Im­proved mind­set trumps ‘wage hike four’ in Tai­wan

The China Post - - COMMENTARY -

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.

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