VZCZCXRO0523 
RR RUEHCN RUEHGH 
DE RUEHIN #0764/01 1560252 
ZNR UUUUU ZZH 
R 040252Z JUN 08 
FM AIT TAIPEI 
TO RUEHC/SECSTATE WASHDC 9066 
RUEATRS/DEPT OF TREASURY WASHDC 
INFO RUCPDOC/USDOC WASHDC 
RUEHBK/AMEMBASSY BANGKOK 4224 
RUEHBJ/AMEMBASSY BEIJING 8330 
RUEHUL/AMEMBASSY SEOUL 9631 
RUEHGP/AMEMBASSY SINGAPORE 7316 
RUEHKO/AMEMBASSY TOKYO 9968 
RUEHML/AMEMBASSY MANILA 0494 
RUEHJA/AMEMBASSY JAKARTA 4348 
RUEHKL/AMEMBASSY KUALA LUMPUR 3981 
RUEHHI/AMEMBASSY HANOI 3615 
RUEHBY/AMEMBASSY CANBERRA 4921 
RUEHWL/AMEMBASSY WELLINGTON 2138 
RUEHHK/AMCONSUL HONG KONG 9569 
RUEHGH/AMCONSUL SHANGHAI 2099 
RUEHGZ/AMCONSUL GUANGZHOU 1283 
RUEHCN/AMCONSUL CHENGDU 2715

UNCLAS SECTION 01 OF 03 TAIPEI 000764 
 
SENSITIVE 
SIPDIS 
 
STATE PLEASE PASS USTR 
STATE FOR EAP/RSP/TC, EAP/EP 
USTR FOR STRATFORD AND KATZ 
USDOC FOR 3132/USFCS/OIO/EAP/WZARIT 
TREASURY FOR OASIA/TTYANG AND HAARSAGER 
TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF 
GOVERNORS, SAN FRANCISCO FRB/TERESA CURRAN, AND NEW YORK FRB MARI 
BOLIS 
 
E.O. 12958: N/A 
TAGS: ECON TW
SUBJECT: Taiwan's Best Leaving While Salaries Stagnate 
 
 
Summary 
------- 
¶1. (SBU) Summary. Over the past seven years Taiwan salaries have 
barely kept up with inflation, rising only 1.5% in real terms. 
According to one local human resources consultant, Taiwan 
compensation packages are now cheaper than those of many countries 
in the region - and in the case of management and executive staff, 
even cheaper than those in China. Although this may bode well for 
Taiwan's competitiveness, many of Taiwan's best are still looking 
overseas for employment, and more and more Taiwan professionals find 
themselves working for Chinese bosses. End summary. 
 
Salaries in Taiwan Basically Flat 
--------------------------------- 
¶2. (U) Over the past seven years, Taiwan salaries have barely kept 
pace with inflation. According to official statistics, in the 
period from 2000 through 2007, average Taiwan salaries increased 
only 1.53% after inflation. This does not represent an average 
annualized number, but the entire cumulative increase over a 
seven-year period. Without adjusting for inflation, average 
salaries increased by 7.57%. The number clearly masks variations 
between business sectors. Those in the real estate industry, for 
example, did even worse, with average pay falling 12.9% before 
taking inflation into account. Salaries in the financial sector, on 
the other hand, saw the greatest increases, rising 24.9% before 
adjusting for inflation. Taiwan's average monthly wage, which 
includes employees across all sectors and measures salary, prorated 
bonuses and overtime payments, stood at NT$45,112 (or about US$1480) 
in 2007. 
 
¶3. (U) Taiwan's stagnating salaries contrast with its respectable 
economic growth rates during the same period. Excluding 2001, when 
Taiwan's real GDP dropped 2.2%, real GDP growth ranged from 3.5 to 
6.2% per year. During the period from 2000 to 2007, productivity, 
in real terms rose on average 3% per year in the service sector and 
just over 4% in the industrial sector, according to official 
statistics. 
 
Vastly More College Grads in Workforce 
-------------------------------------- 
¶4. (U) As salaries in general have stagnated, the number of college 
graduates in the Taiwan workforce has risen significantly. The 
percentage of the workforce with a four-year college degree or 
higher level of education nearly doubled from 11.8% in 2000 to 22% 
by the end of 2007. According to official figures, last year, 
Taiwan's four-year colleges and universities produced more than 
280,000 graduates, triple the number graduating in 1997. Perhaps 
because of the dramatic increase in numbers, entry-level salaries 
for college grads have actually fallen in recent years. The average 
starting base salary, excluding bonuses, overtime and variable 
payments, for new college grads dropped 2.8% from 1999 to NT$26,700 
(about US$880) in 2006, the most recent data available. Those with 
advanced degrees do slightly better, with an average starting salary 
of NT$31,567 (about US$1040). 
 
HR Consultant Reality Check 
---------------------------- 
 
¶5. (SBU) A Taipei-based consultant with a multinational human 
resources consulting firm confirmed that Taiwan salaries, especially 
for new hires, had not budged for years. She stated that bank 
management trainee starting salaries in Taipei, for example, have 
not risen in about ten years and are low in absolute terms - about 
NT$45,000 per month, or less than US$1500. Separately, human 
resource consultants at a local Taiwan firm told AIT that salary 
news will continue to be bleak this year. According to their own 
Taiwan salary survey, one third of Taiwan companies do not plan to 
increase salaries in 2008. Another 44% said they will not grant 
across-the-board increases, but would selectively adjust 
compensation based on performance of individual employees. The 
salary outlook, they said, was most positive for sales, R&D, and 
management personnel, and most bleak for manufacturing, 
administrative and back office staff. 
 
¶6. (SBU) The multinational consultant pointed out that the jump in 
college graduates has come mainly from expanding the rolls at 
private schools, many of which had been converted from technical 
schools, but have yet to establish academic bona fides, and, in what 
she described as a commonly-held view, have largely debased the 
value of a local college education. Multinational and other top 
Taiwan firms target graduates from Taiwan's top four universities 
only, she said. Some will also consider top students from second 
tier public universities, but graduates of private colleges, which 
do not typically have strong academic reputations, are not normally 
sought after by employers. 
 
¶7. (SBU) She also noted that Taiwan's stagnant salary levels also 
mean that staff in Taiwan has become relatively cheap for her 
multinational clients compared to other locations in the region. 
Taiwan salaries are already lower than in Japan, Korea and Hong 
Kong, for example. Taiwan is even cheaper than Mainland China for 
executive and management talent, she said. At current salary rates 
for talent recruited by multinational firms, Taiwan is on par with 
Singapore, but Singapore salaries, she noted, are beginning to 
surpass those in Taiwan due to increasing competition for staff 
there. According to the local consultants, however, Taiwan 
entry-level employees still typically earn two to three times their 
China counterparts. 
 
¶8. (SBU) Not all of Taiwan's employees are doing badly, however. 
According to surveys of multinational employers, executive and 
management pay increases have been rising faster than that for 
general staff, which follows worldwide trends. This year, for 
example, one survey indicates firms are planning to grant salary 
increases to executives and management ranging from 6-8%, while 
general staff can expect raises of between 4-5%. Firms are also 
moving more to increased amounts of variable pay based on some sort 
of performance indicator. These arrangements are customarily 
provided for management and executive-level employees and allow for 
significant increases in compensation. 
 
If Only I Worked in High-tech 
----------------------------- 
¶9. (SBU) Taiwan's high-tech companies, particularly integrated 
circuit design firms and semiconductor, PC, and TFT/LCD 
manufacturers have, in addition to providing basic cash compensation 
packages, also make sizable stock grants to virtually all employees. 
These grants are typically based on a firm's overall performance. 
These grants have been particularly attractive because they did not 
need to be reported as expense on a firm's balance sheet and were 
attractive to employees because shares were taxed at par value, 
which is typically well below the actual market value of the 
security. This year, however, new regulations took effect that 
require firms to expense stock grants and also phase out the tax 
benefit for the grantee. It is not yet clear how firms will react 
to this change, but these firms are still expected to continue to 
provide substantial variable compensation to their employees in some 
form. One reason is that there is still a shortage of qualified 
engineers and other technical staff. Turnover, according to survey 
data from a local human resources consultant, is very high, with 
about 35% of high-tech sector employees actively considering 
changing jobs. 
 
Brain Drain and Mainland Bosses 
------------------------------- 
¶10. (SBU) The multinational HR consultant also noted that if Taiwan 
employees wanted to be promoted into roles with regional 
responsibility, it is very likely they would have to relocate 
elsewhere in the region, typically to Singapore, Hong Kong, or 
somewhere in China, because, as she put it, very few regional 
offices were based in Taiwan. In addition, she said, Taiwan 
employees are more likely to be working for Mainland China 
counterparts as part of a "Greater China" operation. The good news, 
however, is that Taiwan employees are seen as competitive in these 
regional positions. She also stated that Taiwan firms, particularly 
construction firms, are expanding their operations in the region and 
are willing to allow Taiwan staff with regional and/or China 
responsibilities to be based out of Taipei. She expected that this 
practice would become more common if staff have access to regular 
direct cross-Strait flights in the future. 
 
¶11. (SBU) Local HR consultants told AIT that many of Taiwan's best 
and brightest are leaving Taiwan, typically for China, where 
opportunities and responsibilities are greater. One described the 
situation as "a serious brain drain." The head of a large foreign 
bank called it "the thinning of the local talent pool." Both said 
best applicants, he said, do not usually remain in Taiwan. Taiwan 
firms, in particular, like to hire Taiwan staff for positions of 
trust in Mainland China, but the consultants point out that as 
China's own talent pool develops there may be less opportunity there 
for Taiwan employees, especially those without relevant experience 
or highly sought after skills. 
 
COMMENT 
------- 
¶10. (SBU) It is worrying that salaries have stagnated at the same 
time as the number of college degree-holders in the workforce has 
doubled. It is no surprise that many of Taiwan's best and brightest 
are seeking opportunities overseas or enrolling in advanced degree 
programs. On the positive side, Taiwan's relatively cheaper labor 
costs, especially for management and professional staff, may lead to 
more firms placing activities here or at least not moving them out. 
Having access to direct flights to China will be another important 
factor. In the meantime, and probably for the foreseeable future, 
ambitious Taiwan professionals aspiring to regional responsibilities 
will be moving off island and are increasingly likely to have 
Mainland Chinese bosses. 
 
WANG