Pay Raises rooted in Economic Fundamentals, not Populist Rhetoric

Pay Raises rooted in Economic Fundamentals, not Populist Rhetoric
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
May 15, 2014

Summary: The film "The American President" included some wonderful dialogue. At one point, the main character says that politicians usually do not solve problems. They merely provoke anxiety. Then they blame their opponents or some third party for that anxiety. The allegation that "Labour did not receive pay raises because capitalists pocketed all the profits" recalls a a line in the film. After politicians have provoked anxiety, capitalists may well leave. Will the Technology Development Program be distorted? Politicians will shirk responsible for the consequences. If Taiwan politicians and policy makers only wish to incite populist sentiment, do not be surprised if low-pay and low-growth on Taiwan persist.

Full Text Below:

Everyone is now concerned about low wages. Some companies have responded to the government's call to raise wages. This inspires optimism. But some radicals have blamed employers, saying that the long term failure to raise wages was the result of "bosses unwilling to share profits with employees." They even demanded that the law be amended to force companies to either raise wages or pay more taxes. Their alternative is to use the Technology Development Program (TDP) as the basis for wage raises. Their views simplistically reduce pay raises to bosses and employees fighting over who will receive the largest slice of the pie. They totally ignore international labor competition. Raising wages is essential. But too much populist rhetoric will do more harm than good.

Let us begin by calling a spade a spade. Let us first understand what the term "salary" means. In a free economy, salaries are determined by the labor market by labor supply and labor demand. Over the past ten years, Taiwan has experienced a low birth rate. There has been no significant increase in the labor supply. Much low-wage work is being performed by low wage foreign labor. As a result, wages have failed to rise. This is due to a lack of demand for specialized, skilled labor.

But why is labor demand by Taiwan manufacturers inadequate? In the final analysis, it has to do with the global competitiveness of Taiwan companies. Not every Taiwan company is as globally competitive as TSMC, MediaTek, Largan, or Giant. These companies have a strong demand for labor, in research, business, accounting, and production. Salaries for workers in these companies will surely increase. But suppose a company fails to innovate and its products lack distinction? Suppose that in a competitive global environment, the local labor force lacks distinction, and can easily be replaced by others? Salaries will decline due to international competition. They may even approach the levels in low-wage economies such as Vietnam, Malaysia, and the Chinese mainland.

The current salary freeze on Taiwan is the result of a long term lack of innovative industries with distinctive products. This has led to a reduced demand for their labor. In other words, most companies that lack distinctive products now face global and transnational labor competition. Salaries on Taiwan have not risen in 15 years. That has everyone worried. But we must understand that it was the result of the functioning of a market economy. Stubbornly blaming entrepreneurs or engaging in populist demagoguery will not help.

Basically globalization has created an external logic that countries must follow. For example, capitalists can set up factories around the world. They can outsource services. This external logic makes it difficult for domestic labor to make demands of capitalists. Governments the world over offer favorable conditions to capitalists to persuade them to set up factories. This external logic forces governments to lower taxes in order to keep them from leaving. In short, the external logic is too powerful and tends to override the internal logic in any given country.

If a populist political climate forces business owners to raise wages, what will the result be? Will domestic populist pressures reverse the consequences of inadequate innovation and International competitiveness? Unfortunately they will not. Under populist pressures, business owners may be able to tolerate a slight raise. But capitalists will never allow such domestic determinants to become the norm. The most important force for businesses is the profit motive. Forcing entrepreneurs to pay dividends and taxes means forcing them to pay 20 to 30 cents on every dollar earned. If governments force capitalists to pay too much in taxes, they will leave. So why wouldn't they leave if governments force them to give employees too large pay raises?

Globalization means that the entire world has become one vast market. The external logic of globalization means that market forces are ubiquitous. In other words, "The world is flat." The most important revelation about market forces, is that lone individuals or small countries cannot defy market forces. The best way tiny entities can cope is to go with the flow. We must go with the flow of market forces. We must adopt countermeasures when the time is right. In particular we create opportunities for innovation and upgrading.

The film "The American President" included some wonderful dialogue. At one point, the main character says that politicians usually do not solve problems. They merely provoke anxiety. Then they blame their opponents or some third party for that anxiety. The allegation that "Labour did not receive pay raises because capitalists pocketed all the profits" recalls a a line in the film. After politicians have provoked anxiety, capitalists may well leave. Will the Technology Development Program be distorted? Politicians will shirk responsible for the consequences. If Taiwan politicians and policy makers only wish to incite populist sentiment, do not be surprised if low-pay and low-growth on Taiwan persist.

為勞工加薪要看基本面，不能靠民粹
【聯合報╱社論】
2014.05.15 02:04 am

最近各界聚焦勞工薪資過低問題，也有若干企業主動響應政府加薪之號召，這是值得樂觀看待的發展。但與此同時，也傳出了一些激進的聲音，例如指責勞工長期未加薪是因為「老闆賺錢不想與員工分享」，乃至要求修法強制企業「不加薪就加稅」，或在「科專」計畫評比時把員工加薪列為參考。這些見解，把加薪簡化為老闆與員工「爭大餅」的鬥爭，完全忽略了國際間的勞工競爭問題。促成加薪誠然是必要的方向，但若過度流於「民粹」，則有害無益。

讓我們先正名，了解「薪資」是什麼。在一個自由經濟的社會，薪資一定是勞動市場上由「勞動供給」與「勞動需求」兩方面所共同決定的。過去十幾年，台灣由於少子化等因素，勞動供給沒有明顯增加，許多基層勞力工作則由工資低廉的外籍勞工取代；因此，勞工薪資未能成長，應該是肇因於比較專精的勞動力需求不足。

然而，為什麼台灣廠商的勞動需求會不足呢？追根究柢，當然與台灣企業的全球競爭力有關。如果台灣的企業，家家都像台積電、聯發科、大立光、捷安特那樣具有卓越的全球競爭力，則企業不論在研發、業務、財會、生產方面，都會有極大的勞動需求，這些企業的勞工薪資也一定會水漲船高。但是，如果企業的生產沒有創新、沒有特色，在全球競爭的環境下，其所聘用的是沒有特色、且很容易被他人取代的本土勞工，薪資就會因為國際競爭力低而壓低，甚至向工資低廉的國家（如越南、馬來西亞、中國大陸）看齊。

因此，台灣當前的薪資凍漲，可以說是多年來因為「有特色」的創新性產業比率太低，以致其勞工需求不足；換個說法，也可以說是大多數沒有特色企業面臨全球化跨國勞工競爭的結果。台灣人薪資十五年不漲，大家都很憂慮；但是我們必須要了解：那是市場經濟運作的結果，一味責怪企業家或是搞民粹手法，並沒有實質幫助。

基本上，全球化形塑了一套「外部邏輯」，逼著各國依循這個邏輯走。例如，資本家全球到處可以設工廠，可以外包勞務；這項外部邏輯，逼得國內勞工很難向資方爭權益。全球各國都希望用優惠條件爭取資本家來設廠，這個外部邏輯也逼得各國政府拚命降資本家的稅，以求留住他們。簡言之，外部邏輯太強了，往往會壓迫各國的內部邏輯。

如果國內的民粹氛圍硬逼著企業主加薪，結果將如何？我們內部的民粹壓力，能夠扭轉前述企業特色創新不足、國際競爭力不夠的外部事實嗎？恐怕不然。在民粹壓力下，企業主也許可以忍受小幅加薪，但資本家絕不可能讓這類「被內部邏輯逼得加薪」的事成為常態。企業運作背後最大的動力，絕對是業主「逐利」的欲望。逼著企業家分紅，和逼他們繳稅一樣，都是要他們「賺一百吐出二十、三十」。如果政府逼資本家繳稅他們會出走，那麼為什麼逼資本家給員工加薪他們就不會出走？

全球化，就是指全世界形成一個大市場。而所謂全球化的外部邏輯，就是指全世界無所不在的市場機能，亦即所謂「世界是平的」。市場運作最重要的啟示，就是微小個人或微小國家很難獨自抗拒市場。微小個體最佳的因應之道，就是要嘗試「隨順而轉」：我們一方面順著市場機能因應，另一方面也在因應之時安排種種轉變與對策，尤其要營造創新和升級的機遇。

電影「白宮夜未眠」中有句精彩對話，大意是說：政客通常不解決問題，只激起焦慮，然後，把焦慮的責任推給對手或第三者。「勞工沒加薪是因為資本家獨吞了利潤」這句話，與白宮夜未眠的台詞其實有些相似。政客激起焦慮之後，資本家是否出走、企業科專研發會不會受到扭曲，政客都不會對後果負責的。如果台灣政治人物與決策官員的思路就只是掀起民粹或迎合民粹，那麼台灣今天的低薪與低成長困境，也就不必感到意外。