Foreswear Political Struggle: Increase Living Wages
China Times Editorial (Taipei, Taiwan, ROC)
November 5, 2014
Executive Summary: Porter said that the Mainland is like a one ton gorilla sitting in
one's doorway. It gives Taiwan a terrific geographical advantage.
Taiwan's political struggles have affected cross-Strait economic
cooperation. The public on Taiwan should reach a consensus. Taiwan
should sign the STA and MTA as soon as possible. It must not allow
politics to undermine Taiwan's trade opportunities on the Mainland. The
service industries must expand onto the Mainland. Taiwan goods must
enter the Mainland tariff free. These will all raise wages on Taiwan.
Full Text Below:
Global competitiveness guru Michael E. Porter has taken Taiwan's competitiveness pulse. He said the problem is that salaries are too low. We agree. We call on society to acknowledge the problem. The government should implement countermeasures and propose improvements.
Porter came to Taiwan to lecture on the ISC competitive model, to analyze Taiwan's overall global competitiveness. In overall economic competitiveness Taiwan ranks 18 among 144 countries. This is an impressive showing. But Taiwan's per capita income ranking was a mediocre 60. On cross-strait economic and trade cooperation issues, Porter argued that Taiwan's cooperation with the Chinese mainland need not be limited to the FEPZs. It can also include purely economic cooperation. More importantly, political troubles must not be permitted to delay Taiwan's economic growth.
Since 2000, Taiwan's average economic growth has been 4.1%. Nominal wages have not risen for 16 years. Even taking into account inflation, this was a backwards move. But Porter also believes that Taiwan has a tremendous competitive advantage, and a well-trained workforce. To ensure a bright future for Taiwan, it must remain competitive. Taiwan's competitiveness and labor wage growth have slowed. This means that Taiwan has not done enough to upgrade its competitiveness. It has not met international standards.
The performance of Taiwan businesses in the international arena has been outstanding. Taiwan companies are thrifty. They lead their sectors in cost savings. Even when prices are low, they can still fill orders and eke out a profit. This is a result of the OEM model. Taiwan businesses win bids by lowering prices. Or they meet international companies' specifications through low overhead and lowball pricing. Taiwan companies quietly accept these tough conditions. The environment may become polluted. The documentary film "Beyond Beauty: Taiwan from Above" depicts a situation everyone is familiar with. Wages are driven down to achieve cost savings. As a result employees' salaries remain stagnant.
Taiwan's current industrial structure is mainly a case of “Taiwan fills the orders, but manufacturing is offshored.” Export orders in September of this year reached a record high. But the export orders to overseas production ratio also reached a record high of 56.6%. Production and investment on Taiwan has largely been offshored. Naturally this will not raise wages on Taiwan. Any capital gains accrue to the owners. As a result real wages have not increased.
Therefore Taiwan's industries must be upgraded and restructured. Profits from OEM production alone are quite meager. Mr. Stan Shih has long been aware of this. He has advanced a “smile curve theory” that describes the two ends of a product's life. The front end involves research and innovation. The back end involves marketing and branding. These tend to yield higher profits. Porter said wage increases on Taiwan were smaller than in neighboring countries. The average wage for labor has not risen. This means that industrial competitiveness has not improved. Business earnings must be shared with employees. That is social responsibility. Lowering wages is not profit, but exploitation. Taiwan companies should be able to make money. We should emulate Apple and Google. These top notch overseas companies offer both good products and good services.
Another problem is an oversupply of the same kind of employees on the market. Bosses will naturally be reluctant to pay high wages. How can one enhance employee ability? How can people make the most of their talents? How can a competitive staff help companies improve their performance? Taiwan's educational system is cultivating more and more generalists. The latest national survey of seventh and eighth grader found them interested in becoming cooks, bakers, hairdressers, and other beauty industry workers. Technical and vocational education on Taiwan was once provided mostly by “black hand bosses.” Their technical skills, practical experience, and small scale open market nature, made working for them the ideal training ground for SMEs.
But the technical and vocational education system has collapsed. The era of globalization has arrived. A stronger team is required. The government should bolster technical and vocational training. It should enable upgraded technical institutes to be more effective than the vocational schools of yesteryear. SMEs must expand abroad. They will need organized data and help in product promotion. This must all be put in place, enabling businesses to make money and offer their staff dividends. Large scale enterprises and government employees should have the same salary mechanism. This will enable price comparisons, and help raise wages for all industries.
The “Taiwan takes the orders, manufacturing is offshored” model must be reversed. The government should use tax and other incentives to encourage production on Taiwan. This will create jobs on Taiwan. It will ensure that the value added stays on Taiwan. Otherwise it merely creates employment opportunities for others. Money and profits are all hidden overseas. The sharks then return home and make a killing in real estate and the stock market. This is does not help development on Taiwan.
Porter said that the Mainland is like a one ton gorilla sitting in one's doorway. It gives Taiwan a terrific geographical advantage. Taiwan's political struggles have affected cross-Strait economic cooperation. The public on Taiwan should reach a consensus. Taiwan should sign the STA and MTA as soon as possible. It must not allow politics to undermine Taiwan's trade opportunities on the Mainland. The service industries must expand onto the Mainland. Taiwan goods must enter the Mainland tariff free. These will all raise wages on Taiwan.
全球競爭力大師麥可．波特（Michael E. Porter）替台灣競爭力把脈，點出問題出在薪資太低。我們贊成波特的觀點，呼籲社會應認清問題，政府應該圖謀對策，提出改進方法。