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Talk of the Day -- Will wage hike dampen GDP growth?

2012/09/13 22:21:47

Minister-Without-Portfolio Kuan Chung-ming voiced opposition Wednesday to a proposal to raise the minimum monthly wage to NT$19,047 (US$643.48) from next year.

Kuan, a National Taiwan University finance professor-turned official, said that faced with an unfavorable economic environment, the government should not let annual adjustment of the minimum wage become a routine.

Such a practice would not only hurt local industries but could also hinder the government's efforts to revitalize the sluggish economy.

Taiwan raised the minimum monthly wage from NT$17,280 to NT$17,880 Jan. 1, 2011 and again adjusted it upward to the current NT$18,780 at the beginning of this year.

Kuan's opinion immediately drew strong protest from labor groups. Hung Ching-shu, director of the Taiwan Labor Front's research department, said the Executive Yuan should replace Kuan because his view reflects his lack of understanding local wage earners' hardship.

"His way of thinking would lead to repetition of previous mistake that the fruits of economic growth were monopolized by a few people," Hung said.

The following are excerpts from the local media coverage of pros and cons of minimum wage adjustment:

Commercial Times:

The Minimum Wage Review Committee passed a proposal Aug. 8, calling for a 1.42 percent increase in the minimum monthly wage to NT$19,047 from Jan. 1, 2013 and a two-stage hike in minimum hourly wage. In the first stage, the hourly wage will be raised from the current NT$103 to NT$109 and be further raised to NT$115 in the second stage.

The Council for Labor Affairs referred the proposal to the Executive Yuan for approval in late August.

After two weeks of consideration, Premier Sean Chen asked senior Cabinet officials to express opinions about the proposal.

Cabinet sources said Kuan voiced strongest opposition to the upward adjustment plan.

In the end, Chen directed Kuan and another minister without portfolio, James Hsueh , to co-host a meeting to review the proposal next week.

Kuan said Wednesday he was very skeptical of the appropriateness of implementing such a plan under the current economic situation.

He also voiced opposition to call a minimum wage review meeting annually. In his view, such a meeting should be held once every three years.

Kuan further said it's not a good idea to peg minimum wage adjustment to the Consumer Price Index (CPI). Such a practice would add pressure on local companies and even dampen domestic economic growth. (Sept. 13, 2012).

United Evening News:

Deputy Labor Minister Pan Shih-wei said Thursday the minimum wage adjustment proposal was worked out after extensive discussions among representatives of labor and employers groups as well as officials scholars.

Moreover, the minimum wage regulations only aim to protect low-end laborers' rights, Pan said, adding that the policy will be no means affect local companies' competitive edge.

Responding to criticism from labor groups, Kuan said he was only expressing his personal opinions. Labor groups are also free to voice their views and it's up to the premier to make a final decision, Kuan said.

Labor Minister Wang Ju-hsuan said the Council of Labor Affairs will definitely do its utmost to protect rights of grassroots workers. (Sept. 13, 2012).

(By Sofia Wu)