Factors in setting minimum wage

Taiwan’s minimum wage has risen for 11 consecutive years. When the Minimum Wage Review Committee convenes on Thursday next week, the announcement of a new monthly minimum wage exceeding NT$30,000 is all but certain. The key question is: How should this year’s raise be determined?

Taiwan’s K-shaped economy is in the throes of simultaneous growth and decline, painting very different economic pictures across industries. The challenge lies in ensuring that workers share in the gains of broader economic growth, while at the same time addressing employers’ ability to absorb higher labor costs.

There are good reasons for the continued increases in the minimum wage over the past few years. With rising prices, rent and living costs, a stagnant minimum wage would inevitably squeeze the real incomes of the lowest-paid workers. If economic growth is reflected only in corporate profits and capital markets, but fails to translate into higher incomes for workers, its benefits might never truly be felt by ordinary people.

Semiconductor and some export-oriented industries have enjoyed strong growth momentum thanks to the rapid expansion of the artificial intelligence industry; however, traditional manufacturing, retail, restaurants and some domestic service industries face pressures including labor shortages, rising costs and limited consumer spending. There are also significant differences in the financial health of large corporations, and small and medium-sized enterprises (SMEs).

Using the overall economic growth rate as a singular basis for raising wages risks overlooking these disparities between industries. While highly profitable companies might be able to absorb the additional costs, for SMEs operating on thin margins, a minimum-wage increase could strain operations and even affect their willingness to hire. If businesses pass some of these costs on to consumers through higher prices for goods and services, the additional income workers receive could also be offset by inflation.

The review should consider a broader range of economic indicators, including prices, economic growth and conditions across different industries. The size of the increase should reflect these disparities and, critically, be accompanied by supporting measures so that wage policy does not become a burden that SMEs struggle to absorb.

A NT$30,000 minimum wage is likely to become our new starting point. The question is how to gradually translate economic growth into higher incomes for more workers.

The minimum wage review is not simply about deciding on a number; it is also a test of how to strike a balance between raising workers’ incomes and maintaining the competitiveness of Taiwan’s industries.