Taiwan's tech boom masks a daily struggle for the masses
Quarter of island's workforce gets by on minimum wage and cheap food
TAIPEI -- Taiwan's tech sector is booming on the back of companies such as chip juggernaut Taiwan Semiconductor Manufacturing Co., but the headline numbers for the rapidly expanding economy mask a daily struggle for much of the island's workforce.
To survive on Taiwan's minimum wage of 160 New Taiwan dollars ($5.75) an hour, 22-year old Vivian Liao has found ways to eat for less than NT$200 a day. It takes some careful math, but Liao has two advantages on her side. As a university student, she gets a discount at campus stores, including the 7-Eleven where she works part-time. The other is Taiwan's takeout culture.
Small breakfast shops -- open from 6 a.m. to mid-afternoon -- serve sandwiches, toast, and noodles for less than NT$50, while bento boxes can be bought from convenience stores or lunchtime street hawkers for NT$60 to NT$150. Buffets serving meat or Buddhist vegetarian alternatives let patrons pick and choose their meals and charge similar prices by weight. Cheap snack shops are ubiquitous.
Even so, Liao said meals take up most of her earnings.
"At the beginning of each month, I will have a budget. I spend most of my money on food, and I use less in other areas," she told Nikkei Asia at a coffee shop on her campus in Taipei. "Because of the COVID-19 pandemic [regulations], I had four months without a salary and without a job, so things are a bit tight right now. It would be enough under normal circumstances, but it's difficult."
Getting by on minimum wage and cheap food is a scenario faced by almost a quarter of Taiwan's workforce, according to the Taiwan Institute of Economic Research (TIER). The "working poor" range from convenience store clerks to factory employees and domestic workers.
In January, minimum wage earners will get a small pay increase of 5%, raising monthly pay to NT$168 an hour and NT$25,250 a month. The increase, however, still places Taiwan behind neighbors like South Korea and Japan.
Darson Chiu, a research fellow at TIER, told Nikkei Asia that the cost of living in Taiwan is relatively low compared with other parts of East Asia, thanks to cheap health care, education and utilities. Most Taiwanese workers, including laborers, typically make more than the minimum wage -- is a rate primarily earned by part-time workers or foreigners employed in sectors such as textiles and food processing.
There are also concerns raising the minimum wage could lead to inflation. On Oct. 22, the central bank said it is watching prices, expecting the consumer price index to climb 1.7% for the full year. Rising commodity prices are fueling concerns across the world of sustained inflation, putting pressure on monetary authorities to hike rates.
The central bank recently lifted the island's gross domestic product growth outlook for the year to 5.75% -- an expansion fueled by strong global demand for its tech products as many people work and study from home during the pandemic. Exports in September hit a monthly record
Surging demand for semiconductors has pushed companies such as TSMC into the global spotlight. The world's biggest contract chipmaker is Taiwan's largest company by market capitalization and accounts for one-third of the local stock market's value, according to a TIER estimate.
Taiwan's low minimum wage, however, is one symptom that all is not well in the economy.
Since the early 2000s, Taiwan's average wage -- now at NT$55,000 a month including bonuses and overtime -- has largely stagnated as the price of its exports has fallen, said Tzu-Ting Yang, an associate research fellow with the Institute of Economics at Taiwan's Academia Sinica.
The societal impact of this imbalance runs deep, as stagnant wages are a key factor behind Taiwan's historic brain drain to places like China. With parents fearing they cannot afford to raise children, the island also has the world's lowest fertility rate -- the total number of children that would be born to woman who lives to the end of her childbearing years, according to the CIA's "World Factbook."
In recent years, when Taiwan's average wages did rise, the rate of change has largely mirrored increases in the minimum wage, according to Roy Ngerng, a fair wage advocate based in Taipei. But neither the average nor minimum wages have kept up with cost of living increases in important spheres of the economy, including housing, child care, and daily necessities.
"Asian countries as a whole use low food prices as a means to try to mask the fact that actually, the cost of living is not that low. I think even though Taiwan's food prices for eating out are cheap, but if you compare [them] to wages it's not that cheap, especially with groceries and housing prices," said Ngerng. "The illusion is created that the cost of food is low, therefore wages can be kept low. This allows housing prices and other prices to rise without the minimum wage growing."
Taiwanese officials, however, told Nikkei Asia that the rises the minimum wage are having a positive effect on the economy.
The directorate-general of Budget, Accounting and Statistics said government-mandated wage increases are just one factor behind pay increases last year in the industrial and service sectors, where many employees might start out making minimum wage. Consumption is low at the moment due to the pandemic, it said.
The Ministry of Labor told Nikkei Asia that since taking office, President Tsai Ing-wen has raised the minimum wage for six years in a row, adding that the minimum wage is mostly earned by young people, so the government had started an "investment in youth employment program" to provide resources to help them navigate entry into the workforce. Real wages, the ministry added, have risen for the past four years, from 2017 to 2020.
The crowdsourced consumer price index Numbeo calculates that Taiwan's cost of living is on par with that of Germany, where the minimum wage is around $12 an hour, while the prices in major cities like Taipei and Kaohsiung are similar to Prague and Berlin.
The index calculates that before rent, the average single person needs a minimum of NT$22,676 to get by in Taiwan. Depending on where they live, they may need to tack on a minimum of NT$8,000 a month for housing, although that cost can run considerably higher in urban areas.
Vincent Lu, 24, saved money by living at home during his time as a university student, earning minimum wage at a fruit and vegetable stand on weekends.
"It wasn't enough [money], because the work was very tiring. It was just standing, there were very few chances to sit," Lu said, as most of his workday was spent arranging produce and calling customers.
Even with a second job teaching in-line skating at an elementary school during the week, Lu managed to save just NT$5,000 a month despite living at home. If he were on his own and paying rent, Lu said he does not think he could survive.
Another sign that things are amiss with Taiwan's economy is that while the headline GDP figures are good, ordinary people are not spending as much as might be expected.
One indication comes from the consumer price index, which rose just 2.63% in September year-on-year, just over half the 5% increase in the minimum wage last year, indicating it that wages are not rising fast enough to stimulate consumption, said Ngerng.
"Taiwan's headline growth has been pushed by exports and investment, two of the components of GDP," said Nick Marro, lead analyst for global trade at the Economist Intelligence Unit. "Taiwanese factories are producing and selling goods to the rest of the world, but on the flip side, private compensation is not doing well. That indicates there's a pretty big imbalance between what's actually going on across Taiwan's economy."
"Chip firms and electronics firms are doing well, so they have the resources to give wage increases to staff -- and that can be a flat annual rate or bonuses like we have during the Chinese New Year," Marro added. "But that story is not the same when you consider restaurants and shopping malls that cater to Taiwanese, or companies catering to the tourism sector."