Taiwan’s minimum wage has been raised annually since former president Tsai Ing-wen (蔡英文) took office in 2016. Last week, the Ministry of Labor announced a 3.18 percent increase in the nation’s minimum monthly wage to NT$29,500 and the same percentage increase in the minimum hourly wage to NT$196 next year, both up for a 10th consecutive year.
The ministry said that about 2.47 million workers would benefit from the wage hike, which would help low-income families and disadvantaged workers. Based on the current pace of increases, it is estimated that the minimum monthly wage would surpass NT$30,000 in 2027, which was one of Tsai’s presidential campaign promises.
There is no strong empirical evidence to suggest that raising the minimum wage would increase the average wage among formal workers. A survey released last week by online job bank yes123 showed that only 32.9 percent of workers were optimistic about a potential pay raise following the latest minimum wage increase, while 95.1 percent thought the minimum wage hike could lead to price hikes and inflation affecting everyday goods. Of that 95.1 percent, up to 62 percent expressed interest in seeking an additional source of income if their salaries remain unchanged.
Studies have found that the effect of minimum wage hikes on average wages is not a simple linear increase. However, the resulting employment changes are often nonlinear and depend on specific economic conditions. Certainly, raising the minimum wage does affect the income of marginalized workers — such as part-time employees, apprentices, unskilled workers and those in the informal sector — but it is uncertain how much the wage hike could benefit those with higher pay.
From 1997 to 2006, when Taiwan’s minimum monthly wage was unchanged for 10 years, the average wages in the nation’s industrial and service sectors increased by 15.5 percent, Directorate-General of Budget, Accounting and Statistics data showed. However, from 2014 to 2023, when the minimum monthly wage was increased by a total of 36.98 percent, the average monthly wage in the industrial and service sectors only increased by 18.25 percent.
Even though Taiwan’s GDP per capita increased 20.78 percent from US$14,020 in 1997 to US$16,934 in 2006, and further increased 41.29 percent from US$22,874 in 2014 to US$32,319 in 2023, it remains unclear how much of the average wage growth in the industrial and service sectors during these periods was driven by the ripple effects of minimum wage hikes as opposed to broader GDP expansion.
What is certain is that the minimum wage is gradually approaching that of the average wage in Taiwan, but many workers still earn less than the average, while the problem of an increasingly uneven income distribution remains.
It is welcome news that the government has continued to raise the minimum wage to support and protect low-wage workers, but due to the effects of US tariffs and the industrial transformation brought about by artificial intelligence, business operations are facing more uncertainty, and workers in traditional industries would have to bear the brunt of such challenges.
That is not to mention that 70 to 80 percent of workers in the manufacturing sector are employed in traditional industries.
To address uneven income distribution and the widening wage gap between high and low-paying industries, the government must continue its efforts to upgrade the manufacturing sector and transform the nation’s economic structure, while providing subsidies and other supporting measures to help affected businesses overcome difficulties — which is the only way to truly improve workers’ lives.
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