Cover Story: Idle Isle
Taiwan's 4.92 percent jobless rate may shine against other nations' unemployment figures, but the island's shaky social safety net, dearth of blue collar jobs, and lack of skilled workers in some emerging businesses, are causing concern.
By Jim Boyce
Foreigners may be forgiven for questioning the current fuss over unemployment in Taiwan. Although the island's jobless rate jumped to a record high of 4.92 percent in July, it remains the envy of industrialized nations such as Germany (9.2 percent) and Canada (7 percent), on par with economic powerhouses Japan (4.7 percent) and the United States (4.5 percent), and in the same ballpark as Asian Tigers Hong Kong (4.7 percent) and South Korea (3.4 percent). Given this, feeling sorry for Taiwan is like pitying an executive forced to trade in the company Mercedes for a Volvo.
But in a country where the unemployment rate has ranged between 1.5 percent and 3 percent for more than 20 years, the current figure is yet another stone tossed atop a heap of economic and political woes. And a deeper look at the issue shows that there are good reasons to be worried.
Taiwan's official unemployment rate is calculated based on a monthly Directorate General of Budget, Accounting, and Statistics (DGBAS) survey of 20,000 households and follows a style similar to that used in the United States by the Bureau of Labor Statistics. In simple terms, respondents who say they earned no money during the past week and who were "actively" looking for work are considered unemployed.
But the official figures are disputed by many. Using broader criteria, the Chinese-language weekly Biznews claimed in April that the February employment rate was at least 8.4 percent (against that month's official figure of 3.7 percent). Primasia Securities Co. also estimates the real jobless rate at about double the official one. Exact numbers are impossible to calculate, says Irmak Surenkok, an economist at Primasia, because Taiwan lacks an unemployment insurance system, which some advanced countries use to calculate the rate. Without such a system, she adds, joblessness is bound to be underestimated because there is no incentive for people to report being unemployed.
Huang Ching-hsien, president of both the Taiwan Confederation of Industrial Trade Unions and the Taiwan Petroleum Workers' Union, says union surveys show that joblessness is generally 2.5 times higher than the DGBAS figure, translating into a July rate of 12.3 percent. Even the government says that the number of unemployed is about 1.5 times higher than their official figure, claims Huang. In fact, when the government's definition of unemployment includes those people who want a job but who are not actively seeking one, the rate swells to 6.95 percent.
But industry representatives dispute such lofty estimates of Taiwan's unemployment rate. K.C. Lin, chairman of the Chinese National Federation of Industries, says the DGBAS rate reflects the exact situation in Taiwan. Meanwhile S.T. De, chairman of the National Association of Small and Medium Enterprises (ROC), says the rate is exaggerated since many Taiwanese work in fields such as food vending and taxi driving but are not registered with the government. But that does not mean that people like De are unconcerned. What I'm worried about is the rate getting worse in the future, he says.
Economic Tremors
De has good reason to worry. No matter how the unemployment rate is calculated, it is safe to say it is rising quickly. Government figures show that joblessness leapt more than 50 percent during the past year, increasing each of the past 11 months. Union leader Huang attributes the upsurge to three key causes: the global economic slowdown, the changing industrial structure of Taiwan, and instability in domestic politics. For export-dependent countries such as Taiwan, the global slump has been poison - July exports dropped nearly 28 percent and August 1-17 exports were down 25 percent, year on year.
Meanwhile, Taiwan's structural shift from labor-intensive businesses to capital- and technology-based ones is also causing disruptions. The speedy exodus of traditional industries to countries with cheap land and labor, especially across the strait to mainland China, has left behind Taiwanese workers with skills that will be little needed in the new economy. In July alone, 17,000 people lost their jobs due to factory closures.
Political uncertainty is exacerbating Taiwan's economic quandary. While last year's presidential election might have been a celebration of the democratic spirit, the ensuing feuds between the new administration and the opposition parties have thwarted efforts to tackle economic problems. Furthermore, Professor Chang Chang-chi of the Institute for Labor Research at National Cheng-chi University says that a lack of clear government vision makes investors wary of Taiwan. He cites the flip-flopping over the fourth nuclear power plant as an example.
A more emotional and controversial issue is foreign workers, a frequent target for criticism and blame from the unions and the unemployed. July government figures show that Taiwan is home to 326,000 alien laborers and 485,000 unemployed Taiwanese. Given these numbers, there is, as Surenkok puts it, an attitude of 'let's just ban their entry and that will take care of the problem.'
Union leader Huang explains that foreign workers were not originally brought in only for "3D" (dirty, dangerous, and difficult) jobs, but also to protect the livelihoods of Taiwanese. By allowing firms to reduce their costs by hiring up to 30 percent foreign workers, the government helped save Taiwanese jobs by preventing companies from leaving the island. But Huang says, "This goodwill [of the government] has been distorted by the employers because they only focus on low labor costs." As a result, he says, foreign workers are now replacing, rather than supplementing, Taiwanese workers.
Up to two-thirds of the foreign workers could be sent home, says industry representative Lin, if Taiwanese were willing to do the jobs. But this is a big if in a society that now shuns low-paying, low- prestige work. 'Twenty years ago, all housekeepers were domestic, now almost no [Taiwanese] is willing to be a housekeeper. That's why we turn to foreign workers,' says Lin.
But National Association of Small and Medium Businesses head De takes another tack, arguing that foreign workers reduce, rather than boost, unemployment among Taiwanese. Referring to the government's plans to promote tourism, he stresses that even if foreign construction workers help build new tourism facilities such as hotels and theme parks the projects will still create service industry jobs for the locals.
Unemployment Aftershocks
The effects of Taiwan's unemployment problem are not being evenly distributed across the board. Of the 485,000 officially unemployed, for example, about two-thirds are men. Chang Hsu-jung, a representative and director of the Taiwan Confederation of Industrial Trade Unions and general secretary of the Taiwan Petroleum Workers' Union, explains that the jobless fall into four key categories - people over the age of 55, middle-aged men with little education, high-tech workers, and recent graduates. For the latter two groups, the employment situation should improve when the global economy picks up, according to her. But for the first two groups, the outlook is bleak, she says. Not only are many companies reluctant to spend time and money training older employees, but many of these workers are victims of an inadequate retirement system. Under Taiwan's labor laws, workers who remain in the same firm for 15 years or who are aged over 55 are entitled to company pensions. But this setup encourages abuse in the form of hostile layoffs, she says: "Some unethical employers can lay off their workers just before they finish their 15 years or before they turn 55." Not only that, but the limited compensation that is available to some unemployed is difficult to qualify for and pays little.
For this reason, the union recommends reforming the retirement system and creating an independent, comprehensive unemployment insurance system, both based on U.S. models. Council for Labor Affairs (CLA) Chairwoman Chen Chu is one supporter of such moves. "As medium- and long-term solutions, we can improve the retirement system, broaden the restrictions on unemployment help and payments, and create a complete unemployment safety net," she says.
Although improving such protections will bring security to the unemployed, it won't bring them work. Those left jobless from the hollowing out of traditional industry, for example, lack the skills needed to enter Taiwan's emerging industries, such as optoelectronics, logistics, biotechnology, and services. Taiwan could be headed into a worst-case scenario: a growing unemployment problem with simultaneous labor shortages in specific industries. In plain English: It is not enough to provide job openings, Taiwan also needs people who can fill them.
"The demand for labor is coming more from the electronics side, for people who have specific qualifications," says Surenkok. She predicts Taiwan's GNP will recover much faster than the unemployment rate. Even now, Taiwan finds itself with an increasing demand for skilled foreign workers and, according to the CLA's Chu, the industrial and service sectors lack 180,000 people.
The obvious answer to this dilemma is training. Professor Chang points to the IT and software sectors as areas where focus is particularly needed. He says there are many programs for helping farmers and laid-off manufacturing workers, noting that the government has a long history of working with private and public organizations. From 1996-2000, almost 90,000 people finished courses at public vocational training institutes, for jobs ranging from technicians to service workers. During the same period, 1.25 million people were given license examinations for skills as diverse as welding, electronics manufacturing, plumbing, and civil engineering. On top of this, hundreds of thousands of people received training at companies.
Chang names three components necessary to create an effective training program in Taiwan. The employed need on-the-job training to keep them competitive. The unemployed need help developing the skills now demanded by the job market. Last, to ensure skills are not wasted, improved links are needed between compatible workers and companies. K.C. Lin concurs: "[The Chinese National Federation of Industries] recommends improving the matchmaking mechanism so those who need labor can find employees effectively."
But some experts are skeptical of the training programs. The farmers don't have university degrees and are over 50 years of age. "I don't know how you could train them," says Surenkok. She points out that workers with obsolete skills represent a structural difficulty common in many countries, but not necessarily a crisis. Even if the unemployment rate remains at 5 percent, that's not a very troublesome rate. Others are more optimistic that many of these workers will find jobs. At De's own company, San Sun Hat & Cap Co., 45 percent of the workers are 45 years old or above. Rather than lay people off, he says San Sun has added more than 400 more jobs in the past year and still turns a profit. He attributes his success to constant upgrading in design and production, and to the expertise his company has built up through 30 years of supplying to foreign buyers. In the future, he says, labor costs will become less important as capital and technology continue to play bigger roles in Taiwan's economy.
A Vendor On Every Corner
De also sees self-employment as an option - a lucrative one - for those displaced from traditional industries. He cites his 50-year-old sister, who was unemployed for years but recently opened an ice cream shop. She now scoops up a cool NT$300,000 to NT$400,000 in monthly sales with her entrepreneurial skills.
Chang, who points out that many of Taiwan's jobless "are not less knowledgeable, but less educated," stresses the new opportunities opening up in service positions, such as building managers, drivers, and tourist industry workers. Union leader Huang agrees, citing street vendors as an important solution to the problem - especially if legalized and taxed. "Some people say if we claim taxes from street vendors, government tax [revenues] would increase 33 percent," he says.
Such suggestions provide a measure of hope for traditional industry workers at a time when good news is scarce. Taiwan's WTO entry is steadily approaching, a move that the Ministry of Economic Affairs estimates will bring short-term job losses of 170,000. While WTO membership is eventually expected to create more and better jobs in Taiwan, in the meantime expect to find a lot more stinky tofu vendors in your neighborhood.
