A survey by online job bank yes123 showed that 50.2 percent of local companies said they had raised wages in the first half of this year, compared with 44.8 percent in the same period last year. However, the same survey showed that only 16.3 percent of workers reported pay increases in the first half — albeit slightly higher than the 14.2 percent reported in the same period last year.
For the second half of this year, 54.7 percent of companies said they would raise wages, up from 49 percent in the same period last year and the highest for the second-half period in six years. Companies are seeking to increase wages by an average of 4.1 percent, while 13.3 percent said they are planning a more than 10 percent raise, the survey showed.
In general, wages are rising. The good news is that employers want to improve recruitment incentives and retain workers. The bad news is the move is, to a certain extent, a response to inflation, which in economic terms means a general increase in prices and a drop in the local currency’s purchasing power.
Indeed, most wage earners are under growing pressure due to soaring living expenses. Despite a tight labor market and pay increases, real regular wages grew a mere 0.22 percent from a year earlier in the January-to-May period due to rising inflation, official data showed on Friday. Although rising corporate profits are expected to drive further wage increases in the second half of the year, inflation is likely to remain sticky and continue limiting gains in real wages.
Inflation in Taiwan is undergoing a structural upward shift due to factors such as the green energy transition, a recovering economy, industrial transformation and labor shortages, the central bank has said. Nevertheless, rising rents have also started to filter into inflation amid soaring property prices and deteriorating housing affordability.
Last month, the consumer price index (CPI) grew 2.42 percent year-on-year, bringing second-quarter CPI growth to 2.2 percent — the 13th consecutive quarterly increase above the central bank’s 2 percent target, data released by the Directorate-General of Budget, Accounting and Statistics (DGBAS) showed. Overall, CPI growth is forecast to continue to exceed 2 percent for three consecutive years after factoring in an average 11 percent increase in electricity rates from April, the central bank and the DGBAS have said — a rarely seen phenomenon over the past 30 years. This has raised concern over whether government-proposed wage increases for military personnel, civil servants and public school teachers next year would push further up inflation and even trigger an inflation spiral, or the so-called wage-price spiral.
Macroeconomic theory says the spiral starts as rising wages increase disposable income, which then boosts demand for goods and triggers more price increases. As workers expect prices to rise, they ask for pay raises to keep up, which in turn leads to higher production costs, forcing companies to raise prices even more, adding further upward pressure on inflation, and so on.
The spiral does not seem to be a concern for the central bank, as Governor Yang Chin-long (楊金龍) last week said a pay raise for public workers would not fuel inflation, unlike minimum wage hikes that would drive up production costs across all business sectors. One more encouraging sign is that the stubborn wage-price spiral of the 1970s is unlikely to be repeated this time, as there are no special events, such as the energy crises that triggered social panic and amplified inflationary expectations at that time. After all, wages in Taiwan have not kept up with inflation for many years, with 67.73 percent of Taiwanese workers being paid less than the national average. There is no need to worry about an inflationary spiral.
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