Taiwan’s Minimum Wage Review Committee met last month and agreed to increase the minimum wage to NT$25,250 next year.
Around the time of these meetings, Taiwan’s business leaders have issued statements attempting to derail attempts to increase the minimum wage by spreading misconceptions and fear mongering.
I addressed ten of the bunk reasons cited for opposing minimum wage increases in a previous article. Here I’ll address some of the recent, specific comments from figures in Taiwan’s business lobbying groups, along with the expected economic and social benefits of raising the minimum wage.
When Taiwan’s minimum wage growth was higher, unemployment rate was also lower
General Chamber of Commerce chairman Paul Hsu has been insisting for the last few weeks that raising the minimum wage will result in the unemployment rate increasing. He even attempted to prematurely pin the blame on the Ministry of Labor for any increase in unemployment.
But as I explained in a previous article, there are several countries with a similar GDP per capita to Taiwan that have been increasing their minimum wage by as much as 10% to 17% annually. Yet they have seen their unemployment rates continue to decline, some to levels even lower than Taiwan.
So far under President Tsai Ing-wen, while the minimum wage from 2016 has increased, on average, at its fastest since 2000, the unemployment rate has declined to its lowest in 20 years.
In the years that Taiwan’s minimum wage grew at its fastest, from the late-1980s to the mid-1990s, the unemployment rate dropped to the lowest Taiwan has seen in recent times, to as low as 1.45%. In fact, the lowest unemployment rates actually coincided with the highest minimum wage increases.
The historical record shows that over the last few decades, in the years with the highest minimum wage growth, unemployment rates were actually also at their lowest.
Due to a shortage of workers in Taiwan, it is unlikely that businesses will reduce employment, and Hsu’s attempts to blame the Labor Ministry in advance shouldn’t be taken seriously.
Even after the minimum wage increase was announced, the number of workers on furlough fell by more than 5,000 last week, on the back of increased domestic demand.
Taiwan’s unemployment rate is already on the decline after successfully battling the Covid-19 pandemic
Hsu also warned that the service industry does not urgently need to hire workers due to the Covid-19 pandemic, and that increasing the minimum wage could result in higher unemployment.
What Hsu did not say is that since Taiwan managed to successfully contain Covid-19, the unemployment rate in Taiwan has actually been falling.
Not only that, in April this year, Taiwan’s unemployment rate had dropped to one of its lowest levels in the last two decades — to 3.64% in April. And while the unemployment rate did increase to 4.11% in May and 4.8% in June, it actually dropped back down to 4.53% in July and 4.24% in August, as Taiwan’s Covid-19 situation improved.
Even at its peak of 4.8% in June this year, Taiwan’s unemployment rate was still one of the lowest in the world.
Taiwan’s businesses have accumulated enough profits to see through wage increases
Hsu also said the manufacturing and service industries will not be able to bear the burden of increasing wages due to the Covid-19 pandemic, while National Association of Small and Medium Enterprises chairperson Li Yu-chia also claimed that small and medium-sized enterprises would not be able to manage minimum wage increases due to weak economic growth. What they failed to mention is the excessive profits Taiwan’s businesses have been accumulating over the last two to three decades.
A comparison with South Korea provides a vision of what’s possible for Taiwan. As I’ve written earlier this month, the minimum wage in South Korea has grown faster than profits since 1997, while minimum wage has instead lagged behind profits in Taiwan.
I’ve also discussed in a previous article how total wages in the European Union have also kept pace with total profits since 1995, while wages have instead fallen behind profits in Taiwan.
If Taiwan’s minimum wage had grown pegged to profit growth, Taiwan’s minimum wage would have grown to NT$40,000 to NT$50,000 this year.
The minimum wage of private sector workers should be increased to the same level as civil servants, to NT$30,000
Chinese National Association of Industry and Commerce chairperson Lin Por-fong has argued that the minimum wage for private sector workers should not be increased by 6% since civil servants were expected to only receive a 3% to 4% increase in their salaries.
Lin appears to be trying to use a divide and conquer strategy, playing interests of one cohort of workers off of another just to prevent an increase in wages for anyone. But he is also not fully forthcoming in talking about wage increases in terms of percentages.
The reality is that civil servants already earn a minimum wage of NT$30,235 a month, while private sector workers will still only earn a minimum wage of NT$25,250 next year.
If Lin really believes in ensuring equality for workers, then he would advocate to increase the minimum wage for private sector workers by 26% to NT$30,235 to be on par with civil servants.
Not raising the minimum wage hurts workers at all income levels
Another tactic used by business leaders is to divide workers by immigration status.
This tactic was recently deployed by General Chamber of Commerce leader Lai Cheng-I, who claimed that increasing the minimum wage will only benefit migrant workers earning lower wages, and that the minimum wage should therefore not be increased.
For one, this statement by Lai is discriminatory and he should apologize for it. Also, what about Taiwanese workers earning a minimum wage? Should they not earn higher minimum wages simply because Lai would like to discriminate?
As I wrote in an article last week, Taiwan’s median and average wage trends track very closely to minimum wage growth.
If Taiwan’s minimum wage were on par with the cost of living, it would be between the level of Spain and South Korea, at about NT$40,000.
As it is, about 30% of Taiwan’s workers earn less than NT$30,000 and about half earn less than NT$40,000.
Taiwan needs a plan to raise the minimum wage to catch up with the cost of living now
Taiwan is expected to see its highest rates of economic growth in a decade, along with one of the highest in the world.
There has also never been a better time to raise the minimum wage, yet perhaps just because of these expected profits, business leaders are irresponsibly and selfishly claiming it’s counter productive to do so.
Taiwan is actually not “cheap.” Taiwan’s grocery prices and housing prices are actually one of the highest in the world. Based on housing prices, Taiwan’s minimum wage should even be as high as NT$90,000 to NT$95,000 to be on par with other advanced countries.
With the absence of leadership from business leaders, it’s up to Taiwan’s government to act boldly and raise the minimum wage.
READ NEXT: 10 Misconceptions About Raising the Minimum Wage in Taiwan
TNL Editor: Nicholas Haggerty (@thenewslensintl)
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