less than NT$30,000 per month. Added together, these two groups make up 33.96 percent of Taiwan’s overall workforce. Although the figure has been reduced by 219,000, there is still a long way to go before the poverty problem is solved.

The number of Taiwanese earning more than NT$30,000 per month has risen by 298,000, an increase of 3.4 percent. When taken together with the 6.7 percent reduction in sub-NT$30,000 salaries, one can see clear signs of progress.

The government has not yet properly explained the basis behind its aspiration to achieve a minimum monthly salary of NT$30,000.

The latest government data show that last year, nominal GDP per capita was NT$739,000, while wage compensation — the share of labor compensation in GDP — was 43.8 percent. Dividing the product of these by 12 months gives us NT$26,974.

In the late 1980s and first half of the 1990s, wage compensation was 50 percent of GDP, which last year would have been NT$30,792 per month per capita. That amount would probably be acceptable for low-income earners.

The only shortcoming here is that the minimum cost of living differs between the special municipalities, cities and counties, so it would not be appropriate to apply the same low salary standard to low-income families across Taiwan.

The main reasons for Taiwan’s low wages are as follows:

First, corporate structure. There are 1,410,000 small and medium-sized enterprises, which make up 97.2 percent of all businesses, while 41,000 big businesses make up the remaining 2.8 percent. The former employ 8,811,000 people, or 78.2 percent, while the latter employ 2,456,000 people, or 21.8 percent.

Small and medium-sized businesses are mainly operated to provide a living, and this is particularly true for small businesses. The monthly wages they offer are necessarily lower and their employees make up the working poor.

Big businesses — especially big corporations — enjoy tax exemptions and preferential water and electricity fees, and the cost of pollution is not fully reflected in their cost of business. They make big profits and their employees get a bigger share of the profits, making up the medium to high-income earners and even the wealthy.

While wage compensation as a part of GDP has dropped from 50 percent in the first half of the 1990s to 43.8 percent in 2016, the operating surplus, or return on capital, has increased from 29 percent to 35 percent during the same period, further widening the wealth gap.

Second, labor factors. The technical knowledge among employees resulting from their education and experience varies greatly with the result that wages have become polarized.

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