The impact of the overtime policy reform–evidence from the low-paid workers in Taiwan

Abstract

This article investigates the effects of shortening standard workweek on workers with different income levels. Using two repeated cross-sectional survey data, the Taiwanese Manpower Utilization Survey and Human Resource Survey, we estimate the impacts of the new policy on working hours and monthly income. Our results show that the new standard workweek in Taiwan has made the working hours drop, but the scale of decrease becomes smaller in the following 3 years. Although the hours drop has gradually risen back for every worker, the rate of increase is higher for the low-income workers. The monthly incomes of the high-income female workers have decreased, however, the decreases in the hourly wage rates are less than their average wage rates. Our results also show that the firms have automatically adapted under the new law and a poor enforcement scheme after a period of time.

Acknowledgements

Long-Hwa Chen would like to thank the China Foundation for Promotion of Education and Culture for the financial support for the trip to the conference in Denmark. The authors would also like to thank the participants of the Second Annual LoWER Conference 2006 in Denmark as well as Prof. Tor Eriksson for helpful comments. All data used in the article are available upon request and all errors in this article are, of course, our own.

Notes

¹ The theoretical context of the related issue was first developed by Lewis (1969). For more discussions, see Trejo (1991) and Costa (2000a, b).

² The amended article in 1996 stated that ‘every employer–employee relationship is covered by the LSL’.

³ Data are collected once every May. See Section III for details of the datasets.

⁴ There are only a small number of big unions in Taiwan; all exist in the companies that are previously owned by the government. For example, Chinese Petroleum Corporation, Chunghwa Telecom, China Steel Corporation, etc., are previously owned by the government. The government still holds 20–40% of the stock in these companies.

⁵ The two papers discuss that the existence of the CLA has improved the enforcement of the LSL for protective measures for women. However, the papers did not discuss that the enforcement effort might be decreasing after a certain period of time.

⁶ Report on Weekly Working Hours in Businesses in 1999 by CLA (March 2000).

⁷ Report on MUS, Taiwan Area, ROC, 2001.

⁸ For more detailed discussions, please see Costa (2000), Trejo (1991), Hamermesh (1993), Hamermesh and Trejo (2000) and Ilmakunnas (1995).

⁹ The minimum wage level in Taiwan is regulated to be NTD 15 840 monthly and it has not been changed since 1998. This monthly style of minimum wage level setting is different from the minimum hourly wage rates that have been regulated elsewhere. The question in the survey asked how much people earned in the last month.

¹⁰ The reason that causes people to report monthly earnings less than the regulated level is probably due to poor enforcement.

¹¹ See pp. 618–620 in Connolly and Gregory (2002) for detailed discussion.

¹² See BDM (2000, pp. 21–4).

¹³ We include age, marital status, education attainment and occupations.

¹⁴ The change in hourly wages is calculated by dividing the change in monthly income by the change in weekly hours worked times 4.28, assuming a month contains approximately 4.28 weeks.