EDITORIAL: Getting the GDP to workers

Fueled by robust economic growth and rising inflation, Taiwan is set to raise its statutory minimum wage to a new high for the 11th consecutive year during an annual review scheduled for tomorrow.

However, the constant hikes of the minimum wage mask the core issues of real-wage stagnation and a growing imbalance of wealth distribution.

The increase in the wage floor is weakly correlated to the average wage, while the spillover effect is limited to a small group of people. The only significance of the wage-hike policy is to show that the government is committed to protecting low-wage earners and their families.

Taiwan’s economic growth is projected to accelerate at an annual rate of 11.48 percent this year, the fastest in 39 years, while consumer prices are expected to climb to 2.03 percent year-on-year, exceeding the central bank’s 2 percent target, the central bank has estimated.

However, the economic benefits remain out of reach for the majority of workers due to uneven growth. Many are struggling to make ends meet as wage growth stagnates amid persistent inflation.

The median monthly wage — which is considered a more accurate gauge of standard income, as extremely high or low wages do not skew it — rose 3.37 percent annually to NT$41,054 in the first seven months of this year, Directorate-General of Budget, Accounting and Statistics (DGBAS) data showed.

That marked the second consecutive year of growth of at least 3 percent in median monthly wage, but far below the regular average wage of NT$49,491 in July, the data showed.

For the first time, more than 70 percent earned less than the average, the agency said.

The trend is evident, as the proportion of workers earning less than the average has risen over the past few years, with 66.81 percent earning less than the average in 2021, the DGBAS data showed.

The agency attributed the surge in regular average wage to sharp pay increases within the technology sector, particularly among artificial intelligence (AI)-related companies.

Driven by explosive demand for AI chips and servers, employees at electronics and components companies — such as semiconductor manufacturers — were paid on average NT$48,310 and NT$44,374 per month respectively, significantly surpassing the NT$37,803 paid to workers in the overall manufacturing sector in the first seven months of this year, the data showed.

The result highlights uneven wage growth in the manufacturing sector, with the traditional industries lagging even further behind.

It seems that a decade of government-mandated minimum wage hikes has failed to effectively raise overall local wages.

The minimum wage has increased more than 47 percent since 2016, when it was NT$20,008, reaching NT$29,500 per month this year.

The real average wage, in which the impact of inflation is deducted, only edged up 1.12 percent in the first seven months of this year, entering a third year of a growth streak following a 1.4 percent annual expansion last year and a 0.58 percent increase in 2024.

The government has to implement a better approach to address anemic income growth — something other than hiking the minimum wage.

Some economists have suggested that the share of GDP going to workers should be increased to curb a decline over the past few years. In 2024, about 43 percent of the nation’s GDP went to workers, dropping from 46.54 percent in 2008, the DGBAS data showed.

That compared with an upward trajectory of the share of GDP that went to operating surplus, which rose to 35.06 percent of GDP from 31.57 percent over the same period.

That might be a viable option, as Japan and South Korea have labor shares of GDP of 50 percent and 47.5 percent respectively.

Taiwan lacks a union-led mechanism to push for annual wage adjustments such as Shunto, or the Spring Wage Offensive, an annual collective bargaining process in Japan in which unions and management negotiate wage increases and working conditions.

Addressing Taiwan’s wage problems requires structural reforms and supporting measures rather than just raising the minimum wage.