Taiwan Needs to Raise Wages Faster to Protect Its Democracy

Over the last month, a recall campaign was held in a bid to remove Chinese Nationalist Party (Kuomintang, KMT) politicians from the legislature. However, middle-ground voters largely stayed at home. Past surveys indicate that middle-ground voters prioritize economic issues and income inequality as their top agendas that the government should tackle, and their no-show at the polls suggest that they do not perceive their economic concerns have improved, and do not see the need to partake in the democratic exercise of the recall.

Taiwan’s wages are too low and inadequate relative to the country’s wealth 

Taiwan’s low wages rank among the longstanding top concerns of Taiwanese, and while Taiwan’s GDP has seen faster growth in recent years, Taiwan’s wage growth remains subpar. Among Organization for Economic Co-operation and Development (OECD) countries, countries with higher GDP per capita tend to have higher wages—as can be seen in the charts below, their minimum wage (left chart below) and average wage (right chart) tend to correspond with their GDP per capita along the trendline.

However, Taiwan’s wages fall further below the trendline than most countries. 

Data source: GDP (Taiwan, other countries), per capita data is derived by dividing the GDP of respective countries by their populations (Taiwan, other countries); Minimum wage (Taiwan, other countries); average wage (Taiwan, other countries)

When taking a closer look at the countries with more similar GDP per capita as Taiwan, it is clear that Taiwan’s wages are vastly inadequate relative to its GDP per capita—instead of only NT$27,470 a month in 2024, Taiwan’s minimum wage should be at about NT$40,000 to NT$45,000 if its economic output is proportionally returned to workers (left chart below). Instead of only NT$61,002 in 2024, Taiwan’s average wage should be about NT$90,000 (right chart). This is in line with the expectations of Taiwan’s workers, the majority of whom believe that their salaries should be within the range of NT$50,000 to NT$100,000, if their wages should correspond to Taiwan’s cost of living. In other words, Taiwan’s minimum wage should be on par with South Korea, Japan, Slovenia and Spain—countries with similar GDP per capita as Taiwan, but with much higher wages. 

In other words, Taiwan’s wages are only at two-thirds the levels they should be at. As explained in the previous article, the slow growth of Taiwan’s minimum wage has dragged down its average wage. Notably, President Tsai Ing-wen has raised the minimum wage faster than her predecessors, but due to how far Taiwan’s wages have been stagnant over the last three decades, it requires wages to grow much faster to catch up to adequate levels. 

As countries become wealthier, wages grow and consumption picks up, driving the growth of consumer prices—based on Numbeo’s cost of living index, countries with higher GDP per capita thus have higher consumer prices. Higher GDP per capita is therefore both a function of higher wages and higher profits accrued from higher consumer prices. 

Of note, among advanced countries, because wages grow faster, so do purchasing powers—higher consumer prices are less of an issue when wages grow fast enough to overcome price growth. 

Data source: Numbeo’s Cost of Living Index

However, because Taiwan’s minimum wage is not growing fast enough relative to its GDP, its purchasing powers are thus struggling to catch up, and its minimum wage is therefore far less adequate than other countries on the trendline in the chart below.

To estimate wage adequacy, we can use Numbeo’s cost of living index—by dividing each country’s minimum wage by their respective index, the resultant wage-index ratio can be used to identify the country with the highest wage adequacy. Accordingly, Luxembourg has the highest ratio, and thus has the highest and most adequate national minimum wage globally. By multiplying Luxembourg’s wage-index ratio with the cost of living index of the other countries, we would be able to obtain an optimal minimum wage for each country, when pegged to the wage adequacy standard of Luxembourg. From there, it is possible to derive the adequacy of the current minimum wage of each country, by dividing their actual minimum wage by their optimal minimum wage. 

Based on this methodology, the minimum wage adequacies of the countries tend to correspond to their GDP per capita along the trendline, as can be seen in the chart below. However, Taiwan’s minimum wage is far less adequate than where it should be.  

Taiwan’s wages have been suppressed in order for business profits to grow. Relative to minimum and average wage, Taiwan’s profits are far too high as compared to most other OECD countries. The wages and profits of most other countries tend to correspond to each other along the trendline in the charts below—but not Taiwan. Taiwan’s profits should be 60% lower to be comparable to other countries. 

As a result of Taiwan’s businesses paying themselves handsomely, the pay gap between chief executives and the average worker in Taiwan has become one of the largest among the advanced countries, while the richest 10% in Taiwan now hold 60% of the countries’ wealth. The excessive wealth accumulation at the top and the suppressed wages at the bottom lead to Taiwan’s wealth inequality being one of the highest among the advanced countries. 

Data source: Profits (Taiwan, other countries)

The higher profits and earnings of a wealthy minority lead to them speculating Taiwan’s housing prices to extravagant levels, causing Taiwan’s housing prices to also be far too high, relative to its GDP per capita (left chart below) and wages (right chart). 

Clearly, Taiwan’s economy is in a highly imbalanced state, where wages and profits are not growing in line with GDP, and where wealth is concentrated too much at the top while workers earn inadequate wages to afford housing. Taiwan’s housing prices should be 50% to 60% lower, or average wage needs to be 3 to 4 times higher, in order for Taiwan’s housing to be as affordable as other countries—as seen on the trendline. 

Notably, Taiwan’s high housing prices are also one of the top priorities that Taiwanese want to see addressed. 

Data source: Housing prices. Note: Housing prices in the charts are based on the median housing prices of 1-bedroom apartments in the capital city, but the trend is similar for 2-bedroom and 3-bedroom apartments.

Countries with higher GDP per capita tend to manage their social issues better, as they have stronger finances and governance ability to improve their social systems—such as in their ability to reduce deaths caused by road accidents (left chart below), which happens to also be among the top concerns among Taiwanese, and is considered to be even more important than an invasion by the Chinese Communist Party (CCP). Relative to Taiwan’s GDP per capita, its road traffic deaths are far too high—one reason being that Taiwan’s massive wealth inequality leads to wealthy drivers feeling overly-entitled over pedestrians and thus showing less care for them. 

Taiwan’s low wages also impact negatively on its economic development—countries with higher wages tend to have higher economic complexity in technology, or in their ability to produce more innovative and diverse technologies. Taiwan’s relatively low wages mean that its technological complexity is also lower—workers are less incentivized to think of new ideas and innovate, which also prevents businesses from moving into higher-value production.

Data source: Death rate from road injuries, economic complexity for technology

The inability of Taiwan’s democracy to grow wages faster is causing trust in its democracy to erode  

The reason why countries with higher GDP per capita have correspondingly better wages and social lives is because their democracies tend to function more effectively. Stronger democracies tend to perform better in economic and social indicators—countries ranked higher on The Economist’s Democracy Index tend to have higher minimum and average wages, signifying that their governments are more responsive to the economic needs of citizens. 

Taiwan ranks highly for its democracy, but its wages are far lower than where it should be, meaning Taiwan’s democracy looks good on paper, but isn’t being meaningfully used to improve the labor rights and wages of its workers. 

Data source: The Economist’s Democracy Index

Similarly, Taiwan’s democracy doesn’t seem to be utilized to reduce road traffic deaths and income inequality, to an extent on par with most other OECD countries—Taiwan’s road traffic deaths and income inequality are far higher than the trendline of other countries.

Data source: Income inequality (Taiwan, other countries)

Disillusioned by Taiwan’s democracy to meet their economic needs, the support among Taiwanese for democracy is also comparatively low—countries with higher wages (and more adequate wages, as we saw above) and lower income inequality tend to have higher support for democracy. A well-functioning democracy strengthens confidence in democracy’s ability to meet the needs of citizens, but the opposite occurs when citizens feel that their basic needs are neglected. 

Data source: Support for democracy

The disillusionment among Taiwanese also led to them becoming more supportive of strong leaders who do not have to bother with parliament and elections, in the hope that strong leaders will “save” them from their current predicament. Indeed, numerous research have explained how higher inequality risks weakening democracy, as voters have a higher tendency to vote for populist or more extremist political parties or leaders, leading to further social instability. 

This also explains why there is a higher tolerance among Taiwan’s electorate for the brash antics of the KMT and the Taiwan People’s Party (TPP) in the legislature. It is also why the shattering loss at the recall triggered fears and insecurities among Democratic Progressive Party (DPP) supporters, who in turn are demanding stronger action, and are veering towards greater conservatism.

Of note, Taiwan and South Korea are more supportive of strong leaders than the trend, one reason of which could be due to the threat of neighboring warmongering countries that heighten the existential fears of the electorate, who become more keen on voting for leaders whom they hope can quell their anxieties. 

Data source: Support for strong leader

As such, Taiwan’s democracy hasn’t been able to fulfil its democratic promise of ensuring that wages and purchasing powers grow on par with economic growth, that housing remains affordable, and social issues such as road deaths are properly managed. For Taiwan’s wages to be adequate and housing to be affordable, minimum wage should be NT$40,000 to NT$45,000 a month today, average wage should be about NT$90,000, and housing prices should be 50% to 60% lower. While criticism has been heaped on the DPP as the ruling party, it should be noted that the two parties with combined legislative majority currently—KMT and TPP—have also not passed laws to raise minimum wage to an adequate level, or lower housing prices to an affordable level. It should be noted as well, that under President Lai Ching-te’s administration, housing prices have started to come down, and road traffic deaths are finally declining again (also due to the credit of Transport Minister Chen Shih-kai)—even as child traffic deaths have continued to rise; however due to the extremely high housing prices and road traffic deaths to begin with, these decreases may still be considered too minimal.

Taiwan needs a renewed understanding of democracy and capitalism, and their relationship with equality and labor rights

This recall, the focus has been on recalling KMT legislators who have passed laws seen as pandering to the CCP, despite the latter’s threat of war against Taiwan. But this messaging may be lost to middle-ground voters, whose top concerns are their economic livelihoods and the income inequality in Taiwan. Middle-ground voters may not have turned up to vote, as the risk of losing alternative parties to check on the government may outweigh other concerns—their economic concerns tend to be overlooked during elections, and they see no reason to partake in a democratic recall process that they cannot relate with. They may think that the DDP government is using democracy as a façade to defend against CCP’s threats, but is unwilling to use democracy meaningfully to address their economic plight. 

But the existence of these imbalances and inadequacies in Taiwan’s economy are rooted in Taiwan’s practice of capitalism, which is inconsistent with democratic principles. For example, past government officials have resisted calls for strong wage hikes by claiming that Taiwan “is not a communist country”, and that the government cannot thus dictate a single salary. The government has numerously considered higher overtime work as favorable for the manufacturing industry, even as it leads to longer work hours; or blamed Taiwan’s low wages on its export-oriented economy, instead of recognizing the complicity of successive governments in suppressing minimum wage to enable the manufacturing export sector to earn excessively high profits. Politicians from the ruling party have even labeled Taiwan’s high housing prices as a “fake issue”, even as Taiwan’s housing prices are severely unaffordable; but given that many of the party’s top political donors hail from real estate companies, this may partially explain its unwillingness to strongly curtail housing prices. 

But Taiwan needs to understand that setting up businesses, and using housing speculation to generate wealth is a privilege limited to a minority—only 20% of Taiwan’s employment comprise business owners or their family members, and only 20% of homeowners own more than one home for investment—these are not meaningful ways to enrich the population as a whole. And if the DPP may choose to prioritize the needs of business owners and housing speculators—many of whom overlap and also support the KMT/TPP—then it would explain why many middle-ground supporters have become too disillusioned to come out to vote. Basically, Taiwan’s housing market has become a playground for the rich, who keep the wealth for themselves, while suppressing the wages of workers, who have to pay a large chunk of their wages just to afford a roof over their head, and have to sacrifice basic necessities to do so—then, who is Taiwan’s democracy working for exactly? 

The thing that Taiwan misunderstands is that it equates the pursuit of “freedom” as the complete freedom of its political, as well as its economic system—but these are too different things. A free democratic political system is one where power is decentralized in order that the rights of as many individuals can be protected and respected, so as to achieve greater equality as far as possible. An unbridled capitalistic economic system, on the other hand, enables those with power to consolidate their power, and to undermine the rights of other individuals, thereby resulting in greater wealth inequality. Simply, democracy aspires towards greater equality; unbridled capitalism generates greater inequality—a free political system and an overly-free economic system thus necessarily contradicts each other. 

The problem lies in that Taiwan’s definition of democracy has been a limited one, driven by the obsession to use its democracy to differentiate itself from China’s “communism”. But the CCP is only communist in name, and its economic system is highly capitalistic and unequal as well—just as Taiwan’s. To be specific, what Taiwan is doing is using its democracy to fight against China’s authoritarian system—it is a misnomer to say it’s fighting against “communism”—an idea that the CCP no longer practices, but only in name. Moreover, the CCP sees the value of a free deregulated economic system, to enable their corruption, as well as an unfree political system to protect their ill-gotten gains—in this sense, pursuing both a free capitalistic and an unfree authoritarian system are mutually compatible objectives for the CCP. 

But it is not logical or feasible for Taiwan to claim that it upholds the rights of individuals under a democratic system, while allowing rights to be trampled under an uncontrolled capitalistic system. A free capitalistic economic system is ostensibly not free, as it limits the freedom of the majority for a select economic few endowed with economic power, and is in direct contradiction to the broad-based freedoms that democracy aims to support—these two systems are not compatible, and one has to give way for the other. And because Taiwan continues to want to enable an unbridled capitalistic system, it therefore necessarily has to accept the weakening of labor rights and wages, even as this is in conflict with its democratic system. Worryingly, Taiwan seems to have chosen to close one eye to the subjugation of labor rights, which allows its unbridled capitalistic system to take precedence over its democratic system. As a result, as Taiwan’s economy becomes more and more unequal, Taiwan’s democracy is being weakened, and the political inclination of its citizens is becoming more and more authoritarian, and they become less supportive of democracy, and more supportive of “strongman” rule. 

Governments in other countries can afford to continue pursuing an unequal economic system, because even as they may lose power, the country’s sovereignty would likely remain intact. But it is different for Taiwan, because when citizens become less trusting of the government’s willingness to protect their economic livelihoods, and they turn to political parties that do not prioritize protecting Taiwan’s sovereignty, then Taiwan’s nationhood will gradually disappear under an unfair economic system, and with it, its democracy. It is thus a misplaced notion to think that protecting democracy should take precedence over protecting economic rights, when it is the sacrifice of economic rights that will necessarily lead to the demise of democracy. Given that DPP is the ruling party, maybe it needs to ask itself, if it wants to prioritize the support of business profits and housing speculators as its voters, and given that excessive profit accumulation and housing speculation can exacerbate wealth inequality, is this position then compatible with fighting for Taiwan’s democracy?

In fact, protecting Taiwan’s sovereignty and protecting its democracy are two different things—a country can be authoritarian and still protect its sovereignty if it is a priority. But if a country chooses to be a democracy, then it would be difficult to protect a country’s sovereignty, if it does not protect its democracy, as internal strife makes it easy for enemies to intervene. But a country would also not be able to protect its democracy, if it does not protect the economic rights of its citizens, so that they will feel confident in the government, and work with the government to protect the sovereignty of the country. Research has shown that historically, societies and civilizations in the world have collapsed precisely because income and wealth inequality lead to lower trust as well as higher social tensions and political divisions, and individuals questioning the legitimacy of the system, eventually leading to the impacts of inequality being too exacerbated to reverse. But we haven’t seemed to have learned our lesson. Thus, we need to properly recognize what we are fighting for—Taiwan’s sovereignty versus the CCP’s colonialism. It’s Taiwan’s democracy versus the CCP’s authoritarianism. It’s Taiwan’s democracy versus its income inequality. CCP’s authoritarianism and colonialism threatens Taiwan’s sovereignty and democracy, but so does the income inequality in Taiwan. To protect Taiwan’s democracy, we cannot fight one without fighting the other.

But protecting the economic rights of citizens is not about prioritizing the profits of businesses, with the false premise that this will benefit all citizens. In a democracy, protecting economic rights necessarily needs to enshrine the principle of democracy, and ensure greater equality and fairness—meaning by ensuring that wealth is more fairly and equitably distributed to citizens, and that income and wealth inequality is reduced. Thus, the key is that democracy should be used to temper capitalism’s inequalities, to make capitalism more compatible with democracy. This is why in the strongest democracies in the world—among the Nordic countries—not only are social rights such as gender or same-sex rights protected and equal, but so are economic rights, where wages at the bottom are high and adequate, and those at the top are contained, so as to ensure a fairer income distribution structure, and this has helped maintain social trust and social order in their countries, and a sense of unity among citizens—because they know their livelihoods are being taken care of. Simply, the Nordic countries have managed to use their democracy to make their capitalism more equal. Democracy is thus not only about strengthening rights which Taiwan’s government finds convenient, but also about ensuring that all rights are properly protected under the umbrella of human rights—including labor rights and adequate wages. 

This is what Taiwan and Taiwanese need to learn to understand. If Taiwan wants to protect its sovereignty, it needs to start reflecting sincerely and honestly about what it means to protect its democracy, and what freedom truly means, and redefine democracy in a way that is meaningful to workers as well. Taiwan would need to come to the understanding that freedom is not about giving businesses greater privileges while pandering to their wants to keep workers struggling, and to recognize that raising wages faster to narrow the country’s economic inequality is an important step to strengthening Taiwan’s democracy and sovereignty. Until Taiwan acknowledges that it needs major reforms to dramatically raise wages and reduce housing prices instead of only piecemeal improvements, Taiwan will continue to be too severely divided to govern. 

Next month, Taiwan’s labor ministry will convene a Minimum Wage Deliberation Committee, but it estimates that the minimum wage will only be raised by 3% to 4%. If so, it would be too insignificant to solve Taiwan’s problems. 

(Featured photo by geralt on Pixabay)