Sunday, March 26, 2017

INTERVIEW: Academic pans one-size-fits-all approach to labor reform

INTERVIEW: Academic pans one-size-fits-all approach to labor reform

Discussing recent amendments to the Labor Standards Act with ‘Liberty Times’ (the sister newspaper of the ‘Taipei Times’) staff reporter Cheng Chi-fang, National Taiwan University associate professor Hsin Ping-lung said that baseline employees are likely to suffer the most because of rising commodity prices, a net decrease in income and little hope of pay raises

National Taiwan University associate professor Hsin Ping-lung gestures during an interview in Taipei on Feb. 3.

Photo: Chien Jung-fong, Taipei Times

Liberty Times (LT): The National Development Council has said that the amendments will not have a big impact. What are the actual effects?
Hsin Ping-lung (辛炳隆): The effects of the policy on society are greater than the council’s assessment because the council made its assessment based on data from the entire tertiary service sector nationwide, while we [the university] are making our assessments based on companies that have not complied with the policy.
According to our calculations, personnel overhead for the entire service sector has increased by 12.41 percent, increasing its overall overhead by 1.37 percent.
Restaurants have projected the highest increase in personnel costs at 17.04 percent, while their total overhead has increased by 5.9 percent, cutting into its 13.96 percent margin of profit by about 40 percent.
Personnel costs for retail have increased by 13.33 percent, increasing the total overhead for the industry by 1.73 percent, while transportation and storage industries have seen an increase of 9.67 percent to personnel costs, while their total overhead increased by 1.62 percent.
Some restaurant businesses said that some of their personnel costs have increased by 20 to 30 percent. While this is true, costs should at most cap out at 30 percent.
Normally, personnel costs at restaurants and eateries are 20 percent of total overhead, and in the event of a 30 percent increase in personnel costs, the total increase to overhead should rise by 6 percent. However, recently it rose by 10 percent.
If business owners are not in agreement on increasing prices, the market should be the prime determining factor.
Even so, there must be a clear reason, whether it is higher rent, increased prices for water and electricity, or additional material costs. The amendments to the Labor Standards Act (勞動基準法) cannot be blamed for everything.
The manufacturing industry is affected to a lesser degree, with 8.01 percent overall personnel increase and total overhead increase of 0.8 percent.
However, labor-intensive manufacturing industries are affected to a greater degree.
For example, personnel costs for the garment and jewelry industry have grown by 13.89 percent, with a total overhead increase to 2.72 percent, while estimated margin of profit stands at 2.17 percent.
The furs and leathers manufacturers have seen their total overhead increased to 2.1 percent, while its project margin of profit only stands at 2.9 percent.
These companies are seeing higher overhead and lower profits and might be the first to do away with overtime.
The consumer price index (CPI) over the past five years has been at an all-time low due to the downturn in Taiwan’s economy, but the businesses have all refrained from scaling up the prices until now.
The government’s reaction to price increases has also been on the slow side.
With Premier Lin Chuan (林全) saying that “price hikes are an inevitable result,” business owners see no reason not to increase their prices accordingly.
LT: Some companies have already increased their prices, reduced services, or placed restrictions on overtime as well as the hiring of temporary staff. How does all this affect workers and consumers?
Hsin: When the legislators amended the law, they did not think of how many people would not be able to work overtime due to the amendments. Worse, the index used to calculate overtime was the result of a “compromise” at the Legislative Yuan after a considerable debate.
The Legislative Yuan forgot to calculate how many corporations would actually be able to afford such rates, which brings us to our current state, in which most workers are aware of the rates, but cannot be paid those rates.
According to our research, there are many people in Taiwan who work second jobs due to low wages and the long hours required to meet their living expenses.
The question is whether the government should allow them to work elsewhere, or to simply work overtime at their primary jobs.
I think that they should work at their primary jobs, as there are regulations in place that would prevent individuals from being overworked.
After all, the calculation of work hours is based on the company and not the individual; if one worked eight hours in one company and then another eight hours at another company, they would be working overtime, but it would still be legal.
The result has two connotations, the first of which is that workers are severely underpaid. While the government hopes that workers could have more rest time, this comes at a price of workers not be able to earn enough to meet their living expenses.
Second, in the past it was corporations who were the ones to say that the Labor Standards Act could not be applied universally. Actually, the term “workers” cannot be applied universally as well.
While some workers are complaining about their inability to work overtime, other stand to gain.
For example, some hospitals are halting weekend shifts and many doctors are happy that they now have weekends. Doctors, being highly paid, therefore would want more days off rather than making more money.
In addition, there are suspicions that the amendments have intervened in the autonomy of labor. The workers are willing to put in extra hours for the extra pay, but the government has amended the law mandating that the companies deny their workers such options.
Even with additional hours on weekends, the workers are still getting one off day for every seven work days, and such a schedule may not have a significant impact on their health.
We must ask if the amendments that intervene in the autonomy of workers is right or wrong.
LT: Employers and workers have complained about the amendments. How should the amendments be adjusted or the policy modified?
Hsin: I believe the government should allow more overtime. If workers are concerned with increased overtime, the maximum allowable work hours per month could be raised from 46 hours to 54 hours, then a cap could be placed on the total overtime performed per year.
For instance, the total available overtime per year does not need to be derived by multiplying 54 hours by 12 months. We can take off 10 percent of that to allow flexibility in monthly work hours, but still reduce total overtime per year. This is a solution that should be acceptable to both employers and workers.
However, increased overtime may not help the service industry. For example, increasing overtime at a restaurant time will not have much effect, because the time available for work is limited by the customers’ meal times.
The service industry might have to hire more full-time or part-time employees, or it can try to acclimate customers to reduced service; but those solutions only address problems from the consumers’ end and does little to raise income for workers.
When low-income workers are concentrated on the food industry and the retail industry, the inability for employees to work overtime would have a negative effect on wages. In other words, raising the wages of low-income workers is the real problem.
I am not inclined to argue for amending the law again right now. Before considering further amendments or modifications to policy, the government should try to understand actual working conditions. How many people are moonlighting part-time because they are deprived of overtime work? What has been the policy’s impact on disadvantaged workers?
Government agencies have little idea of the actual situation at the moment. Committing to policy modifications without a coherent theory or adequate data may change things, for the worse.
LT: The Labor Standards Act amendments have been plagued by controversies from the start. What went wrong? How can the government avoid repeating its errors?
Hsin: The issue was highly politicized from the very beginning, when the Democratic Progressive Party (DPP) blocked the then-Chinese Nationalist Party (KMT) government’s proposal to cut seven national holidays.
[After the transfer of power,] the DPP found itself proposing to cut those same holidays, which it tried to compensate by implementing the “two-day weekend” scheme.
However, by then the “two fixed days off” counter-proposal was let out of the bottle, and the government found itself trying to fight it by adding more goodies to its proposal, including overtime pay and extra annual leave. Those measures were implemented without any follow-up research on their effects. The controversies became a runaway problem that completely got out of hand.
Other effects of the Labor Standards Act amendments might follow. For example, industries might accelerate their automation, driving down employment. For the government to protect workers, it must set its priorities.
I believe that employment and wages should take precedence over issues of work hours and vacation time. The government cannot possibly reach every policy objective it wants because employers are bound to transfer costs and react to policies, which may lead to more negative effects for workers than the previous “status quo.”
It is not likely that wages will be raised. With talks of raising the premium of the national labor insurance, it is even less likely that wages will be raised in the future.
The government needs to understand this fact: For both businesses and workers, it is no longer appropriate to apply a single set of labor standards in one code of law.
Every industry requires a different set of regulations, and to insist on uniformity is to court disaster. The reforms have backfired.
Translated by staff writers Jake Chung and Jonathan Chin

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