Vice Premier Shih Jun-ji (施俊吉) on May 14 said that the short-term solution to the problem of low wages is to increase hourly wages, so the Cabinet is planning to raise the minimum statutory hourly wage.
Minister of Labor Hsu Ming-chun (許銘春) chimed in, saying that there is a consensus in the government to raise the basic wage, and that the Basic Wage Deliberation Committee would convene to come up with suggestions as soon as possible.
The Cabinet also announced that the monthly minimum salary of government employees would be raised to NT$30,000.
With regard to medium-term measures, Premier William Lai (賴清德) has said that the main goal is to increase investment and speed up industrial upgrades.
He thinks the main economic problem is a lack of investment, which is why the government proposed the Forward-looking Infrastructure Development Program and the “five plus two” industrial innovation plan.
If the government and the private sector work together to build more investment opportunities, more jobs would be created, offering a possible solution to the issue of low wages.
The government is trying to relieve the symptoms by raising the basic hourly wage and the basic wage for government employees, hoping that private businesses follow its lead.
Addressing fundamental problems and raising wages requires overall national economic structural reform and improvement.
The government must be cautious when relieving short-term symptoms by forcing an increase in the basic hourly wage. When South Korean President Moon Jae-in assumed office last year, he announced that the minimum hourly wage would be increased to 10,000 won (US$9.28) during his five-year presidency.
This year, Moon’s administration raised the basic hourly wage from 6,470 won to 7,530 won, an increase of 16.4 percent. However, last year, the number of long-term unemployed, or those unable to find a job for six months, reached 147,000, which was 14.3 percent of the total unemployed population and the highest figure since 2000.
More than 40 percent of South Korean enterprises — mainly labor-intensive small and medium-sized enterprises — are estimated to lay off employees in preparation for the upcoming salary increase.
Taiwan has far more small and medium-sized enterprises than South Korea. Moreover, there is no clear motive for private businesses to follow suit.
As for the medium-term approach to addressing fundamental problems, the government seems to have found the root of the low wage problem, and it should devote more resources to resolving it.
Of the three main drivers of national economic growth in recent years, investment has been the least stable. The nation’s fixed-asset investments even contracted last year.
The reason that businesses are less inclined to invest in Taiwan might be the same as their reason for sharing profits with shareholders rather than increasing employee wages: They do not see any future prospects for sustainable operations and profit creation, so are unwilling to invest and want to reap profits quickly to keep shareholders happy.
What the government should do is to change the short-term mindset of businesses and focus on reviving investment, which would contribute to growth. A strengthening of investment incentives would be followed by a growing need for personnel.
The government should work on increasing labor demand among enterprises so that it exceeds labor supply. This would drive up the cost of labor and provide a fundamental solution to the problem of low wages.
Darson Chiu is a research fellow at the Taiwan Institute of Economic Research.
Translated by Chang Ho-ming
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