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EDITORIAL: Tackling stagnant salaries
The Cabinet’s decision to give businesses tax breaks so they can raise employee wages was borne out of a belated sense of responsibility at a time when higher home prices and stagnant salaries have aggravated economic inequality.
On Thursday, the Cabinet approved an amendment to the Act for Development of Small and Medium-sized Enterprises (中小企業發展條例草案) to create incentives for companies to give better salaries to their employees. The government expects that if it is passed by the legislature this year and becomes a law next year, the amendment would encourage about 430,000 small and medium-sized firms — one-third of the total such companies in Taiwan — to offer pay raises.
The government’s move comes after a 3 percent pay raise for civil servants in 2011 failed to prompt similar action in the private sector and its recent call for businesses to increase wages went largely unanswered.
In March, Premier Jiang Yi-huah (江宜樺) told the legislature that corporate profit growth outpaced the nation’s GDP growth over the previous year, making many companies more able to share profits with employees. However, his remarks met a lukewarm response from businesses.
The Cabinet’s amendment also comes as the Taiwan Stock Exchange is preparing to introduce a new index in August to tracks the performance of the 100 highest-paying companies for investors to use as a reference. The Financial Supervisory Commission is deliberating whether it is appropriate for the exchange to name which listed companies offer the stingiest salaries.
The government is under rising pressure for what critics say is the way tax credits benefit businesses, but the fruits of higher profits are not shared with employees. That is bound to make more people hesitant to side with President Ma Ying-jeou (馬英九) and his Chinese Nationalist Party (KMT) government in the seven-in-one elections in November.
Yet doubts remain about the amendment’s effectiveness because the government has set some preconditions for the tax breaks — the amendment only applies to small and medium companies’ “base-level Taiwanese employees” at a time when the nation faces an “economic slowdown.” What remains unclear is how the government defines an economic slowdown, or base-level employees.
The Ministry of Economic Affairs suggests that an economy growing less than 3 percent annually could indicate a slowdown, but under these parameters, can it still be termed a slowdown when GDP growth goes from 2 to 2.9 percent? What if GDP grows more than 3 percent, but the public are still suffering from an even bigger increase in consumer prices and unemployment?
Adding to the challenge is a long-standing mindset among businesses when it comes to tax breaks — they want them to be bigger and they want more of them.
National Association of Small and Medium Enterprises president Lin Hui-ying (林慧瑛) last week said that current tax credits are not very substantial and companies would like to see a more substantial government policy that provides greater incentives. Lin’s comments reflected not only her view, but that of all businesses.
Among labor rights advocates, many of whom see Ma’s government as an enemy of the public in terms of labor policy, the response to the draft amendment is the opposite. They welcome the pay raise proposal, but request more tax breaks for workers as well. Some people have also suggested that the government revise the Company Act (公司法) to make it mandatory for businesses to give dividends to employees.
Of course, companies have their own mechanisms for raising salaries, so the government may have to make more of an effort to motivate businesses to increase wages. It is hoped that the government can seize this opportunity to tackle income inequality and stimulate a positive cycle of improvement in the economy in the long term.
source: Taipei Times
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