the effect of foreign labor on labor market
TRANSCRIPT
The Effect of Foreign Labor
on Labor Market Labor Economics
Eason Wu, Allen Wang, Chloe Chen, Ken
Yang, Debbie Lee
2012/7/13
1
Content
Content ....................................................................................................................... 1
I. Introduction ........................................................................................................ 2
1.1 Motivation and Background ............................................................................ 2
1.2 Objectives ........................................................................................................ 3
1.3 Hypothesis........................................................................................................ 3
II. Methodology ...................................................................................................... 3
2.1 Literature Review............................................................................................. 3
Foreign Labor Policy in Taiwan ........................................................ 3
Minimum Wage Policy in Taiwan ...................................................... 6
Controversial Issue Related to Foreign labor..................................... 8
2.2 Hypothesis Test ................................................................................................ 9
Regression Model .............................................................................. 9
Controversial Issue........................................................................... 13
III. Conclusion ....................................................................................................... 16
3.1 Review of Research Findings ........................................................................ 16
3.2 Possible Explanations for the Results ............................................................ 16
3.3 Recommendations for Future Research ......................................................... 16
IV. References ........................................................................................................ 17
2
I. Introduction
1.1 Motivation and Background
Labor allocation is absolutely the most concerned issue among governments
around the world, and Taiwan is no exception. For the last two decades, Taiwan has
been experiencing both fast growing period and recessional period. On the other hand,
the higher level of education in average changes the physiological recognition of job
and wage for workers in Taiwan. Confronted with such a massive challenge, the
supply and demand in labor market were forced turned into a confusing situation. In
other words, the shortage in the low level labor force and the oversupply in the high
level labor force exist at the same time. However, the enactment of importing foreign
labor can be traced back to early 1980s. With all the changes we have mentioned, we
want to know whether the purpose and laws are suitable for the current situation.
According to the annual data from 2004 to2009 on the website of Executive
Yuan, Taiwan, an unreasonable phenomenon occurred. As the unemployment rate rose,
the number of foreign labor in Taiwan increased to a historical high at the same time.
(Graph 1 and 2)
However, the original purpose of importing foreign labor is to implement the
shortage of domestic labor and ease the heavy burden in domestic labor market. If the
growing quantity of foreign labor would increase the unemployment rate, is it still
necessary to import so much foreign labor nowaday? On the other side, as Taiwan
confronted with the global recessional situation, what’s the best reaction for our
government to do the in-time reaction on the foreign labor policy?
Graph 1: Unemployment Rate Graph 2: Number of Foreign Labor
(2004-2009) (2004-2009)
3
1.2 Objectives
Our goal is to figure out the relationship between foreign labor and the domestic labor
market, and make further discussion to the relation and the original purpose of the law.
Therefore, unemployment rate is used as the single measurement. We want to figure
out if there is a significant relationship between the quantity of foreign labor and
domestic unemployment rate. Data from each city in Taiwan are taken into
consideration both individually and in total. In the end, we want to know if foreign
labor a substitute for domestic labor.
1.3 Hypothesis
According to the observation we’ve mentioned, we assume foreign labor and
domestic labor are substitute. If the quantity of foreign labor increases, the
unemployment rate would rise up correspondingly
II. Methodology
2.1 Literature Review
Foreign Labor Policy in Taiwan
Until 1989, in Taiwan, the importation of low-skilled labor was forbidden and
importation of other types of foreign workers was strictly restricted (Hwang 2010).
However, because of the rapid development and changes in industry structure, Taiwan
faced the labor shortage problem. It was a big influence especially for labor intense
industry. So after government initiated foreign labor for 14 major infrastructure
projects in 1984, the first batch of foreign low-skilled labor was hired. In 1990, import
of foreign labor was officially allowed (Hwang 2010). The main reason was Taiwan
government expected to make good use of foreign labor to
promote the employment of nationals, increase country’s competitiveness, and use
foreign labor source to implement the shortage of domestic labor force on certain
industry. According to this original purpose, the government adopted the policy based
on implement principle.
In 2001, Taiwan joined WTO and it was necessary to follow the related
regulations and international conventions of importing foreign labor. It was
imperative for the government to ensure fair treatment and basic rights such as
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equality for foreign labor in order to earn the respect of other members in WTO. Until
2011, the total number of legal foreign labor in Taiwan was approximately 4,256,000.
It soared dramatically about 1,400 times than in 1990.
Table 1 provides a concise overview of the number of foreign labor in each
industry in Taiwan. We can find that there are three major industries importing foreign
labor.
Table 1: Overview of foreign labor employment in Taiwan (Industry) —
2004 to 2010 (unit: persons)
Source: Council of Labor Affairs (2010).
Three major industries are manufacturing, nursing, and public constructions.
First, manufacturing expects to get flexible to adjust the foreign labor regulation. The
qualifications for manufacturing enterprises are complicated. Those industries of
specific production procedures categorized as abnormal temperature operation, dust
operation, poisoned gas operation, organic solvent operation, chemical processing,
non-automatic operation and other specific production procedures have been verified
by the competent authorities for other purposes at the central government level or the
administration of the free trade port areas to be complied with the specifications in the
attached Chart Two of the Standards. And those industries of specific timeframe
categorized as within the timeframe from ten o’clock in the evening till six o’clock in
the morning, production operation work hours last at least one hour have been verified
by the competent authorities for other purposes at the central government level or the
administration of the free trade port areas to be complied with the specifications in the
attached Chart Three of the Standards.
Second, Taiwan imports foreign nursing labor to assist the development
of domestic long-term care system. The nursing industry is composed of family
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caretaker and institutional nursing jobs. For foreign labor being hired to perform
family caring tasks, the persons under their care shall have one of the following
qualifications: (i) persons with one of items listed in the specially grave physical or
mental diseases; (ii) after professional evaluation conducted by medical institution
through team method, persons are determined as requiring 24 hours care. Moreover,
the employers and the persons under their care shall have one of the following relative
relationships: (i) spouses; (ii) direct blood relatives; (iii) collateral blood relations in
third degree; (iv) marriage relations in first degree; (v) grandparents and
grand-daughters-in-law or grandparents and grand-sons-in-law. The sanatoriums
request enough human resources for nursing jobs to correspond to regulations. So the
institutions face heavy pressure to recruit abundant employee. In that case, importing
foreign labor to those institutions will assist them to operate more smoothly and to
build up completed domestic long-term care system for the coming aging society.
There are some qualifications to ensure the policy can be settled down. For foreigners
hired to perform the institutional caring tasks, the employers shall have one of the
following qualifications: (i) long-term nursing institutions, caring institutions, caring
institutions, or social welfare organizations for receiving and caring middle-range
physically or mentally disable persons, mentally disturbed persons, or persons
suffering from dementia; (ii) nursing and caring family institutions, hospitals for
chronical illness patients or general hospitals, ordinary hospitals or specialized
hospitals with wards for chronical illness patients or respiratory disease wards. The
number of foreign labor would be limited, which is based on the scale of institution.
Last, in order to implement the expansion of domestic demand of employment
on public constructions, we also import adequate number of foreign labor. For
example, major public construction projects under the Twelve Major Infrastructure
Programs controlled and audited by the Executive Yuan, or any national economic
construction projects approved and registered by the Executive Yuan, and their total
amount of construction exceeds 100 million New Taiwan Dollar. Other construction
projects initiated by governmental authorities outside the preceding item, their total
amount of construction exceeds 200 million New Taiwan Dollar, and the duration of
construction is over five hundred and forty-seven calendar days. Generally, if the
public-enterprise construction projects cost exceeding certain amount and the duration
of construction taking over certain period, the employer can import foreign labor for
the projects.
6
Table 2: Overview of foreign worker employment in Taiwan (Nationality) —
2004 to 2010 (Persons)
Source: Council of Labor Affairs (2010).
From Table2, we can found that most Taiwan’s foreign labor comes from
Indonesia, Vietnam, the Philippines and Thailand. Although Taiwan permitted
importing labor from Mongolia in 2004, there were only 1 Mongolian labors in
Taiwan in 2010.
The Taiwan Council of Labor Affairs (CLA) allocates quotas for imports of
foreign labor based on the percentage of foreign labor in each industry in
Taiwan. Originally, the maximum percentage of foreign labor allowed was
15 per cent, 18 per cent and 20 per cent of the total numbers of employees, in
different industry sectors. The restraints were restructured to five brackets of
10 per cent, 15 per cent, 20 per cent, 25 per cent and 35 per cent in 2011, implying
foreign labor can account for as much as 35 per cent of the workforce in some
qualified enterprises (Hwang 2010). The reason for changes of percentage of foreign
labor is that enterprises argue that the previous regulation didn’t fit their needs.
According to the past regulation, they cannot hire enough number of foreign labor to
assist the production. Consequently, instead of facilitating industry developing, the
policy stops the enterprises strengthening competitiveness by importing foreign labor.
Minimum Wage Policy in Taiwan
In order to ensure that labors earn enough to cover their basic living expenses,
the government promulgated the Temporary Minimum Wage Procedure in 1968 and
set the domestic minimum wage at NT$600 per month (Hwang 2010). Taiwan
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experienced a ten-year golden era of economic boom from 1965. With the rapid
growth in economy, the minimum wage was also adjusted upwards irregularly. By
1997, minimum wage in Taiwan had reached NT$15,840 per month. Since then, the
minimum wage stayed at that figure in the following decade. Until 2007, the
government began to increase the minimum wage more frequently. From table 3, we
can see the process of adjustments from the beginning of adopting minimum wage
policy. This year, 2012, the minimum wage was raised again to NT$18,780 per month
or NT$103 per hour. It is about an increase of 5 per cent from last standard which was
carried out just last year, 2011(Council of Labor Affairs).
Table 3: Overview of minimum wage adjusting in Taiwan
Source: National Statistic, R.O.C.(Taiwan) (2010).
Existing regulations carried out by Labor Standards Act in Taiwan prescribe
that the minimum wage should apply to both local and foreign labor and there should
be the same minimum wage everywhere inside the country. Furthermore, for Taiwan
is the member of WTO, Taiwan has to obey the National Treatment Principle to give
equal treatment between domestic and foreign labor. Due to the fair treatment,
enterprises which employ relatively more foreign labor cannot get the benefit from it.
It even constitutes a substantial financial burden on enterprises. The sudden surge in
wage costs means a significant pressure on the profitability of employers. In the other
hand, foreign labor is protected by the regulations to be paid by minimum wage when
they work in Taiwan. Actually, the payment is higher than the other countries
surrounding Taiwan. In that case, the foreign labor gets the benefit and it causes a
strong pull force for attracting more and more foreign labor to come to Taiwan for
work.
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Controversial Issue Related to Foreign labor
It has been 20 years since the foreign labor officially imported into Taiwan, we
need to reflect whether the suitability of importing foreign labor still exists or not. At
the beginning, government expected to get the benefit through importing foreign labor
to get adequate human resources. The implement principle was the concept as the
policies were made. However, according to table 4, the labor shortage ratio in
manufacturing decreased year by year. It makes us to think again the issue: whether
we should adjust the foreign labor policy to protect domestic labor from supplanting
by foreign labor or not.
Table 4: The labor shortage in Taiwan (2002-2011)
Source: National Statistic, R.O.C.(Taiwan) (2010).
Another controversial issue of foreign labor is whether we should decouple the
minimum wage between domestic and foreign labor. In recent years, owing to factors
such as sluggishness in the Taiwanese economy and extremely competitive
international markets and the hike in the minimum wage in Taiwan, some business
enterprises and scholars have advocated decoupling of foreign labor’ wages from the
minimum wage. In their opinion, higher cost of foreign labor will accelerate the
labor-intense industry to move out so that the competitiveness of Taiwanese
manufacturing will drop. In the long term, it will affect investment and generation of
new employment opportunities in Taiwan. The experts claim that decoupling the
minimum wage would encourage companies that have relocated their units elsewhere
to return to Taiwan. However, this section involves many different aspects and the
government should cautiously considerate.
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2.2 Hypothesis Test
Regression Model
Since we have made a substitute hypothesis in the beginning, we are now going
to use the regression model to test whether our hypothesis is true. We have made
regression three times due to some amendment in need.
Regression 1
First, we take deseasonalized monthly data from 2004 to 2009 as resource. We
introduce unemployment rate as dependent variable and numbers of foreign worker as
independent variable, as it shows in Table 5 and 6, and then we find that the
correlation coefficient between these two variable is only 0.046101. For such an
insignificant result, we decide to introduce more independent variable to make an
amendment.
Table 5: Deseasonalized Monthly Unemployment Rate (unit: %)
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2004 4.53 4.61 4.45 4.36 4.41 4.54 4.62 4.67 4.50 4.31 4.14 4.09
2005 4.06 4.28 4.15 4.04 4.10 4.22 4.32 4.36 4.14 4.07 3.94 3.86
2006 3.80 3.92 3.87 3.78 3.84 3.98 4.05 4.09 3.96 3.90 3.86 3.81
2007 3.79 3.78 3.94 3.83 3.87 3.96 4.03 4.09 3.99 3.92 3.87 3.83
2008 3.80 3.94 3.86 3.81 3.84 3.95 4.06 4.14 4.27 4.37 4.64 5.03
2009 5.31 5.75 5.81 5.76 5.82 5.94 6.07 6.13 6.04 5.96 5.86 5.74
Table 6: Monthly Numbers of Foreign Workers (unit: person)
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2004 299,
563
299,
641
298,
122
298,
211
303,
750
301,
764
302,
541
307,
958
307,
182
309,
041
312,
358
313,
728
2005 312,
007
309,
458
304,
518
302,
335
299,
470
300,
408
303,
507
309,
697
315,
221
320,
284
322,
437
327,
055
2006 326,
974
331,
394
332,
840
333,
235
333,
113
336,
581
336,
419
336,
101
336,
508
336,
626
337,
688
338,
402
2007 341,
509
341,
263
345,
442
346,
798
348,
296
350,
573
350,
835
351,
925
355,
378
356,
116
357,
311
357,
544
2008 358,
705
362,
373
364,
814
366,
691
368,
978
371,
672
373,
723
372,
904
369,
308
372,
769
372,
845
364,
629
2009 355,
307
348,
826
342,
792
343,
923
341,
484
341,
026
342,
768
344,
139
345,
295
347,
158
348,
970
350,
548
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Regression 2
We still hold unemployment rate as our dependent variable and numbers of
foreign worker as independent variable, but we add three more variables in
Regression 2, making a multiregression model.
First is the minimum wage. We found that there is a drastic escalation in
minimum wage in July 2007, from $66 per hour to $95 per hour. We believe that there
might be an effect from this variable, but there are two different calculations in
minimum wage, hourly and monthly; thus, in order to make the result unbiased, we
change the variable into dummy variable form, as it shows in Table 7.
Table 7: Minimum Wage (dummy variable form)
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2004 0 0 0 0 0 0 0 0 0 0 0 0
2005 0 0 0 0 0 0 0 0 0 0 0 0
2006 0 0 0 0 0 0 0 0 0 0 0 0
2007 0 0 0 0 0 0 1 1 1 1 1 1
2008 1 1 1 1 1 1 1 1 1 1 1 1
2009 1 1 1 1 1 1 1 1 1 1 1 1
Second is deseasonalized GDP growth rate. Considering every possible factor
that might affect the unemployment rate, we introduce the most important economic
index, GDP. Some research, like Okun’s law, they pointed out that there is a
relationship between GDP and unemployment rate, and in order to make our
explanation unbiased and make it strongly connected between each period , we
introduce GDP growth rate as our second independent variable, as it shows in Table 8.
Table 8: Deseasonalized GDP Growth Rate (unit: %)
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2004 0.21 0.21 0.01 0.01 0.01 0.40 0.40 0.40 0.40 0.40 0.39 0.52
2005 0.52 0.52 0.14 0.14 0.14 1.29 1.27 1.26 0.09 0.09 0.09 0.31
2006 0.31 0.31 0.33 0.33 0.33 0.54 0.54 0.54 0.35 0.34 0.34 0.62
2007 0.62 0.61 0.78 0.78 0.77 0.38 0.38 0.38 0.45 0.45 0.45 -0.01
2008 -0.01 -0.01 -1.19 -1.21 -1.22 -1.69 -1.72 -1.75 -0.40 -0.41 -0.41 1.19
2009 1.17 1.16 0.86 0.86 0.85 1.65 1.62 1.59 1.40 1.38 1.36 -2.19
Third is CPI. Considering every possible factor that might affect the
unemployment rate, we introduce CPI as an inflation factor into our regression model,
as it shows in Table 9.
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Table 9: CPI
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2004 96.3 97.1 97.1 97.2 96.8 97.0 97.3 97.8 98.1 98.1 97.1 97.4
2005 97.4 98.1 98.4 98.8 98.8 99.2 100.2 100.1 100.1 99.2 99.2 99.4
2006 99.6 99.8 99.7 99.6 100.6 100.5 100.6 100.1 100.0 99.3 99.8 100.4
2007 101.1 100.9 100.6 101.0 101.0 100.7 101.0 101.9 102.3 103.6 103.6 103.8
2008 103.7 104.2 104.3 104.8 104.8 106.4 106.6 106.5 106.1 106.1 105.8 104.6
2009 104.3 103.8 103.8 104.1 104.4 104.3 104.2 105.4 105.6 105.2 104.8 104.8
Table 10 shows the result of Regression 2:
Table 10: Result of Regression 2
Y: Unemployment Rate
ß1: Minimum Wage 0.77226467
ß2: Numbers of Foreign Worker -3.41168E-05
ß3: GDP Growth Rate 30.80050762
ß4: CPI 0.223527021
ß: coefficient of variable X
As the result shows above, we find a negative relation between unemployment
rate and numbers of foreign worker, which conflicts our hypothesis, but we also
notice that the number of foreign worker has huge differences among counties. Thus,
we change our regression resource from general data to individual county data, in
order to get rid of the bias resulted from regional difference.
Regression 3
In order to get rid of regional effect, we change the scale of our resource, from
general to individual counties, but the form of variables remains the same. Table 11
shows the result.
Table 11: Result of Regression 3
ß1: Minimum
Wage
ß2: Numbers
of Foreign
Worker
ß3: GDP
Growth Rate ß4: CPI
Keelung City 0.46593 0.00167 23.51430 -0.16180
Taipei City 0.91668 -0.00008 49.50979 0.06591
New Taipei City 1.30943 -0.00009 43.72763 0.01139
Ilan County 0.21888 0.00081 28.24863 -0.14763
Taoyuan County 0.00667 -0.00017 4.15067 0.12225
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Hsinchu City 0.12974 -0.00095 5.92959 0.08113
Hsinchu County 0.46593 0.00167 23.51430 -0.16180
Miaoli County 0.88865 0.00004 42.99496 -0.03445
Taichung City 0.87834 -0.00050 33.50433 0.16808
Taichung
County 1.17658 -0.00024 31.17964 0.16106
Changhua
County 0.58394 0.00027 44.26074 -0.13814
Nantou County 0.46593 0.00167 23.51430 -0.16180
Yunlin County -0.50230 -0.00026 44.64591 0.12879
Chiayi City 1.13989 0.00008 33.69482 -0.10065
Chiayi County 1.37847 -0.00052 41.44176 -0.02587
Tainan City 0.98146 -0.00046 44.47335 0.03457
Tainan County 1.44947 0.03741 -0.41880 -0.13358
Kaohsiung City 0.97199 -0.00038 32.11334 0.16610
Kaohsiung
County 0.88052 0.00002 40.45160 -0.04374
Pintung County 0.95823 0.00007 37.40602 -0.08835
Penghu County -0.15684 0.00413 38.00297 -0.17402
Hualian County 0.95022 -0.00002 37.50613 -0.06131
Taitung County 0.76693 0.00123 27.35169 -0.12002
In Regression 3, we find that there is a significant positive relation between
unemployment, minimum wage and GDP, but the relation between unemployment
and the number of foreign worker is ambiguous. After analyze the ambiguous result,
we find an interesting phenomenon. In those foreign labor abundant counties, where
foreign workers above 10,000, six out of eight counties show significant negative
relation: New Taipei City, Taoyuan County, Hsinchu County, Taichung City,
Taichung County, Changhua County, Tainan County, Kaohsiung City. In those
foreign workers scarce counties, where foreign workers below 10,000, five out of
seven counties show significant positive relation: Keelung City, Ilan County,
Hsinchu City, Hsinchu County, Nantou County, Yunlin County, Penghu County.
(When P-value is below 0.05, we call it significant)
In brief, there is a significant negative relation between unemployment and
numbers of foreign workers in foreign labor abundant counties, and significant
positive relation in foreign labor scarce counties. We conclude that foreign and
domestic labor are complement in foreign-labor abundant county and substitute in
foreign-labor scarce county. (2010 Hwang)
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Possible Reason
For the regression model somehow contradict to our hypothesis, we find out
some possible reasons to explain this situation. We conclude two reasons: one is
industry structure, the other is government policy. First, due to industry structure
differences among counties, the relation between foreign and domestic labor might be
different. Some industries need a lot of basic labor, which is foreign labor, and
therefore need more leaders or managers, which are domestic labor, but some
industries do not; thus, the difference results in different situation among counties.
Second, the government might outsource some project, like construction, to company,
and those project needs a lot of basic labor; thus, the construction company needs
much more foreign labor, but still, the situation is different among each county.
Policy Recommendation
Due to the regional difference, we recommend the government apply different
policy in different counties to intervene the labor market in order to maximize social
profit.
Conclusion
To unemployment rate, the number of foreign labor is not a significant factor.
The effects of GDP and the minimum wage on unemployment are much more
significant. Thus, the positive relationship between unemployment rate and number of
foreign labor from the observation is a coincidence. They happened to change
correspondingly, but have no significant relation in regression model.
Controversial Issue
A. Necessity of the foreign labor in labor market
As we know, job vacancies are finite, and continuously importing foreign labor
definitely hurts domestic labor a lot. So, regardless of practicability in law, should we
stop importing foreign labor or set quotas for them?
In the very start, we import foreign labor to recruit labor force. In late 1980s,
because the economy was booming, job vacancies increased a lot. Taiwan is short of
labor force then. Therefore, the government decided to begin importation of foreign
labor to solve the problem. That is, the reason we began official importation of
foreign labor is shortage of total labor force.
However, the situation is totally different nowadays. As the industries’ structure
changes, economic development and education level progresses, and domestic labor
seeks for a higher level of work, which cause low-end jobs lack candidates. Therefore,
foreign labor is indispensable now because they do those low-end jobs that domestic
labor would not like to do.
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Graph 3: Labor Shortage Ratio from 1997 to 2011 (unit: %)
Graph 3 presents the labor shortage ratio of industry from 1997 to 2011. The
red, blue and green lines represent industry, constructing and manufacturing
respectively, which are industries with abundant foreign labor. From this graph, we
can see that the trends of these three lines are declining, which is the evidence that
importation of foreign labor effectively filled shortage of unskilled labor.
As industrial transformation happening in the last twenty years, the role of
foreign labor really changed a lot and is now indispensable in our society, for they do
low-end jobs that domestic labor are not willing to do. The necessity of foreign labor
is clear and it is hard to reduce or stop employing foreign labor at all.
B. Decoupling of minimum wages
Graph 4: Number of Foreign Labor Graph 5: Minimum Wage
Graph 4 shows the total amount of foreign labor from 2004 to 2011, and Graph
5 shows minimum monthly salary from 2004 to 2011. The minimum wage and
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
工業
礦業及土石採取業
製造業
水電燃氣業
營造業
Industry
Mining
Manufacturing
Water, electricity and gas
Construction
15
quantity of foreign labor are both increasing in the past eight years.
When the minimum wage and the number of foreign labor are increasing, firms
in Taiwan suffer from increasing operating cost and try to cost down, such as moving
out to China and asking government to decouple the minimum wage.
What if we decouple the minimum wage of foreign labor with that of domestic
labor? Following are pros and cons:
Pros:
1) Lower cost and higher competitiveness of firms
The labor intensive industry is especially affected. After decoupling, the
wage of foreign labor goes down; therefore firms can lower their price of
products to enhance their competitiveness.
2) Attracting Taiwanese firms in China back to Taiwan
If government carries out the decoupling policy, Taiwanese factories would
move back. The demand for diet, transportation, finance and livelihood can
prosper local economy.
Cons:
1) Worse international impressions
Taiwan has international labor conventions with other countries. If Taiwan
decoupled minimum wage, other members would take some reprisal
measures, like trade sanctions.
2) Less job vacancies for vulnerable domestic labor
If the wage of foreign labor goes down after decoupled, it will be harder for
disadvantaged labor to find jobs (because the minimum wage of domestic
labor is higher than the wage of foreign labor).
3) Possible boycott of foreign labor’s home countries
Because decoupling makes foreign labor get less pay, it may irritate some
home countries of foreign labor. They may stop exporting foreign labor for
revenge.
So far, decoupling is only beneficial for firms but harmful to many aspects of
Taiwan. That is, though decoupling is somewhat favorable in some aspects, it may
bring much more terrible and unpredictable results.
In the government’s view point, whether in law field, human-right field or
moral field, the decoupling is not feasible at all. And the fact is that, there is no
country decoupling the minimum wage of foreign labor with that of domestic labor
now. Firms must find other ways to cost down, or try to value up.
16
III. Conclusion
3.1 Review of Research Findings
According to the research results, we found that the results in general and in
counties level are different, and even converse. With general data, it shows that
when the number of foreign labor rises, the unemployment rate decreases. It means
that instead of damaging our domestic job market, the increasing amount of foreign
labor even help more domestic labor to get a job. On the other hand, in counties level,
there are two aspects of the results. If it is a county with abundant foreign labor, the
unemployment rate would decrease when foreign labor is increasing. There are
complementary with each other. Nevertheless, if it is the county with scarce foreign
labor, the relationship between them is substituted.
3.2 Possible Explanations for the Results
The possible explanations for the result may be that when foreign labor keeps
being imported to Taiwan, they not only get a job but also create additional job, such
as management vacancies. Because the employers would need more people to manage
the increasing number of foreign labor, then it would boot the demand of domestic
labor. Moreover, this phenomenon will be more obvious in the counties with abundant
foreign labor.
3.3 Recommendations for Future Research
Since the introduction of foreign labor did not damage our job market. We
should corporate with them. In other words, we can encourage the domestic labor to
move to higher management level and hire foreign labor to fill up the basic level job.
Also, Based on previous discussion, it is not appropriate for decoupling in the
future for there are still a lot of non-economic controversies, such as human rights,
politics and international law.
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IV. References
Essay and Periodical
1. Hart, Vivien. 1994. Bound by our Constitution: women, workers, and the
minimum wage. New Jersey: Princeton University Press.
2. Starr, Gerald. 1993. Minimum Wage Fixing: An International Review of
Practices and Problems. Geneva: ILO.
3. Jen-Te Hwang, Chieh-Hsuan Wang, and Chien-Ping Chung. 2010. “Is it
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