On September 8th, the Basic Wage Deliberation Committee will be convening its annual meeting to review the new level of the minimum wage for the year 2024. The latter part of the article explains the fringe benefits that increasing the minimum wage will bring to Taiwan’s society.
On September 8th, Taiwan’s Basic Wage Deliberation Committee under the Ministry of Labor will be meeting annually to review the new level of minimum wage in 2024.
In the first part of this article, we saw that increasing the minimum wage will enable Taiwan’s wages as a whole to rise, thereby raising domestic consumption and profits, and the overall economy. Raising the minimum wage more rapidly also reduces unemployment and increases consumer confidence, as well as ensuring greater revenue for Taiwan’s social insurance programs. Faster increases to the minimum wage will also enable Taiwan to develop more diversified and innovative industries, and become one of the most powerful countries in the world.
In the second part of this article, I will look at the other benefits that increasing the minimum wage will bring to Taiwan’s society.
11) Taiwan’s fertility rate may rise
When we track minimum wage growth with fertility rate, we can see that up until the mid-2000s, as the growth of Taiwan’s minimum wage started slowing down, the fertility rate also declined. The chart below uses 7-month rolling averages to better illustrate the trend.
Data source: Minimum wage, fertility rate
However, as minimum wage growth started gaining pace, Taiwan’s fertility rate also started seeing faster growths.
As such, when the minimum wage is increased at a faster rate and wages at other wage levels rise, couples may find it more affordable to raise families, and thereby help to boost Taiwan’s fertility rate.
12) Encourage more Taiwanese to return to Taiwan to work
In the first part of this article, we saw that as the minimum wage rises, the total wages in the economy will rise as well. And in the chart below, we can see that in the last decade or so, when the growth in Taiwan’s total wages grows faster, fewer Taiwanese would go abroad to work. But when Taiwan’s minimum wage slows, more Taiwanese would move abroad to work. (The change in the number of Taiwanese working abroad is charted on an inverted axis below for easier comparison.)
As such, raising the minimum wage, and thus total wages, more rapidly could restore the confidence of Taiwanese in the economy to enable them to earn higher wages, and thereby encourage them to return to contribute to Taiwan’s economy.
Data source: Total wages, number of Taiwanese working abroad
13) Enable households to better afford household items
Due to Taiwan’s minimum wage stagnating, and thereby the average wage as well, this has resulted in households being less able to afford household items. For example, in terms of the percentage of households who are able to afford cars, as the growth of Taiwan’s average wage declined, the growth in the percentage of households who can afford cars have also declined.
Data source: Average regular wage, percentage of households with cars. Note: The charts in this comparison include data up until 2019, so as to illustrate the general trend prior to the Covid-19 disruptions.
When comparing with other advanced countries at a similar level of economic development, we can see that the percentage of households in Taiwan who were able to afford cars were previously growing at a similar rate as these countries, but after the 1997 economic crisis when Taiwan started to suppress wage growth, the percentage of Taiwan’s households who could afford to do so started to stagnate.
Meanwhile, the other countries continued growing their wages at a faster rate, and more households are able to afford sedan cars.
Data source: Taiwan, South Korea, other countries
We can see the same pattern when looking at the percentage of households who can afford personal computers – while more and more households are able to own personal computers among the advanced countries, the percentage of households in Taiwan who are able to do so has been declining since the 2010s.
In order to ensure Taiwanese households are able to afford household items, some of which like personal computers are crucial for personal growth and development, raising Taiwan’s minimum wage will enable them to better do so.
14) Reduce income and wealth inequalities
Since 2012, the income gap between the 1st quartile and 3rd quartile of Taiwan’s wage earners have widened. In 2012, the 3rd quartile income earner earned NT$29,750 more than a 1st quartile income earner a month.
By 2021, the income gap has grown to NT$33,167.
Data source: Taiwan’s National Statistics
When comparing in terms of households, the average disposable incomes between the top 20th and bottom 20th of households have also grown to their widest level in Taiwan today – the average disposable income of the top 20th household is NT$1,847,09 higher than that of the bottom 20th household. In fact, in the last 15 years or so, households in the bottom 20th have not been able to save and have been living in debt.
Raising the minimum wage at a faster rate would give an added boost to workers at the bottom and enable the wealth gap to close, as well as allow households at the bottom to earn enough to pay for their most basic needs, and live with dignity.
Data source: Directorate General of Budget, Accounting and Statistics (DGBAS)
15) Enhance trust among Taiwanese
In the chart below, we can see that among countries which are more unequal, there is also less trust among people.
Taiwan’s wealth inequality is higher than Japan and South Korea, and there is also a lower proportion of people who trust others; Taiwan in fact has one of the lowest trust levels among the advanced countries. When there is greater inequality, the social distance between individuals in society is greater, this results in a lack of understanding among individuals, which then leads to greater distrust. Research also shows how among more unequal countries, there would be higher crime rates and more health problems, such as mental health issues.
Increasing the minimum wage and reducing economic inequalities can help to restore trust among individuals, as well as enhance social well-being.
Data source: wealth inequality, trust
16) Enhance support for democracy
Among the advanced countries, in countries with higher GDP per capita, citizens are also more likely to support democracy. Taiwan’s GDP per capita is comparatively low, and its support for democracy is therefore also low.
As we saw in the first part of this article, higher wage increases lead to higher GDP per capita, and it also increases consumer confidence. Where individuals earn higher wages, it gives them the confidence that their country’s democracy is working for them, which leads to greater support in democracy.
This is especially important for a young democracy like Taiwan which is still in an ongoing democratic transition, and where a part of the electorate still reminisce about the authoritarian past and believe that it had brought about greater economic wealth in the past.
In order to regain trust and support for Taiwan’s democracy, raising the minimum wage to a level that can ensure greater well-being for individuals would lead to them developing greater belief in the power of democracy to address their livelihood concerns.
Data source: GDP per capita, support for democracy
17) Restore wage equality between public and private workers
The average wages of Taiwan’s public sector workers are not publicly disclosed, but based on the publicly-available information, Taiwan’s public servants earned nearly twice as much on average as private-sector workers in 2006 and 2007. Last year, the median starting salary of public sector workers was also 30% higher than that of all workers.
By increasing the minimum wage of private sector workers to a level more in line with public sector workers, this would enable workers in Taiwan to earn more equal pay, as well as reduce wealth inequalities and other social problems.
Data source: Public sector average salary, private sector average salary, median starting salary
18) Enable young graduates to earn higher starting salaries
One argument used by detractors against raising the minimum wage asserts that the minimum wage does not need to be raised as it affects only migrant workers, and does not affect other workers.
However, for the starting salaries of Taiwan’s young graduates, there are about a quarter of them who earned only the minimum wage of NT$25,250 a month in 2022.
Data source: Taiwan’s Ministry of Labor
By sector, over 30% of young workers in most service sectors earned only the minimum wage for their starting salaries, such as those in the accommodation and food, wholesale and retail trade, and the arts and recreation sectors.
Even among the manufacturing, and health and social work sectors, about 15% of young graduates earned only minimum wage for their starting salaries.
In fact, for the starting salaries of the first decile of workers, workers in the majority of sectors earned only NT$25,000.
Note: The starting salary figures in the Ministry of Labor’s report are rounded to the nearest thousand.
As for median starting salaries, workers in all sectors earned less than NT$35,000 except for those in the public sector, who earned NT$39,000 a month.
In fact, half of the workers earned a starting salary of less than NT$30,000
Even when comparing by educational level, even workers who have a university degree were only earning about the minimum wage at the 1st decile and 1st quartile for their starting salaries.
As for the median salary, the starting salary of junior high and senior high schools and that of vocational schools was only about minimum wage, while that of university graduates was only NT$30,000.
In other words, as long as Taiwan’s minimum wage remains low, fresh graduates will not be able to earn higher salaries, and many of them will only be able to earn a low wage at the level of the minimum wage. For those earning above minimum wage, as long as the minimum wage is too low, their wages will also be dragged down by a low minimum wage.
As we saw in the first part of this article, the growth of the median wage follows that of the minimum wage, and as long as minimum wage stagnates, then median wage will also stagnate.
Raising the minimum wage more rapidly will ensure that young graduates can also earn higher starting salaries.
19) Workers will earn enough to have a basic decent standard of living
Based on the Numbeo cost of living estimator, individuals living in Kaohsiung and Taichung would need a minimum income of about NT$35,000 a month to have a basic standard of living when accounting for housing mortgages.
Further up north in Taipei and New Taipei, workers would need to earn a minimum income of about NT$65,000 to have a basic standard of living, due to Taiwan having one of the highest housing prices in the world.
Data source: Numbeo. The housing mortgage used for this comparison is based on 60% of the mortgage data on Numbeo, based on the lower estimates of mortgage data on the website.
However, there are still a fifth of Taiwan’s full-time workers who earned less than NT$30,000 a month in 2022.
Data source: Directorate General of Budget, Accounting and Statistics (DGBAS)
There were also over 30% of private sector workers who earned less than NT$33,167 a month, and half who earned less than NT$42,167, even when accounting for bonuses and overtime. In other words, at least 30% to half of Taiwan’s private sector workers are earning poverty wages and who are not able to afford to meet all their basic needs. This also explains why the bottom 20th of the households in Taiwan have not been able to save for the past 15 years or so and are living in debt, as we saw above.
However, the minimum wage is only expected to be increased to about NT$27,250 to NT$27,653 next year, which will still be vastly inadequate for a basic standard of living in Taiwan.
In order that all workers are able to earn a wage that is adequate for their basic needs and to enable them to live decently, then Taiwan’s minimum wage would need to be raised by at about 32.5% to NT$35,000 a month, from the minimum wage of NT$26,400 today.
Moreover, the wages at other wage levels follow closely to that of the minimum wage, as we can see in the chart below, how the lines at different wage levels parallel one another. As such, as long as Taiwan’s minimum wage stagnates, then the wages of workers at other levels would also stagnate.
Only when the minimum wage is raised more rapidly, will workers at other wage levels be able to earn higher salaries as well. All workers in Taiwan should thus support higher wage increases, so that their own wages will rise faster as well.
Data source: Taiwan’s National Statistics
20) Enable average wages to grow faster
From 2013 to 2021, Taiwan’s minimum wage grew by an average of NT$580 a year while its median wage grew by an average of NT$593. Thus, the growth of median wage actually follows closely to that of minimum wage, as can be seen in the chart below, where the gradients of the lines are similar. Even so, the average worker feels that the minimum wage growths do not affect them.
The reason is because the percentage change in minimum wage is calculated at a lower base, which explains its higher percentage increase. For example, in 2015, both the minimum and median wage increased by a similar amount – minimum wage increased by NT$735 from NT$19,273 to NT$20,008, while median wage increased by NT$750 from NT$37,833 to NT$38,583. But in terms of percentage increase, the minimum wage increased by 3.8%, but the median wage increased by only 2.0%. The minimum wage has a higher increase because it is calculated from a lower base figure of NT$19,273, while the median wage increase is lower because it is calculated from a higher base figure of NT$37,833.
Data source: Minimum wage, median wage
When comparing with South Korea, the minimum wage and median wage also increased by similar amounts in 2016, by NT$2,319 and NT$2,366 respectively, while the percentage increase in that year was 8.1% and 4.0% respectively. The percentage increase of the minimum wage is higher than that of median wage, even though both increases at dollar value are similar.
In other words, in order for the median wage to be increased by a higher rate, then the minimum wage would also need to be increased by a higher rate. If workers at other wage levels want to receive higher wage increases, they should therefore also support higher minimum wage increases.
Data source: Minimum wage, median wage
How Can Taiwan Raise Its Minimum Wage More Rapidly?
Among other manufacturing countries which have depressed their minimum wages like Taiwan, they have realized the folly of their actions, as their economies stagnate due to the suppressed wages, and have therefore implemented plans in the last year to increase their minimum wages.
This year, Germany raised its minimum wage by 22%. Ireland implemented a four-year plan which could see its minimum wage increase by 30% by 2026. Under Singapore’s six-year plan, the minimum wages of cleaning workers will go up by 84% by 2028, while the minimum wage for security workers will jump by 145%.
Data source: How Should Taiwan Learn From Other Countries in Increasing the Minimum Wage? (Part 1)
If Taiwan were to follow in their footsteps, Taiwan’s minimum wage could go up to about NT$32,000 next year if it were to be increased by 22% like Germany. Following Ireland, Taiwan’s minimum wage could go above NT$40,000 by 2027. If following Singapore’s cleaning sector, Taiwan’s minimum wage could surpass NT$50,000 by 2029, or even reach close to NT$65,000 by then, if following Singapore’s security sector.
In other words, there are many examples of how Taiwan’s minimum wage could be increased in order to ensure Taiwan’s workers can earn enough to afford a basic and decent standard of living in the country.
The main question is whether there is political will and whether Taiwan’s policymakers understand the urgency of the issue, as well as whether Taiwan’s policymakers are willing to get their act together to implement meaningful policies to benefit Taiwan’s workers.
Taiwan’s minimum wage has been stagnant for the past two to three decades, which has resulted in its economy stagnating behind other advanced countries. This has also led to a stagnation of Taiwan’s innovation and dynamism. On top of that, the profits of Taiwan’s domestic businesses have also stagnated, and the low wages have also led to social problems and a lack of confidence towards whether Taiwan’s democracy is able to solve these problems.
But as this article shows, raising the minimum wage has tremendous positive benefits for Taiwan’s economy and society, and it is time Taiwan’s policymakers take a hard look at the data, and start implementing a clear plan to raise Taiwan’s minimum wage to ensure it can meet the basic needs of individuals, and to enable Taiwan’s economy to recover from the last few decades of stagnation.
As Taiwan’s next presidential election draws near, a new vision is needed to transform Taiwan based on boosting wages to grow the economy. The presidential candidate who has such foresight will win the most support from Taiwanese.
READ NEXT: 20 Reasons Why Hiking the Minimum Wage Is Good for Taiwan (Part 1)
TNL Editor: Kim Chan (@thenewslensintl)
If you enjoyed this article and want to receive more story updates in your news feed, please be sure to follow our Facebook.
