Management leaders, government officials, and economic observers alike are closely monitoring the transforming environment, as is senior economic and political analyst Osman Tseng, Vice President of the China Economic News Service, who has the following analysis of current developments on management-labor issues in Taiwan:
Demonstrations staged by local workers to protest management policies are increasing not only in number, but also in intensity, causing concern in all economic circles. In two short months earlier this year, more than 40 major labor demonstrations occurred throughout Taiwan. Most took the form of work stoppages and slowdowns, protest activities which until recently were unprecedented in Taiwan's history of labor-management relations.
Some of the activities had adverse effects which spread far beyond corporate borders. For example, a strike launched by bus drivers in Taoyuan County to demand larger year-end bonuses at the Chinese New Year lasted for three days and affected as many as 200,000 commuters.
Reasons for Taiwan's proliferation of labor protests are many. Chief among them is laborers' newfound awareness of the right to seek more reasonable treatment from employers. Their position is now reinforced by two favorable developments. One is that the sustained growth of the ROC's economy continues to boost demand for workers, strengthening their power to negotiate better terms of employment. Another is that as Taiwan's society moves toward greater democracy, it imposes fewer legal restraints on how people express their dissatisfaction. Virtually all protest activities are now legal in Taiwan, as long as they are non-violent.
Growing labor awareness aside, out-of-date laws and the inability of employers to catch up with the times in leading their workers are other important factors in Taiwan's proliferating labor protests. The Collective Contract Act, for example, was proclaimed a half century ago and has never been updated. One basic problem with this law is that it lacks a vital provision requiring employers to sign collective contracts with their workers. Because of this omission, most labor unions have difficulty persuading employers to sign those contracts, documents which spell out major obligations such as wages, hours, and working conditions.
That so many disturbances broke out before Chinese New Year was due mostly to the dissatisfaction of employees with the amount of their year-end bonuses. Many expected much more than they received, especially because their employers had registered large increases in profits in the past year due to booming sales. Employees felt they deserved corresponding increases in year-end bonuses.
But employers did not agree. They viewed such bonuses as payment beyond wages, and felt the decision on proper amount was a matter of employer discretion. Disputes could have been avoided, said many labor affairs experts, if collective contracts had been reached between labor and management with the inclusion of a clear-cut stipulation on the issuance of bonuses.
The unwillingness of companies to sign employment contracts reflects their attempt to prevent labor from gaining the advantage of collective bargaining power. But it also shows an employer concern that a contract with everything written in black and white makes it more difficult to avoid obligations. This is an established orientation. One primary source of increasing labor-management disputes over recent years has been employers who try to cut labor benefits stipulated in a law enacted in 1984 to protect labor interests. And this evasion was largely achieved by using loopholes in the Labor Standards Law.
One widely used practice utilized by employers has been to offer below-market-rate wages so they can save on expenses for severance pay and for retirement pensions. Both kinds of payments are calculated according to an employee's monthly wages and length of service.
To make up for lower wages—and thereby stay competitive in the labor market—companies offer bonuses in all possible names and guises. This is possible because under the labor law, some 26 kinds of bonus and prize money are not treated as wage income and, therefore, their issuance does not affect employees' future severance pay or retirement pensions.
Another popular benefit-cutting scheme used by employers is to under-report wages when providing compulsory labor insurance for their workers. Under this same labor law, employers must cover 80 percent of labor insurance premiums, with the remainder paid by workers themselves. The lower a policy-holder's wages, the less the employer's insurance expenses will be. A recent island-wide inspection of both government and private companies with a work force of more than 700 found that 98 percent underreported employees' wages to the Labor Insurance Bureau, all for the sake of reducing legitimate labor costs.
Employers must stop using these and other shameful labor practices if they are to maintain or improve relations with workers, as well as ensure a lower turnover rate and raise productivity. In the old days when workers were unfairly treated, they withstood it without making complaints or protests. But today's workers are better educated and more realistic; they want not just a job, but fair treatment and all the employee benefits they deserve. If these requirements are not met, workers could try to bargain collectively and, in serious cases, could even strike.
In short, employers must change their old-fashioned concepts in dealing with labor relations. First, they need to break with traditional authoritarian management, which demands absolute submission by employees. This is not only because that kind of management no longer works and tends to provoke resentment from employees, but also because it serves to discourage two-way communication in the workplace, which is essential to raising efficiency and product quality.
Employers must also change their old method of cutting labor benefits to boost competitiveness and profits. While this can pay off in company revenue in the short run, it can destroy one of the most important ingredients in company success: employee loyalty.
Another reason the reduction of production costs at the expense of labor cannot be continued is that it raises growing concerns in the U.S. and in other countries with which Taiwan enjoys a trade surplus. In a recent letter addressed to the ROC government, the U.S. Labor Department asked for information about Taiwan's labor laws, basic wages, and its promotion of labor rights, such as those to form unions and to stage strikes. That department, as well as many other labor affairs organizations, seems unsure whether Taiwan is actually providing adequate protection for its labor interests. If not, they may decide that Taiwan is taking advantage of its labor to boost export competitiveness, and this will be considered a form of unfair trade practice. This issue should be given proper attention by all related local authorities, especially those companies engaged in exports.