Raise Wages by Increasing Competitiveness
China Times editorial (Taipei, Taiwan, ROC)
May 14, 2014
Summary: Labor Minister Pan Shi-wei suggested that the Legislative Yuan consider
implementing a "region-based minimum wage." This provoked opposition
from local government officials and labor groups. Minister Pan
subsequently clarified. He said he was referring to the living wage. His
clarification was followed by a regularly scheduled Ministry of Labor
press conference, which stated that the minimum wage would apply
everywhere. Local governments would establish living wages based on
Full Text Below:
Labor Minister Pan Shi-wei suggested that the Legislative Yuan consider implementing a "region-based minimum wage." This provoked opposition from local government officials and labor groups. Minister Pan subsequently clarified. He said he was referring to the living wage. His clarification was followed by a regularly scheduled Ministry of Labor press conference, which stated that the minimum wage would apply everywhere. Local governments would establish living wages based on local conditions.
Wages and salaries have long been a national concern. Average salaries have not increased in 16 years. This has led to complaints that "Low wages are a national embarrassment." Demands for salary increases are ubiquitous. The question is how. The key is the correct government policies and the correct social attitudes.
First, the Ministry of Labour quickly corrected itself. This should exempt it from any futile "spittle war." When Sean Chen was premier, the government began planning for free trade zones. At the time many advocated "virtual offshoring" inside these zones, so that foreign workers' salaries could be delinked from the minimum wage. This was intended to help companies save on labor costs, But opposition by labor groups and the CLA made this impossible.
Labor groups cited a substitution effect. Foreign labor would replace local labor. Local labor employment conditions would deteriorate. Local labor job opportunities would diminish. The CLA said labor relations and labor rights were universal values. It stressed that foreign workers must receive the same minimum wages. Delinking the two would violate labor rights. The government had to uphold non-discriminatory minimum wage guarantees
But the distinction between the minimum wage and a living wage is essential. The former takes care of disadvantaged workers on the bottom rungs of the labor force. It ensures that they have the required minimum purchasing power. All employers should offer more than just the minimum wage. Failure to do so is illegal. The minimum wage is established and adjusted by the Ministry of Labour Temporary Advisory Committee. It is consistent throughout the country. But local governments can set living wages based on local characteristics, prices, employment data, and life styles. This can ensure competition and avoid current economic stagnation.
Comptroller data shows that the 2012 national average monthly consumption expenditure per capita was about the same as the minimum wage. They were 18,774 NT and 18,780 NT respectively. This suggests that our national minimum wage is reasonable. But a considerable gap remains between the city and the country. In Taipei, consumer spending is 135% of the minimum wage. In Yunlin County its is only 74%. Wages are different in different regions. Higher wages or wages in excess of the minimum wage will exist. We are not labeling counties in central and southern Taiwan as poor. We are merely presenting the facts. In the central and southern regions life is slower paced and healthier. In Taipei and New Taipei life is hectic. Taipei and New Taipei have higher living wages. To some extent this is compensation for poorer working conditions and higher living costs.
When living wages are different throughout the country, local leaders can take advantage of the differences to make economic breakthroughs and pad their resumes. Local governments can seek government subsidies or public works projects to provide workers with a living wage higher than the minimum wage. They can rely on their own fiscal efforts to attract investments by means of local tax policy. In the wake of economic development, local prosperity, and tax increases, they can then offer employees higher wages. When the relevant enterprises and government salaries change, private sector companies will be pressured to follow suit. The result will be a virtuous cycle of rising wages.
Wage earners should be able to earn better wages. During a recent discussion, New Taipei Mayor Eric Chu called on companies to pay more in taxes if they failed to increase salaries. Taipei Mayor Hau Lung-bin argued that increases in the minimum wage should not be limited by increases in the consumer price index. Both were moves in the right direction. Over the past 10 years, only once has the Republic of China's CPI risen more than 3%. Obviously the mechanism is slow to respond. The government must implement a more proactive system.
The Mainland authorities' minimum wage system was created in 2003. Back then the minimum wage on Taiwan was seven times that on the Mainland. Over the past 10 years, the Mainland authorities have raised the minimum wage more than 10% each year. Cumulatively, they have raised it to over twice its original rate. Taiwan authorities, by contrast, have increased the minimum wage by only 10%. The two sides' minimum wages are getting closer and closer. The current minimum wage on Taiwan is merely two times that on the Mainland.
The relationship between economic growth and wage growth is not a one-way street. Over the past 20 years, Taiwan used the labor dispatch system. This greatly reduced government and corporate personnel costs. Businesses were not subject to salary pressures. Cost savings led to growth. Bosses became accustomed to earning easy money. They were no longer under pressure to upgrade and innovate in order to add value. Such thinking must be changed.
Eric Chu said the key problem on Taiwan is the "distribution of wealth." We agree. The government has recommended corporate tax cuts as carrots. But only amending the tax system will provide a root cure. The tax system should take into consideration a company's employee hiring practices and employee salaries. These should become important indicators of corporate social responsibility. We look forward to harmonious labor relations, to dedicated employees who serve the company out of a sense of duty, and to bosses who regard employees as assets, and offer them a share of the company's profits. Such changes could enable Taiwan to experience a rebirth.
2014年05月14日 04:10 中國時報 本報訊