This article describes and analyzes historical and structural factors associated with the labor-control carried out by Taiwan's KMT government in the period of the Martial Law. The roots of KMT's labor control goes back to the 50 years of Japanese occupation. To achieve political and economic objectives the Japanese government put in place a lot of laws and regulations during its years of control of Taiwan. The effect of Japanese administration was to make Taiwan's people accept authoritarianism. KMT's government had the same objectives. To maintain political stability and economic development a "harmony" labor policy became the hallmark of KMT's labor policy. The mechanism of the KMT government to achieve these objectives was to foster close relationships with entrepreneurs, and establish procedures to keep Industry and Business Associations under its control. The government also became the powerful employer of public enterprises. In addition, the government educated the people to follow Confucian thought. Under KMT's controlled labor regime, trade unions basically became instruments of government policy. They did not have enough organization and power to negotiate employment conditions with their employer. Paying low wages was a key factor that helped Taiwan become one of the four new industrial countries (NICs).