Mandate-based welfare policies and the effect on real wage – The case of Taiwan

Yung hsiang Ying, Wenli Lee, Koyin Chang

Research output: Contribution to journalArticle

Abstract

This study estimates the relationship between statutory welfare programs and workers’ compensation. Employing monthly macroeconomic data from 1982 to 2016 and wage rates in several private industrial sectors in Taiwan, the relationships between pay variations and policy interventions are explored after controlling for the economic growth rate, labor productivity, and time fixed effects. The seasonal autoregressive integrated moving average (SARIMA) and multivariate adaptive regression splines (MARS) were adopted in the panel analyses. The findings of this study suggest that social welfare policies have negative effects on employees’ wage rates. The magnitudes of the effects are directly linked to the burden borne by the employers. National Health Insurance has the greatest negative effects on workers’ pay in all selected industrial sectors. The statutory welfare benefits explain approximately 23% of the pay deviation from the trend predicted by the models. A non-payroll-based financing method could be considered in the future to alleviate this impact.

Original languageEnglish
Pages (from-to)417-427
Number of pages11
JournalEconomic Modelling
Volume90
DOIs
Publication statusAccepted/In press - 2019 Jan 1

Keywords

  • Autoregressive integrated moving average
  • Payroll-based financing
  • Stagnant wage rate
  • Welfare and social protection policies

ASJC Scopus subject areas

  • Economics and Econometrics

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