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Wage hike will have minimal effect on companies' profitability: NDC

2018/08/18 19:56:14

Taipei, Aug. 18 (CNA) The Taiwan government's decision to increase the country's minimum wage next year will have little effect on the bottom line of enterprises, according to the National Development Council (NDC).

NDC deputy head Cheng Cheng-mount (鄭貞茂) said Friday that the minimum wage hike is expected to raise operating costs in the business sector by about NT$39 billion (US$1.27 billion) in total a year, which is an insignificant amount.

In 2017, listed companies in Taiwan raked in a record NT$2.2 trillion in combined profit, he said, responding to cost concerns raised by the Chinese National Federation of Industries after the Ministry of Labor (MOL) earlier in the week decided to raise the minimum wage.

The federation said it was particularly worried about the wage hike impact on the local labor market and on small and medium sized enterprises, which are vulnerable to rising labor costs.

In a meeting with representatives of labor unions and business groups Thursday, the MOL decided to raise the monthly minimum wage by 5 percent from NT$22,000 to NT$23,100, and to increase the hourly minimum wage by 7.14 percent from NT$140 to NT$150, with effect from Jan. 1, 2019, pending Cabinet approval.

Cheng said it was a conservative increase, based on evaluations of workers' needs and employers' ability to pay higher wages.

The minimum wage hike will improve the welfare of workers, which in turn will boost consumption to the benefit of the business sector, he said.

Expressing similar views, Chu Tzer-ming (朱澤民), head of the Directorate-General of Budget, Accounting and Statistics (DGBAS), said the wage hike will lift Taiwan's 2019 gross domestic product by about 0.06 percentage points on higher consumption.

He said the wage increase will boost the country's consumer price index (CPI) growth by 0.04 percentage points in 2019.

On Friday, the DGBAS forecast Taiwan's economic growth for 2018 at 2.69 percent and for 2019 at 2.55 percent, and its CPI growth in 2019 at 0.93 percent.

Meanwhile, Deputy Economics Minister Kung Ming-hsin (龔明鑫) said his ministry will provide assistance to small and medium sized enterprises help improve their competitiveness as they seek to deal with higher operating costs.

He said the wage hike is expected reduce the rate of return among local food and beverage business by no more than 0.24 percentage points from the current 11 percent on average.

(By Pan Tzu-yu, Liao Yi-yang and Frances Huang)