Economy & Business

Taiwan's migrant worker issues

14 April, 2022

Taiwan is facing a shortage of migrant workers and the government is belatedly taking action to improve their rights and future prospects. However, it remains questionable if changes will go far enough to recognise and value the vital role they play in Taiwan's economic and social development.

By Paul Shelton

The recent announcement number of Covid-19 cases tied to a cluster infection that started at the Datan Power Plant in Taoyuan City has served to, once again, sharpen focus on migrant workers. Whilst this article will address some positive developments, it also aims to put the migrant worker situation into a realistic perspective.

Migrant worker numbers in Taiwan
Despite Taiwan's reliance on migrant workers, the number of migrant workers in Taiwan has fallen from 718,058 at the end of 2019 to 669,992 at the end of 2021. This compares to the statistics from the Ministry of Labor (MOL) October 2021 that reported the total number of migrant workers in Taiwan at about 680,000, including 449,000 working in industrial or manufacturing jobs (often referred to as the "3D" industry ("dirty, dangerous, and difficult") and 230,000 working as caregivers. The drop is primarily attributed to Covid-19 restrictions that have limited the ability of migrant workers to enter Taiwan.

Whilst Taiwan re-opened its borders to some migrant workers on 11 November 2021 (with further relaxations that have now been initiated), and despite a steady trickle of new arrivals, the ban issued in the previous year has caused a severe labour shortage in various industries in Taiwan.

Indonesian migrant workers make up for 35.36% of all foreign workers in Taiwan, followed by those from Vietnam (35.05%), the Philippines (21.17%), and Thailand (8.42%).

According to the MOL's report in 2020, there are around 58,000 Taiwanese businesses that are categorized as "3D" industries, and most are small to medium-sized companies which perform special manufacturing processes or operation systems, such as casting, surface treatment, printing, dyeing, and more. These operations are regarded as "difficult" and many Taiwanese are unwilling to do it, leading to the industry facing a shortage of labour and having a high demand for migrant workers.

Taiwan relies heavily on migrant workers. These workers make huge contributions in the manufacturing and electronic sectors and help sustain the growth of Taiwan's economy. 

The treatment of migrant workers in Taiwan
Despite the heavy reliance on migrant workers, it is regularly reported that, the rights and dignity of migrant workers often take second place to company profits. In general, migrant workers face enduring physical and emotional stress while the infrastructure for addressing their concerns remains limited and often difficult to access.

Even before the Covid-19 pandemic, there have been complaints about migrant workers being forced to stay in overcrowded dormitories with insufficient facilities. Complaints include almost no private space, exposing them to physical health problems due to the confined and sometimes squalid environments, making it hardly surprising that cluster infection outbreaks continue to occur.

The plight of migrant workers in Taiwan has even drawn the attention of international observers.  The US State Department issued a report in 2020 in which concerns on human rights practices in Taiwan, including concerns about what it saw as "forced labour" occurring in sectors reliant on migrant workers were highlighted. These sectors included domestic services, fishing, farming, manufacturing, meat processing, and construction.

Language barriers are cited as a typical example of where accidents happen, due to the misunderstanding between migrant workers and their employers. Also cited as a contributor to mental stress is the lack of opportunities to participate in social activities. Migrant workers often find it virtually impossible to pursue language classes or leisure activities, as they are overwhelmed with work and have trouble reaching out to and socializing with Taiwanese people. 

In addition, underneath poor labour conditions and the lack of social engagement is skepticism found among a large part of the Taiwanese society. The reported view is that Taiwanese people ignore or pretend not to see migrant workers as if they had nothing to do with them.

One explanation is that most Taiwanese people are not familiar with Southeast Asian cultures, thereby rendering their understanding of migrant workers from the region superficial but it is also true that there are few proper academic studies on the attitudes from Taiwanese vis-à-vis migrant workers. The lack of studies hinders a clear understanding of the plight of migrant workers, with a resulting slow down in the process of updating programmes that would help them with physical and mental challenges.

Observers of the rights of migrant workers also argue that the Taiwanese government has not previously paid sufficient consideration to migrant workers especially with the espoused aim to "globalize" Taiwan's workforce. It is argued that the current administration should include migrant workers in its New Southbound Policy (NSP), a flagship policy adopted in 2016 to enhance Taiwan's ties with 18 countries in Southeast Asia, including the ASEAN member states. It is also argued that the people-centric value of the NSP should remain the nucleus of Taiwan's strategy of enhancing ties with its regional partners and like-minded countries. But, it seems, people like migrant workers are excluded from Taiwan's ambitious strategy. Surely recognizing the important role of migrant workers in the NSP could help forge greater ties with these countries and boost Taiwan's people-to-people linkages with its partners.

It is not that Taiwanese authorities have done nothing, in the past, to try to help migrant workers. Attempts have been made to provide free Mandarin Chinese and Taiwanese Hokkien classes. However, most migrant workers are too busy to pursue language classes, which have made their possession of adequate Mandarin ability virtually unattainable.

For domestic care workers, there is also the issue of being excluded from the Labor Standard Act. This exclusion means they are not granted equal legal protections and rights, such as no regulation on maximum weekly working hours, as those of locals or migrants working in other sectors. Forced overtime has also been an enduring issue that migrant workers have claimed and voiced protest, including the call for the inclusion of two days off per week as per Taiwan's regulations.

Taiwan opened its doors to foreign workers some 30 years ago, but never has it needed them more than now. The government has repeatedly loosened restrictions on bringing in construction workers from abroad to ease the shortage, but the inflow of labour was frozen in May 2021, when a serious Covid-19 outbreak in Taiwan led to strict border controls. As a result, construction companies face a nightmarish situation. Migrant workers in Taiwan are being poached by other companies at a time when new people may not be brought in from overseas to replace them.

The resulting higher demand for labour has forced companies to bid up wages. In some instances, it has been alleged that contractors at construction sites need to offer triple wages to get workers and pay them in cash by the day.

The race to attract workers with higher wages has also been fueled by the need to keep construction projects on schedule. The human resources cost of a migrant worker, not including overtime, is now over NT$40,000 a month, well above the current minimum wage of NT$24,000.

The construction sector is simply a microcosm of the problems facing other parts of the economy. Across the board, for the first time in history employers can no longer choose from a large pool of prospective employees. Instead, the average migrant worker today can pick from over 10 jobs on offer. 

Long-term care operators in central and southern Taiwan have seen foreign caregivers head to construction sites to get paid by the day, leaving nobody to care for the elderly. In effect, families that want to hire caregivers are at the bottom of the recruiting food chain. Domestic caregivers only make NT$17,000, NT$7,000 less than migrant workers employed by companies. Statistics from the first five months of 2021, indicated that there were 1,751 caregivers who switched for factory or construction jobs, six times the number seen in all of 2020.

Employer groups complained about the trend, and the MOL agreed, in August 2021, to raise the threshold migrant workers have to meet to change jobs. Priority was given to employers in the same field to hire the worker, and only if no other employer makes a hire in 14 days can the worker change industries.

The recent chaotic pursuit of labour around Taiwan has been mainly driven by the investment wave and Covid-19 pandemic, but structural components are also at play. Almost all Taiwanese go to college, reducing the availability of basic manual labour, and industrial employers have had to recruit and rely on overseas labourers to fill the gap.

Also, Taiwan's labour force is shrinking. The Ministry of the Interior estimated that more people will retire from the workforce (329,100) in 2021 than enter the job market (320,800) for the first time.

Taiwan is not competitive on the wage front. Without migrant workers to pick up the slack, several economic sectors will have trouble functioning, and even reopening the country's doors to overseas workers will not automatically solve the problem. This is largely because the competitive edge Taiwan has had in recruiting migrants is gradually disappearing.

Taiwan had an advantage early on because migrant workers were protected by the Labor Standards Act. That meant that they could make the minimum wage and get a raise when the minimum wage went up, leaving them better paid than if they worked in Singapore or Hong Kong. 

But other countries have increased wages for migrant workers in recent years, and now Taiwan's wages for industrial workers are lower than anywhere else in Asia, except for Singapore, and even there Taiwan's edge is narrowing.

The real challenge for Taiwan is coming from Japan and South Korea, which have opened their doors to workers from Southeast Asia. Previously, Japan had addressed labour shortages in the past by bringing in Chinese nationals as "technical interns" while South Korea turned to ethnic Koreans in China and Russia. 

But as China has prospered, fewer Chinese need to go abroad to find work, forcing Japan and South Korea to shift their focus to migrant workers from Southeast Asia. The changing focus has dealt a blow to Taiwan, which finds itself increasingly marginalized in the migrant worker labour market because of the relatively high wages paid for industrial work in Japan and South Korea.

In Japan, for example, the Chinese "technical interns" that once made up more than 70% of its overseas workers now account for less than 20%. Japan began allowing in people with specified skill visas in 2019, leading to the recruitment of foreign caregivers. Japan's top three targets have been Vietnam, Indonesia, and the Philippines, the same countries where Taiwan finds most of its overseas caregivers, but Japan has also been hard hit by Covid-19 and imposed some of the strictest limits to foreigners entering Japan (even those with existing visas).

The other problem for Taiwan is that fewer Southeast Asian countries are exporting labour as they grow stronger.  For example, Thailand now supports the the development of its own industrial sector. At one point, Thailand was the main source of labour for Taiwan's public infrastructure projects, peaking at 140,000 workers. But today, fewer than 60,000 Thai workers remain in Taiwan.

With the global labour market battle underway, the days when Taiwan could bring in large numbers of migrant workers are numbered. At the same time, the emergence of the poaching of workers as the "new normal" indicates that treating migrant workers as cheap labour is no longer viable.

Taiwan is entering the ranks of developed countries and needs viable and practical answers to its labour shortage issues. The MOL, which is responsible for the country's labour supply, has come under pressure to address the problems.

At present, Taiwan's Labor Standards Act only applies to two types of migrant workers, industrial labourers and caregivers in long-term care institutions. More than 200,000 caregivers who work for families make less than the minimum wage. These caregivers should be brought under the Labor Standards Act.

It is now widely accepted that the era of cheap migrant workers will not return. In addition, labour exporting countries and supply chains are now advocating a policy of "zero expenses" for migrant workers. This means employers taking on the cost of air tickets, physical check-ups, and brokerage fees that the migrants typically shoulder at present (by further indebting themselves even before they arrive in Taiwan). In following the international trend, Taiwanese employers should pay. 

Beyond wages, the protections afforded migrant workers in Taiwan lag behind the market. For example, caregivers live in the homes of the families that employ them and are on duty virtually 24 hours a day, but they receive no overtime pay, are often expected to do household chores, and reportedly often have no "time off". All these factors are a clear infringement of their rights. 

Manufacturers in Taiwan must enroll their overseas workers in the national labour insurance programme, but the coverage for migrants does not include unemployment benefits. So whenever migrant workers quit their jobs as a result of unpaid overtime, they cannot get unemployment benefits and are forced to borrow money to survive. By contrast, migrant workers employed by long-term care institutions in Japan are not only paid the same wages as their Japanese counterparts for the same work, but also get time off and are eligible for profit-sharing plans.

Taiwan's industrial sector and families depend heavily on the migrant workers in the country, and they have in fact long been indispensable and a backbone of Taiwan's economic stability. It is now time to afford them a more stable and sustainable future.

There are some changes afoot!

Covid-19 Insurance for migrant workers
The MOL announced that commencing from 1 December 2021, migrant workers arriving in Taiwan must be covered by a Covid-19 health insurance plan before they can be allowed to enter the country and the employers of the migrant workers must bear the costs of the insurance.

The health insurance plans, which cost just under NT$12,000 per person, are designed to cover hospitalization fees within the 30-day period after the migrant workers' arrival in Taiwan if they are infected with Covid-19.

The insurance companies that are participating in the scheme, will pay the money directly to the hospitals, up to a maximum of NT$500,000. Proof of the Covid-19 insurance coverage must be submitted, by the employers to the MOL, before the employees are due to arrive in Taiwan.  Failure to do so will result in the workers being denied entry to Taiwan. Further, employers will have to cover all insurance costs and will be prohibited from seeking reimbursement from the workers. Violators will be subject to a fine of NT$60,000 to NT$300,000, have their hiring permits revoked and banned from reapplying for such permits for two years (pursuant to the Employment Service Act).

Prior to the introduction of this scheme the medical treatment fees and other health costs for migrant workers arriving with Covid-19 infections were being paid by Taiwan's Central Epidemic Command Center (CECC).

Pathway to permanent residency
On 17 February this year, the Taiwanese cabinet approved a proposal to provide a pathway to permanent residency in Taiwan for migrant workers and for foreign students who earn an associate degree in the country. The plan will allow for permanent residency applications by migrant workers and foreign associate degree graduates employed in fishing, manufacturing, construction, and agricultural food farming, and as caregivers.

When the plan goes into effect in April, the first step in the process for eligible persons will be an application by their employers to have them classified as "intermediate skilled manpower". Migrant workers will be eligible for reclassification as "intermediate skilled manpower" if they have been employed in the designated fields for at least six years, after which they will have to work another five years at that level before they could apply for permanent residency. Foreign nationals who graduate from a Taiwan college with an associate degree can be classified immediately as "intermediate skilled manpower" on their first job once they are earning at least NT$30,000 per month on their first contract. After five years of employment, such graduates can apply for permanent residency in Taiwan, but by that time, their salary must be at least NT$50,500 per month.

For migrant workers in the production, construction, agriculture, and fishing industries, the minimum wage for "intermediate skilled manpower" application eligibility will be NT$33,000 per month or NT$500,000 per year. Caregivers in institutions will be required to show an income of at least NT$29,000 per month, while those working in private homes will have to show a minimum monthly pay of NT$24,000. In both categories, migrant workers and associate degree holders, the minimum pay requirement for permanent residency will be waived if they acquire a Level B professional technician certificate, which can be obtained through government approved training courses.

The MOL's Workforce Development Agency, said the residency plan was aimed at relieving Taiwan's shortage of "intermediate skilled manpower," which was as high as 131,000 in 2021.

The response to the residency plan has been mixed. Some migrant workers have expressed gratitude for the opportunity to continue working in Taiwan (and it should be noted that Taiwan still sets a 12-year limit for migrant workers, excluding caregivers). However, many migrant workers who may want to obtain permanent residency in Taiwan feel the bar has been set too high (especially when you appreciate that the average monthly salary of migrant caregivers working in private homes, is only NT$17,000.

Those in support of the plan feel that Taiwan is doing the practical thing by facing the fact that there aren't enough entry-level employees due to the increasingly low birth rate. Taiwan's birth rate fell to last place among 227 economies in a 2021 ranking by the United States' Central Intelligence Agency, with an average of merely 1.07 births per woman further adding to the manpower shortage in the future.

Other factors that seem to support the plan is Taiwan's brain drain, or the outflow of skilled manpower. In 2019 alone, some 739,000 Taiwanese moved overseas for work, many citing better pay and work benefits as the motivation.

Taiwan's National Development Agency predicts that the island will have only 49% of the population in the workforce by 2065, a significant decline from the 59.17% this year. But as with any new plan, and particularly one as sensitive as the question of permanent residency, some observers have cautioned about possible protests from some labour groups in Taiwan because it would cut back on employment opportunities for locals.

So, change is indeed afoot. It is doubtful that the announced changes will be the final word in Taiwan's reliance on migrant workers. We shall need to wait and see how this important issue continues to be addressed.

Paul Shelton is a consultant with 30 years of experience in the international financial services and related industries with skills in all aspects of legal and financial crime compliance and regulatory relationship advisory and management.

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