With the nation’s GDP growth last quarter showing the largest annual increase since the first quarter of 2015 and the unemployment rate in September falling to the lowest in 17 years, wage earners might have expected salaries to rise significantly. They have not.
The Directorate-General of Budget, Accounting and Statistics’ preliminary third-quarter GDP data released on Tuesday last week showed that the economy last quarter expanded 3.11 percent annually, accelerating from a 2.13 percent increase in the previous quarter and well above an August government forecast of 1.89 percent.
However, according to the latest economic data, even though the jobless rate fell to 3.77 percent in September, the lowest in 17 years for the month, and averaged 3.78 percent for the first nine months of this year, down 0.16 percentage points from the same period last year, average real wages after adjustment for inflation for the first eight months rose only 0.93 percent year-on-year to NT$37,776 per month.
Average real wages have regressed to below the level they were at 17 years ago, when they were NT$37,908 per month.
Despite a steady improvement in the economy, the latest jobs report indicated that wage gains remained sluggish. While the government plans a 3 percent pay raise for military personnel, civil servants and public-school teachers in the next fiscal year — the first pay hike since 2011 — the decision for wage hikes in the private sector are left up to each company based on their business plans, operating situation and financial resources.
Explanations vary for the phenomenon of limited wage growth amid low unemployment rates. One explanation is that the jobless rate could be falling because official figures do not include long-term unemployed people — those who have not had a job for more than a year and have given up looking for one.
Another explanation, as suggested by several surveys, is that first-time jobseekers over the past years have been reluctant to ask for higher salaries amid long-term wage stagnation.
Other possible explanations for the low-wage environment are structural changes in the labor market, which give rise to low-pay, atypical employment — such as contract, temporary and dispatch work — and companies seeking to improve productivity through increased automation.
Surprisingly, some of the employers in the manufacturing and service sectors say that they are desperately looking for employees and are willing to offer attractive wages, but add that open positions still go unfilled.
A survey released last month by an online job bank showed that nearly 40 percent of the nation’s salary earners have no money left at the end of the month and about 9 percent need to borrow money to make ends meet.
Sixty percent of respondents said they struggle to save as much as they feel they should, only saving NT$6,345 each month on average, which explains why few young people want to get married or have children, let alone buy a home.
The situation is not unique to Taiwan, with advanced economies, such as Australia, Germany, Japan, the UK and the US, all facing the same conundrum.
While the government can comfort itself with strong economic data, it must realize that the issue of low wage growth deepens the question among the public as to why the benefits of economic recovery are not being shared equitably.
Fixing the problem of slow wage growth is not easy, but at the very least, policymakers should abandon the old way of thinking about the economy and endeavor to find a new solution.
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