Improved mindset trumps ‘wage hike four’ in Taiwan
Lawmakers across the political spectrum in Taiwan are pushing for the so- called “wage hike four” — amendments to the Company Act, the Factory Act, the Labor Standards Act and the Small and Medium Enterprises Development Act — aimed at requiring businesses to increase salaries or share profits with employees.
If the proposed amendments are enacted, employers would be required to set up profit- sharing schemes or face a fine as high as NT$ 5 million. Meanwhile, SMEs will be able to claim 130 percent of the amount of raises given to their employees as deductible expenses on their taxes in the three years following the hikes.
Many of the public see these measures rightly as voter- pleasing gestures ahead of the 2016 presidential and legislator elections. Instead of supporting the amendments, labor groups including the Taiwan Confederation of Trade Unions and employee unions of the Taiwan Railway Administration, financial professionals and teachers are planning a demonstration on Labor Day in part to criticize the “wage hike four.”
Requiring and encouraging businesses to share their profits seems a reasonable improvement but the problem is the proposed bills are not able to achieve that in a meaningful way. The drafted bills do not set a specific ratio of the profit businesses are required to share, meaning that employers can circumvent the new requirement by sharing a very small amount of profits. More importantly, it is doubtful that the government will have enough resources to audit the huge number of non- listed companies that do not provide open financial information to the public, meaning that the new laws would only be meaningful to employees working in the roughly 1,700 listed firms in Taiwan.
Modeled after a similar measure in Japan, the proposed tax incentives are also unlikely to be effective in encouraging SMEs to increase pay as businesses in Taiwan are already paying low taxes ( 17 percent compared to over 30 percent in Japan). The taxes saved would not be enough for many to justify the increase in personnel expenses.
At best these measures can only tackle the symptoms of Taiwan’s wage stagnation, and only for a short period before local firms find their way around them.
The labor groups criticizing the “wage hike four” are offering four proposals of their own: the shortening of working hours, measures against overwork, pay raises and banning agency workers. These proposals will be more likely to benefit local workers in the midterm but to fix Taiwan’s wage stagnation in the long term one has to face the nation’s structural problems.
Many of the reasons behind wage stagnation are global and therefore beyond Taiwan’s control. One contributor to the nation’s sluggish wage increases, however, is unique to Taiwan: long- time negligence of added value in society in general. This mentality is prevalent among both employers and employees looking for “high cost- performance ratio” ( CP ) , a buzzword in Taiwan. Employers ( especially SMEs that hire most of Taiwan’s workers) are often looking for workers who come cheap, underestimating the importance of skillful workers for their businesses. It is not uncommon to find unskilled or demoralized employees in supposedly high- end restaurants in Taiwan that spend a fortune on decor.
Workers, on the other hand, are also overlooking added value in their job hunt. The popular saying in Taiwan is that the best jobs are those that “pay well, require light workload and are close to home.” Such a viewpoint means that jobs are appreciated on their financial merits and their lack of challenge.
Over time, the lack of aspiration among both local employers and employees leads to the loss of competitiveness among Taiwan’s businesses and workers at a time when entrepreneurship and a can- do spirit is increasingly important in the globalized world.
The government should promote long- overdue wage increases and the best way to do so in the short to mid- term is to empower workers with enforceable regulations. In the long term, however, the nation has to change its way of thinking.