Many Internet users have been posting images showing classified advertisements that were placed in a newspaper 12 years ago, offering starting monthly salaries of NT$35,000 for a private English school teacher and NT$40,000 for a real-estate agent. What has caught people’s attention is the contrast with today’s average starting salary for young people, which is about NT$22,000. It is really shocking to see how far wages have fallen.
No great change is to be expected following a meeting of the Basic Wage Commission that took place a few days ago, except that the basic wage would be adjusted next year. In an unusual move, the commission added a supplementary clause setting a threshold for convening future basic wage reviews, according to which they will be held when there has been an accumulated rise of 3 percent or more in the consumer price index (CPI). Considering the trend observed in commodity prices in recent years, this amounts to a declaration that there is next to no chance of a rise in the basic wage the year after next.
It is thoroughly unreasonable to take the CPI as the basis for adjusting the basic wage because the CPI is a measure of how the average price of goods has changed, whereas the price of daily necessities, which account for the greater part of the consumer expenditure of low-paid workers and low-income families, generally rises much more than overall CPI. Taking CPI seriously underestimates the impact that price fluctuations have on marginal workers.
Another point is that the supplementary resolution disregards the function of the basic wage, which is not only to maintain low-paid workers’ living standards and work conditions, but also has to do with the way in which the fruits of economic growth are shared out, and the CPI has never been the sole standard for measuring that.
A further concern is that the Basic Wage Commission has unilaterally set a new condition for convening future wage reviews, and this condition does not comply with the Regulations for the Deliberation of Basic Wage, since it contradicts the principle that a wage review should be conducted every year.
The procedure for adjusting the basic wage has been disrupted for two years in a row. The first disruption came last year, when the Cabinet set aside the proposal that had been put forward at that time and set new thresholds that economic growth and the unemployment rate would have to meet for the proposed adjustments to go ahead.
This delay prompted then-Council of Labor Affairs minister Jennifer Wang (王如玄) to resign in protest, and the minimum wage was not increased until April this year. The recent wage review meeting again delayed the implementation of a minimum wage adjustment by half a year, while adding a supplementary clause that will make it harder to convene wage review meetings in the future.
These are concessions made to employers in exchange for their agreement to the resolution, and to avoid the risk of the Cabinet vetoing the minimum wage adjustment proposal.
Incidents such as these highlight the Cabinet’s extremely unfriendly attitude to workers, and demonstrate how it lacks any understanding of the positive function of the minimum wage, called the “basic wage” in Taiwan.
Last year, 10 distinguished economists, including Nobel Prize in Economics winner Joseph Stiglitz, issued a joint statement calling on US President Barack Obama, the speaker of the US House of Representatives and the leaders of the majority and minority parties in the House and Senate to raise the federal minimum wage. The economists who signed the statement said that increases in the minimum wage would allow low-wage workers to increase their consumer spending, thus raising overall demand and creating new jobs, while at the same time prompting businesses to adjust their internal wage ladders, leading to higher wages for other, better-paid employees.
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