When thinking about the level a county’s minimum wage should be, it’s always important to keep in mind the cost of living. Only by factoring in costs of living can we get a true sense of whether a minimum wage is adequate to provide a decent material existence for workers—and not just for those earning the minimum wage. Simply put, higher costs of living require higher minimum wages for workers.
Luxembourg has the highest national minimum wage in the world. This minimum wage is also the most adequate for its cost of living, compared to other countries with official minimum wages. (The Nordic countries and other countries in Europe like Switzerland, Austria, and Italy, as well as Singapore, do not have national minimum wages, but collectively bargained minimum wage rates in various sectors.)
If we take Luxembourg as the standard in terms of minimum wage adequacy corresponding to the cost of living, the chart below shows how much the minimum wages of these countries should be (blue bars) as compared to the current level t of their minimum wages (yellow bars).
Taiwan’s current minimum wage is NT$25,250, but if Taiwan’s minimum wage were pegged to Luxembourg’s minimum wage corresponding to its cost of living, then Taiwan’s minimum wage would be NT$57,753, or 128% higher.
Below, countries are charted according to how adequate their minimum wages are as compared to their optimal minimum wages. The collectively bargained minimum wage rates of hospitality workers in the Nordic countries and Switzerland, and the minimum wages in Australia and New Zealand, are the most adequate. Other Western European countries have minimum wages about 10% to 20% lower than their optimal level, if pegged to Luxembourg.
The Eastern and Southern European countries have minimum wages of about 25% to 50% of their optimal minimum wage, but these countries have also been seeing the fastest increases in their minimum wages in the last few years, in order to catch up.
Compared to its cost of living, Taiwan’s minimum wage is 56.3% lower than the optimal amount that its minimum wage should be.
When comparing the inadequacy in terms of nominal wages, Taiwan’s minimum wage is about NT$32,000 lower than its optimal level.
The most unequal advanced countries — the U.S., Israel, and Singapore — have the largest gaps, while Japan’s economic stagnation has also resulted in its depressed minimum wage. While Singapore has the least adequate minimum wage, it last year implemented a plan to 2028 to increase the minimum wages in certain sectors. Taiwan’s inadequate minimum wage puts it alongside this group of countries, making it one of the least adequate among advanced countries.
Additionally, not only is Taiwan’s minimum wage highly inadequate for its cost of living, Taiwan’s income inequality is also one of the highest among the advanced countries. As you can see in the chart below, the U.S., Singapore, Israel, and Taiwan also have among the highest levels of income inequality.
Beyond the Gini coefficient comparison shown above, the gap between actual and optimal incomes also gives an indication of how unequal a country can be.
The chart below shows that there is a correlation between income inequality and actual versus the inadequacy of the minimum wage. If we exclude the anomalies (Czech Republic and Slovakia), we can see that countries that have more adequate minimum wages also have lower income inequality.
Taiwan’s Minimum Wage Has Stagnated
Taiwan’s minimum wage has languished to such an extent that it is no longer adequate for the cost of living. In 13 of the 25 years since the 1997 economic crisis, Taiwan’s minimum wage did not grow.
Since 1996, Taiwan ranks as the advanced country with the second highest number of years in which the minimum wage saw zero increases.
Taiwan had only four years in which the minimum wage increased by 5% or more. Luxembourg, France, Australia, the Netherlands, and Belgium have fewer years with increases of 5% or more, but their minimum wages are also the highest in the world and more adequate for their cost of living. But Taiwan’s minimum wage is one of the lowest, and also one of the slowest to grow.
While Japan did not see any years with more than 5% in minimum wage increases, it also did not see years with zero increases. In addition, Japan’s minimum wage grew faster in relation to its economic growth while Taiwan’s minimum wage did not keep pace with growth.
In spite of 13 years without a minimum wage increase, Taiwan also had no “catch-up” years in which the minimum wage grew by more than 10%, which has prevented its minimum wage from catching up as fast as the United States and Israel.
Since 1996, Taiwan’s minimum wage has only grown by 1.70 times. Japan’s minimum wage has grown the slowest but unlike Taiwan, its minimum wage grew faster than the economy, and is more adequate for its cost of living than Taiwan.
Taiwan’s Minimum Wage Needs to Grow Much Faster
As mentioned, under President Tsai Ing-wen, Taiwan’s minimum wage has increased at a faster rate than it had under presidents Chen Shui-bian and Ma Ying-jeou.
But because of how far the minimum wage was depressed under the two former presidents, Taiwan’s minimum wage today has fallen behind that of other advanced countries.
Not only that, Taiwan’s cost of living is also not cheap. It is more expensive than countries with similar minimum wages, and its groceries and housing prices are also one of the most expensive in the world.
Given the high costs, Taiwan’s minimum wage is therefore severely inadequate for its cost of living.
If Taiwan’s minimum wage had grown as fast as the annual rate under President Tsai Ing-wen from 1997 when minimum wage started stagnating, then Taiwan’s minimum wage would have grown to NT$41,767 today, or about where it should be if it is to be commensurate to the country’s cost of living.
But as it is, Taiwan’s median wage today is only NT$41,750 a month, which means that half of Taiwan’s workers are earning less than what they need to have a basic standard of living in the country.
Based on the rates of growth of the minimum wages in the last 10 years, if we compare Taiwan with similar emerging economies, Lithuania’s minimum wage will likely overtake Taiwan next year, while Estonia will overtake Taiwan in 2026, and Slovakia and the Czech Republic in 2027.
If Taiwan is to follow in the growth rates of the Eastern European countries, minimum wage could grow to NT$40,000 by 2026 if following Lithuania’s growth rate, by 2028 if following Estonia’s growth, by 2029 if following Slovakia and the Czech Republic’s growths, and by 2030 if following Latvia’s growth.
Based on Taiwan’s current growth rate, minimum wage would grow to only NT$31,997 in 2030 and NT$40,548 in 2038, but this should be the minimum wage Taiwan needs to have today to be adequate for the cost of living. But Taiwan’s workers will only be able to see this amount 16 years later based on the current rate of growth.
In light of how the median wage is pegged to the minimum wage in Taiwan, this has also meant that workers in Taiwan across the board have also not been able to see their livelihoods uplifted. Meanwhile, prices have kept increasing in Taiwan.
Given that Taiwan has one of the world’s highest prices in groceries and housing, this puts the lives of workers in a yet more precarious position.
In order to enable Taiwan’s minimum wage to be adequate to ensure a basic standard of living for Taiwan’s citizens and workers, Taiwan’s government needs to implement a concrete plan to spike up its minimum wage in the next few years.
Prolonging this problem will lead to further social problems and unrest, which will impede on Taiwan’s ability to strengthen its national security and democracy. Solving the minimum wage problem cannot be delayed any longer.
READ NEXT: Lithuania’s Minimum Wage Is More Adequate for Its Cost of Living Than Taiwan’s
TNL Editor: Nicholas Haggerty (@thenewslensintl)
If you enjoyed this article and want to receive more story updates in your news feed, please be sure to follow our Facebook.
