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EDITORIAL: A downward
spiral for the economy
A Bloomberg article last week about the loss of Taiwanese jobs to China has
drawn mixed reactions. The article attributed the losses to the nation¡¦s
sluggish easing of investment rules and slow development of the service
industry, saying these have caused Taiwan to fall behind Singapore and Hong
Kong.
Some sources attributed job erosion to the government¡¦s China policies, which
they said helped domestic manufacturers relocate to China in the shortest time
possible without creating jobs at home. Others said Taiwan was facing a labor
shortage, rather than high unemployment, with the nation¡¦s unemployment rate
falling to 4.27 percent in May, its lowest level in 33 months, after peaking at
6.13 percent in August 2009.
One thing is clear: It is impossible to say that the nation¡¦s unemployment
problems have been solved, because the unemployment rate is still higher than
pre-financial crisis levels.
An unemployment rate of 4.27 percent is indeed an improvement over one of 6.13
percent, but the government should not paint a rosy picture based on that number
alone.
The public should keep in mind that the government¡¦s definition of
¡§unemployment¡¨ refers to people who are out of work, but ready to find jobs any
time soon. ¡§Discouraged workers,¡¨ who are not currently looking for jobs after
having tried for a long time, and ¡§non-typical workers,¡¨ such as part-time and
temporary workers, however, do not fall into the government¡¦s narrow definition
of unemployment.
If the roughly 155,000 ¡§discouraged workers¡¨ in May are added to the pool of
476,000 unemployed people for that month, the unemployment rate shoots up to
5.66 percent rather than the 4.27 percent reported by the government. In other
words, just because certain people do not appear in the official unemployment
statistics does not mean the labor market is improving.
Meanwhile, the nation is facing a serious problem of ¡§structural unemployment,¡¨
an issue that Mark Williams, an economist at Capital Economics Ltd in London,
rightfully pointed out in the Bloomberg article. Indeed, economists have long
said that increasing structural unemployment is the main reason for rising
unemployment and wage stagnation in Taiwan.
Over the past two decades, many labor-intensive manufacturers left Taiwan for
other countries, causing the nation¡¦s economy to go through structural
adjustment as it shifts from traditional, labor-intensive industries to
capitalized, technology-intensive industries. However, the labor force that lost
jobs as traditional industries left Taiwan has failed to catch up with the
nation¡¦s industrial upgrade, with job seekers¡¦ skills falling short of the
demands of the new industries. Ironically, this has led to a skilled labor
shortage and high unemployment occurring at the same time.
Structural unemployment is dangerous; it becomes more difficult to fix the
longer it persists. This is because the longer people are out of work, the
harder it is to find employment.
Moreover, structural unemployment not only results in a rising number of
discouraged workers and shortage of skilled workers, but also restricts wage
growth among salaried employees. This is because new industries lack the work
force to sustain growth, while social welfare spending on the unemployed
continues to expand, adversely affecting the competitiveness of the nation¡¦s
economy as a whole.
No matter what message people take from the Bloomberg article, no one should
overlook structural unemployment and its implications for the nation¡¦s economy ¡X
the paradox of high unemployment and a serious labor shortage, which we must
tackle now.
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