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China Times: Low salary problems

2015/12/21 13:10:01

The low salaries paid to Taiwan's quality talent have become a constraint on the country's economic growth.

The annual International Institute for Management and Development (IMD) World Talent Ranking for 2015 showed Taiwan at 23rd among the 61 countries or areas listed, which was an improvement from 27th last year. But in the sub-indicator of brain drain, Taiwan remained at 50th, same as last year, which indicated a dearth of skilled personnel.

The Global Talent 2021 survey by business consultancy Oxford Economics has predicted that by 2021, Taiwan will become the most talent deficient country among the 46 in the survey, due to a brain drain and its failure to attract foreign talent.

Low salaries are the main factor driving the outflow of talent from Taiwan. The issue of adjusting the salary structure in the country to deal with the problem should be a major concern for both the ruling Kuomintang and the opposition Democratic Progressive Party.

From a short-term perspective, Taiwan workers have seen a slight increase in salaries this year. According to the Directorate General of Budget, Accounting and Statistics (DGBAS) data, the average monthly wage of workers stood at record high NT$38,631 in the first three quarters of this year, a 1.36 percent increase year-on-year.

However, from a long-term perspective, the country is plagued by a long standing problem of wage stagnation resulting from conflicting economic and talent development policies.

To address the issue, the relevant parties will have to take an encompassing view of the situation.

First, it should be understood that salary levels are unrelated to short-term economic growth. The key economic data released so far this year points to a weak economy. However, these statistics can be misleading and some of the facts behind the figures are often ignored.

Taiwan's economic downturn this year has been linked to a steady drop in its exports due apparently to the growth of China's red supply chain. However, the weak exports may actually be a result of the sluggish global economy, falling oil prices and depreciation of the Taiwan dollar.

In fact, companies listed on the local main board and the over-the-counter (OTC) market saw improved profitability in the first nine months of the year, with more than 1,550 of them posting NT$1.5 trillion (US$45.73 billion) in aggregate pretax profit for the nine-month period, up 6.52 percent from a year earlier. This means Taiwanese enterprises remain on track to achieve profitability for the full year despite the weak domestic economy. The key lies in sharing those profits with employees by raising salaries.

Currently, despite the strong performance of Taiwan's manufacturing sector, the overall economy is sluggish and salaries are frozen mainly because of the stagnation of the services industry.

The services industry's output value accounts for 70 percent of the nation's GDP, while workers in that sector make up about 60 percent of the country’s workforce. However, most of the companies in that sector are small and medium-sized enterprises that are not usually internationally competitive, cannot pay high salaries, or attract top-end employees. This leads to a massive exodus of high-quality talent.

In addition, many young graduates who are reluctant to work in the manufacturing industry prefer to seek jobs in the services sector, creating an oversupply of manpower, which is not conducive to salary hikes.

The two main political parties and all the candidates in the Jan. 16 presidential and legislative elections should understand what the problems are and devise measures such as taxation and incentive systems to encourage businesses, particularly those in the services industry, to raise salaries and help them go global. Editorial abstract -- Dec. 21, 2015

(By Evelyn Kao)
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