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

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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)

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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.

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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

7

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.

17

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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Website

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http://www.evta.gov.tw

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http://www.moea.gov.tw

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