Why Wages in Taiwan are So Low

I’ve been thinking about this question for a long time (I think this thread is in the right sub-forum?), and I think I’ve finally figured it out: unions.

For a long time, I wondered why wages in Taiwan could be so low, when other countries that are equally developed (infrastructure, etc.) are much higher. I suppose the country that can best be compared to Taiwan is South Korea.

Taiwan’s GDP per capita: $20,100 USD
TW GDP PPP per capita: $37,719
South Korea GDP per capita: $23,749
SK GDP PPP per capita: $31,753

PPP = Purchasing power parity: en.wikipedia.org/wiki/Purchasing_power_parity

Thus, although Taiwan’s nominal wages are lower than South Korea’s, the Taiwanese person actually has a higher standard of living.

Anyway, my point here is (this probably applies to South Korea, as well), that although these countries have first-class infrastructure, rule of law, technology, etc., they still don’t see nominal wages as high as Japan, North America, Western Europe, Australasia, etc. I now think it’s due to the weak unions.

With strong unions come the irresistible demand for higher wages, which in turn starts the upward spiral of structural inflation… eventually raising the nominal price of everything in the country, thus raising the country’s earning power and GDP vis-a-vis other countries.

Taiwan has suceeded precisely because it hasn’t had strong unions, and I would argue that Korea suceeded in shipbuilding, autos, and high tech because of its dictator, Park, in the 6Os and 70s. He may have subsidized the chaebols but it worked at that time and he was also able to strong arm the unions.Taiwan is a totally different ball game with no chaebols but dominated by SMEs with the small business owner hostile to unions. Look at the few unionized companies they have in Taiwan (e.g. Chungwa Telecom) and it’s full of overpaid, underworked, and bloated government workforces.

Given Taiwan has no natural resources, the unions would be dominated by these type of white collar government unions. I don’t see them making any economic miracles.

Taiwan is not succeeding anymore. That’s the point of this thread. Wages are now at 1998 levels while the cost of living is much higher. There is such a massive brain drain happening because of wages that the Ma admin is desperate. Even they know the seriousness of present conditions.

It’s also the reason why, compared to countries such as the UK and Australia, Taiwan has been able to:

[ul]1) build and operate a better public transportation service;
2) build more affordable housing;
3) maintain low levels of unemployment – and thereby generally avoid the social and economic problems associated with high unemployment (relatively speaking, of course);
4) keep taxes low – due to the low cost of government funded services such as state schools and public hospitals;
5) provide better customer service in retail, as well as across a whole range of service industries.[/ul]
Would the Taiwan Economic Miracle or the Ten Major Construction Projects (en.wikipedia.org/wiki/Ten_Major_ … n_Projects) have ever been possible if Taiwanese workers had organized themselves into powerful unions? I think not.

I think Korea is far ahead of Taiwan in most spheres and GDP does not capture what is going on. Electronics, shipbuilding, automobiles, heavy industry, Korea is kicking ass. Then they have huge cultural influence through their soap operas and movies and singers. Plus salaries that are double Taiwan’s salaries actually means something, PPP or not.

Local PPP (remeber you dont get a discount of overseas education or IPads just because you get paid less) is probably Taiwan’s only saving grace at the moment but it is quickly being eaten away as inflation starts to bit here.

Taiwans industry setup is quite different than Korea and I have no doubt unions have played some part in the difference between the two countries. Koreans are more militant and aggressive in general, Taiwanese are more pliable and less likely to organize and protest except for green/blue divides.

It’s a good question that I have also pondered and it is a mix of different influences but the main problem is actually lack of foreign investment, lack of regional service economy, lack of diversity in industry and lack of new business models here. What you then also get are people who would have been managers somewhere else practically being forced into running their own small enterprises. Lack of real local economic growth overall is the problem.

Why not? All major western countries managed to build impressive infrastructure in the 50s and 60s, to say nothing of affordable housing, with unions and relatively high wages. The results are certainly more impressive than what Taiwan has achieved. Other than the medical system (which is on the path to insolvency), the MRT, which serves only 15% of the population, and the HSR (which was massively expensive) the country has pretty crappy infrastructure. Less than half the country is even hooked up to sewage systems: the Phillipines has higher rates. The recent county-city merger is showing just how cash poor the government is: as everyone clamours to raise living standards to Taipei levels they are discovering there is no money. Taiwan’s low tax rates can effectively keep Taipei running smoothly and that’s about it.

Furthermore, Taiwan’s airports, railways and ports are in bad shape except those that are now being revamped on credit. The gov is going into debt to finance these which wouldn’t be so bad if there were good economic prospects for the future. But there aren’t. The tax base is already low (though for political reasons that aren’t likely to change) and will get lower as the population ages and those with good educations continue to move abroad.

Furthermore what new infrastructure we do get tends to cost as much if not more than it would in a western country.

Obviously unions could not reverse such a tide, but there is little doubt that low wages are if not a cause then a massive symptom of Taiwan’s problems.

Build more affordable housing ? Where is that?

Efficient public transport? UK has better public transport systems overall. Taiwan has some good parts but Taichung and Kaoshiung are almost completely dependent on car and scooters to get around.

Taiwan has been stuck doing the same thing for too long , they have to be willing to make some bold changes to keep with changes globally.

Major infrastructure projects have very little to do with unions.

It’s better than Belgium … there unions ruined the economy and still are … they have old fashion thinking! They basically hold many businesses in a stranglehold and the only thing those companies can do is move out (to another country) or go broke.



Hmm, :ponder:

OK, forget about major infrastructure projects such as highways, airports, oil and steel refineries, ports or power generation facilities (which, BTW, I would hardly call “crappy”). Not only are there differences in the actual projects and the degrees to which their workforces are organized, different countries have quite different resources and competition - so it’s difficult to compare Taiwan and Western countries.
I accept that Taiwan’s economic miracle may have still been possible with a unionised workforce, but I’m quite certain that it would have have cost a lot more.

So let’s just consider the present, and let’s consider public transportion. Could the UK or Australia nowadays build an MRT or HSR that compares with Taiwan’s? The cost would be too prohibative mainly due to the cost of labor. And even if they did build one, would it be as good or as affordable as Taiwan’s? It would be too expensive to operate, and few people would use it.

Let’s be clear. Construction unions and public transportation worker unions don’t exist to serve the interests of public transport users, who want a convenient, regular, safe, cheap service.
They exist to serve the interests of their members, who want higher wages and better working conditions.
There’s a fundamental tension here. But fortunately in Taiwan, the lack of powerful unions is to the advantage of the travelling public (not to mention the shopper, the electricity consumer, the taxpayer, etc.)

I find it hard to believe that the Philippines has higher sewage connection rates than Taiwan.

Economically it’s better in Taiwan!

[quote=“adikarmika”]…OK, forget about major infrastructure projects such as highways, airports, oil and steel refineries, ports or power generation facilities (which, BTW, I would hardly call “crappy”).

Yes, quite crappy. Taoyuan Airport is a regional joke. Our water pipes leak far above world averages. Taiwan has an oversupply of old coal thermal energy plants which causes massive pollution problems (the Taichung plant is the biggest single CO2 producing source in absolute terms in the world). The 4th nuclear power plant is riddled with problems and may likely never be allowed to start. That’s $15 billion US down the drain.

In recent years the petrochemical industry has been failing because facilities are old and inefficient. Industry has been allowed to operate cheaply because of lax pollution standards, monopolies and exploitative labor practices. Hardly something to be proud of. According to the Canadian Chamber of Commerce even China has higher environmental standards for its oil and steel industries. Pollution levels in Taiwan are a disgrace. But hey, at least taxes are low and when you get cancer it’s largely covered by NHI.

Taiwan companies have gotten a free ride for decades. That doesn’t make them smart, savvy or efficient. It means they simply kicked the can down the road.

Fifteen years ago Angola had a higher connectivity rate. Can;t find the Philipine conparison but this from the American Chamber of Commerce in 2006 should suffice:

Note that if you follow the government reports, 6 years later we are still are around the same rate despite billions being spent in Taipei to increase the rate.

According to the Public Works Department:

As for your union rant, what exactly do you think construction companies exist for? The public good? Taiwan has second rate infrastructure that tends to cost as much as first rate because of corruption and especially the lack of open bidding.

Another thing to consider is that western countries are also a lot more wealthy and have a greater tax base to fund public projects. In Taiwan, 70% of taxes come from salaried workers, compared to less than 50% in the US, so low salaries are affecting the government’s ability to fund new projects without going into debt as they are now.

[quote=“adikarmika”]Let’s be clear. Construction unions and public transportation worker unions don’t exist to serve the interests of public transport users, who want a convenient, regular, safe, cheap service.
They exist to serve the interests of their members, who want higher wages and better working conditions.
There’s a fundamental tension here.[/quote]
What on earth does that have to do with anything? This “fundamental tension” exists for everyone with every job. Or should we all just work as volunteers, because otherwise our desire for a salary betrays how we don’t really have the interests of our companies/schools/employees/bosses at heart? The same logic suggests that North Korea should be successful because, after all, no one gets a salary there, so there’s no tension between the interests of the public and the desire for a wage.

My point was simply that public transportation workers’ unions do not support the interests of public transportation users.

To illustrate my point, I made the comparison between relatively low-paid, non-unionised construction and public transportation workers in Taiwan and the standard and affordability of the public transportation service provided here with better paid, unionised workers in countries such as Australia and the standard and affordability of the service provided there.

To suggest that I was somehow equating excessive union demands with the individual’s basic right to be paid for his/her work is, of course, absurd.

(BTW, I speak as a former construction union member.)

Fifteen years ago Angola had a higher connectivity rate. Can;t find the Philipine conparison…[/quote]
Here you go. psiru.org/reports/2008-03-W-sewers.pdf (p.20)

Note that this is talking about just the “urban population” (albeit figures from 2004).

I would remind you that my point was made in the context of public transportation only, not Taiwanese infrastructure more generally.
As examples of what I was talking about, I mentioned the HSR and MRT. What do you find so “second rate” about the infrastructure of these services?

For who, the rich?

Even your point regarding transportaton is not great. The train system is the most important public transport system on the island and heavily unionized. While it loses money (like most public system and even many private) it it cheap and efficient.

The education sector , police and military here is not unionized, but they have been paid off with other perks. Many police have incomes of +100,000 not including the money they pull in on the side.

Union or no union, I would say it is not the most important difference in this day and age.

I find nothing about them second rate. They are fantastic. However the MRT services only 15% of the population of Taiwan. The rest are left with effectively no public transport. Nor can the rest of the country afford a great system. You seem unaware of how taxes work in this country. Yes, taxes are low but the lions share goes to Taipei. The rest of the country pays for us to have a nice MRT. :discodance:

Actually let me take some of that back. When the Muzha Line was constructed it was discovered the concrete had been mixed with sea sand and hence structurally compromised. All manner of makeshift improvements had to be made. When the Wenhu Line was added the system was a disaster and it took months to integrate because of poor planning and a desire to save some costs along the way. And yes that line is crap now with tiny cars and uncomfortable seats.

Last year we had a whole section of reinforced side of a highway collapse because of poor design and construction. Last year it was found that all the roads in Kaohsiung have for years been built with inferior materials. Billions keep getting thrown at the cross island highways despite the fact they shouldn’t be repaired.

The HSR is excellent plagued by land subsistence problems and also deep in debt. It is also far less effective than it could have been because of poor choice in choosing stations.

The railway system is improving as are airports but they are being financed through debt which it looks increasing unlikely Taiwan will be able to pay for in the future.

Not sure what you attempted to accomplish with your pdf on sewerage other than yes, Taiwan has third world rates of connectivity.

MM your point about low salaries resulting in low revenue is a very good one. Due to the current tax structure encouraging higher salaries would go a long way to bumping up revenue.
70% of Taiwans revenue is from income tax.

Taichung keeps getting it’s plans for MRT lines knocked back, as does Kaoshiung. The central govt says they should be self financing systems, but they didn’t use the same criteria for Taipei. Of course they are not self financing at the start, you need to invest in them and enlarge them to get more ridership and rental revenue!

There is definitely a North-South bias in this country.

The tax allocation system is bizarre aswell. In most countries cities subsidize the countryside, but in Taiwan the poorer places subsidize the richer ones! Very strange system.

Why would they? They are workers unions, not users unions … :doh:

For who, the rich?[/quote]