President Ma urges wage increases to close income gap

There exists a large group of blue- and white-collar workers in Taiwan that works hard all day, but is barely able to eke out a living to cover their basic needs. This is the “new poor”, according to Taiwan Panorama magazine. 

The average monthly income for workers (including their average salary and non-regular income such as bonuses and dividends) rose from NT$40,842 (US$1,276) in 1999 to NT$42,176 (US$1,405) in 2009. This is only a tiny increase of 0.32 percent in ten years. Although in recent years, average salaries have stagnated or even regressed, the average number of working hours per month has increased from 183.9 hours in 2007 to 191.1 in 2009. This figure is the second highest  in the world, only behind the number of hours worked in South Korea.

According to Taiwan Panorama, economist Chou Tien-cheng said that Taiwan’s nominal average GDP grew at a rate of 2.89 percent during the ten years from 1999 to 2009, which is not satisfactory but passable, while workers’ wages only grew 0.58 percent, lagging behind economic growth.

The largest weighted catagory in the GDP figure is paid employment. The proportion of paid employment gradually increased in the 1980s, reaching a record high of 51.7 percent in 1990. Then it started a slide, reaching a low point of 45.55 percent in 2007 while the proportion of business profits grew. This means that business owners either reserved their earned profits for future investment, are keeping it, or are distributing it as dividend to shareholders. By no means are they sharing it with their employees, explained the Directorate-General of Budget, Accounting and Statistics.

In addition to the emergence of the “new poor”, the gap between rich and poor in Taiwan continues to widen. The United Daily News reported that  Ministry of Finance statistics reveal that the average annual income of the highest income group in 2009 was nearly NT$2.81 million (US$93,600), while that of the lowest income group was only NT$99,000 (US$3,300). The gap was 28 times, a record high in Taiwan.

The Ministry of Finance noted that the data analysis from income tax returns showed a widening wealth distribution gap. The downward trend in the income of the nation’s poorest was the main contributor to this  gap.

According to the Commercial Times, Jennifer Wang, Minister of the Council of Labor Affairs said the government would raise the minimum wage by at least 3 percent in July. About one million low income  Taiwanese workers will benefit from this increase.

Hu Sheng-cheng of Academia Sinica said there are several feasible policies for the government to adopt to reduce the gap between the rich and poor. For the medium and long term, of course, the government should be committed to the restructuring of industries to improve productivity and the value-added commodities.  In the short term, the most direct way is to reform the tax system is to level capital gains on real estate and securities transactions, according to the Apple Daily.

On April 28, President Ma Ying-jeou said that the Executive Yuan has decided to give all civil servants a 3 percent pay rise. The government is the largest employer in Taiwan, reported the Taipei-based China Times. Now that the country’s largest employer will give a pay rise, President Ma hopes that businesses will follow suit. He pointed out that the government has lowered business income tax since last year, from 25 percent to 17 percent, inheritance tax from 50 percent to 10 percent, and also increased the amount of the standard deduction. So the government has played its part in providing corporate tax help to businesses, which in turn should help to take care of the income of their employees.

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