Only Change can Break the 22K Spell
United Daily News editorial (Taipei, Taiwan, ROC)
December 19, 2012
Summary: College graduates entering the workplace make a starting salary of only 22,000 NT per month. Former Vice President Vincent Siew complained. He said that it was unhealthy for industries to reduce salaries to that level. Last week one business representative attending the National Industrial Development Conference responded to critics. He said, "If they keep quarreling, even 15,000 NT will be impossible." This led some people to blast business owners as wealthy boors. This intensified the already antagonisic atmosphere. This phenomenon has people worried. A solution must be found.
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College graduates entering the workplace make a starting salary of only 22,000 NT per month. Former Vice President Vincent Siew complained. He said that it was unhealthy for industries to reduce salaries to that level. Last week one business representative attending the National Industrial Development Conference responded to critics. He said, "If they keep quarreling, even 15,000 NT will be impossible." This led some people to blast business owners as wealthy boors. This intensified the already antagonisic atmosphere. This phenomenon has people worried. A solution must be found.
As many as 63% of workers under 30 work temporary jobs. As many as 1.3 million people earn less than 30,000 NT a month. Twenty to twenty-four-year-olds earn an average of 22,000 NT a month. This is less than what they made 14 years ago. Many outstanding university graduates look at the 22,000 NT starting salary and seek jobs abroad. A survey by the Organization for Economic Cooperation and Development (OECD) indicates that as many as 61.1% of those with higher educations have fled overseas. That number is the highest in the world. It is much higher than second place India at 50.9%. It confirms that low pay is a major reason for the high-level brain drain.
Salaries are essentially determined by the labor market. If the economy is bad, demand for labor is lower than the supply. Salaries will not increase. They may even fall. Young people now expect to be poorly paid or even unemployed. The average annual GDP growth rate for the past 14 years has been over 4%. Yet salaries have stagnated. University graduates making 22,000 NT a month is hardly an improvement. It is a decline. But why? The reasons are worth pondering.
Many say that higher education on Taiwan has taken a wrong turn. They say it neglects technical and vocational education. They say this has led to a surge in the number of university graduates. This has created a discrepancy between education and application. Therefore it is not easy to give them raises. But we must ask why. By itself, it fails to explain the low-wage phenomenon, which transcends the issue of academic major and employee qualifications. The real reason is Taiwan's economic development model, with its biases, business concepts, and mentality.
Over the past two decades, Taiwan's economic growth has been driven by exports. The ICT industry accounts for the lion's share. Mainland factories enabled Taiwan to operate OEM export industries. These OEM export industries emphasized low production costs and the cross-Strait division of labor. These high capital, technology-intensive, high-end production line industries employed few people on Taiwan. On the Mainland, these industries were low capital, low-tech, low-level production lines. They were labor-intensive, and made full use of cheap and abundant labor.
This mode of production created massive exports, export-based investments, and consumption. They accounted for nearly 70% of the nation's GDP growth. But they also created many conditions adverse to wage growth. One. Such industries required large amounts of domestic capital, but only small amounts of human labor. They created a small number of high-paying jobs that inflated domestic wages, but reduced the capital available for other jobs. This reduced salary levels. Two. Industries attached too much importance to cost reduction. When the Mainland offered a cheaper alternative, Taiwan production lines moved there. This led to a wave of unemployment and froze salaries. Three. Taiwan would fill orders. Production would move overseas. The ratio continued rising. Business owners made substantial profits. This made for attractive GDP growth figures. But salaries stagnated. During the 1990s salaries accounted for over 50% of GDP. By 2011 this fell to 45.7%. This is why the working class has not benefitted from long-term economic growth. This is why the 22,000 NT spell remains unbroken.
In recent years businesses have undergone a change in mindset. The domestic market is increasingly open. Businesses are increasingly competitive. In order to survive, many pinch pennies when hiring new personnel. They save wherever they can. The corporate culture once valued employees. This has changed. Many companies place too much emphasis on scale. They have replicated Taiwan's business model on the Mainland. But once they thrive in the Mainland market, they shift their emphasis accordingly. They cease investing and innovating on Taiwan. The cross-strait gap in the quality of goods and services is narrowing. This makes it harder to increase salary levels on Taiwan. The 22K figure is the distorted product of this mentality.
To break the 22 K spell, we must change Taiwan's economic growth model. Future economic growth must increase domestic demand and local content. It must reduce outsourcing and dependence on exports. It must pay more attention to the value of innovation and labor. It must reduce price competition. We must link industrial development with domestic employment. We must enhance industrial innovation and labor productivity. This will solve the predicament of low wages.
The environment is poor. Everyone must pay attention to the business community. But industries must become self-sufficient. We must transform the corporate culture. We must emphasize innovation and value employees. If we can do this, then we can boldly raise salaries or hire new, highly-paid workers. We will no longer spin our wheels at 22K. The government has a responsibility to allocate resources. It must encourage, accelerate, and drive this transformation, and break the 22 K spell.
2012.12.19 03:54 am