AmCham has a couple of good articles in their latest Topics magazine, including an important article on income inequality by well-known commentator Ting-yi Tsai:Economists attribute the rise [in income inequality] to three main factors: soaring real estate prices beginning in 1986 that created a new upper class overnight; the breakdown of larger households into groups of smaller households, skewing how income appears to be distributed; and the creation of a group of highly paid specialists in knowledge-intensive jobs who command incomes far beyond their peers in traditional industries.
Others have blamed the growing income inequality on the import of foreign laborers since 1992, and on the exodus of small and medium enterprises in the 1990s in search of cheaper labor overseas, particularly China. These two trends have led to higher unemployment and to salaries that fell below those earned by workers at similar levels in South Korea.
Starting in the late 1980s, Taiwan faced a growing shortage of workers for the so-called “3D” jobs: those that were dirty, dangerous, or difficult. Responding to appeals from industry, the government lifted what had been a longstanding ban on blue-collar labor from abroad, opening the market first for construction and factory workers and later for domestic help and care givers. As of the middle of this year, the number of foreign laborers in Taiwan had reached 350,684 – up from fewer than 5,000 in 1992 and 294,967 in 1999.
Now enterprises are urging the government to remove restrictions on the number of foreign workers they can import and to lower the minimum wage, which rose to NT$17,028 (about US$528) per month in July 2007 after having stayed at NT$15,840 (about US$487) for the previous decade.
Some labor experts have argued that the 350,000 low-paid foreign workers in Taiwan have diminished the willingness of local employers to raise the salaries of local workers, but others contend that employees should reflect on their failure to retrain themselves for higher-paying positions rather than fight for the labor-intensive jobs currently taken by foreign workers.
Ah, economists. As if unskilled labor can retrain to be knowledge workers.....just another example of blaming the victim....
...the article leaves out a number of factors. For example, Taiwan's weak or non-existent unions are not mentioned at all in the article. Another factor not often discussed is the increasing formalization of the economy -- in the 1980s huge swathes of the economy were off the books, aiding household perceptions that they had plenty of money. As SMEs have fled to China and large retail and manufacturing firms expanded their share of the economy, the off-the-books economy has receded and the service economy expanded. Service economies may provide jobs, but few of them are good jobs. Further, I can't prove it, but I suspect widening public debt is also a mechanism for wealth transfer to the upper 1% or so.
Taiwan's income inequality shows how the sparring over the economy between Greens and Blues is in reality an empty political game. As long as economic growth is the object of discussion, then no re-arrangement of the current social order need be threatened and the System that hands out wealth and power can be preserved. Both sides can talk about "the problem of economic growth" in full knowledge that such conversation threatens no one. But a frank discussion of income inequality might lead to changes in the ordering of society that threaten the interests of the rich and powerful.
SPECIAL: Don't miss this brilliant and insightful piece by Steve Crook on traveling with children here, which cites the always-sensible veteran Taiwan expat Jeff Miller, Taichung's own Cheryl Robbins, and a certain pudgy, balding blogger.
[Taiwan] [KMT] [DPP]
Taiwan showed incredible resilience during the great economic meltdown in Asia years back in part due to its vast labyrinth of cottage industries. Korea was unable to sustain because of the top down nature of its industry (chaibole). At the heart of Taiwan's industry is the family. To subject the country to modern economic analysis is to overlook the most important aspect of how it works.
ReplyDeleteWhen these families outgrow their small local factories they then migrate often to China and have to learn a new economic system to adapt to the new labor force.
To model this sort of behavior is a tad different than the reports would suggest.
Economics is a complicated social science. If you are a believer of Kuznet curve, then the income equality should decrease. Personally, I think he is wrong. A recent study in US realized that majorities of increase in income equality were caused by lower income families usually having more children then the upper-class (I try to find a link on the article but can't find it; it is a article published in economists though). In addition, the lower income families are usually broken, and children are less like to have high academic achievements. Don't know about Taiwan though.
ReplyDeleteArty, the majority of increase in income inequality has nothing to do with the number of children. It is a structural feature of the American system and has been since the US started offshoring its jobs in the late 1970s.
ReplyDeleteThere are many brilliant analyses, but you should start with Mark Ames very accessible _Going Postal_.
Michael
They are always talking about M-shaped economy around here. Is there any actual evidence that this is the case?
ReplyDeleteI'm more in the lots of questions camp than the pontificating expert, but I think you do a real disservice to Frank Hsieh when you lump together Green and Blue, without it seems having examined his presidential platform. Among the items that would be beneficial to the left-behind group include waivers for health insurance fees for the poorest group, encouragement of repatriation of Taiwanese overseas businesses (largely factories) to Taiwan in order to create more job opportunities, and regional development (the six singapores idea). The poor-rich divide in Taiwan is highly correlated to regional divides and emphasizing regional development would be one way of addressing that.
Further, I want to also point out that the current president, Chen Shuibian, has continued an 8 year policy of "even development platform" and it's a good example of an attempt at bridging the wealth gap. The basic idea is that historical Taiwan has developed the north (greater-Taipei, Taoyuan, Hsinchu) without much regard for southern Taiwan and that government policy would be to increase investment in the south. Examples include moving important government organizations to Taichung, Nantou, Tainan, Kaohsiung, creating the Central and Southern Taiwan Industrial Parks, moving part of ITRI (Industrial Technology Research Institute) to Tainan etc. These create tons of high quality job opportunities which in turn provide job opportunities for services, real estate, education, medicine, etc.
I want to further point out that Ma hasn't proposed any similar ideas (other than building lots of stuff...) and in essence is attempting to address income/wealth inequality with construction projects and that's the end of it.
So, while I think the Legislative Yuan may fit into the sort of Green/Blue are all sort of just part of the system kind of mold, I don't think that is true of either the current president or of Frank Hsieh.
Your comments are right on the mark. The only way I'd write it differently would be to emphasize that AmCham didn't simply overlook how unions serve to slow the breaks on rising inequality or how neoliberal economic policies accelerate it -- no Republican administration would allow it.
ReplyDeleteFurther, I want to also point out that the current president, Chen Shuibian, has continued an 8 year policy of "even development platform" and it's a good example of an attempt at bridging the wealth gap. The basic idea is that historical Taiwan has developed the north (greater-Taipei, Taoyuan, Hsinchu) without much regard for southern Taiwan and that government policy would be to increase investment in the south. Examples include moving important government organizations to Taichung, Nantou, Tainan, Kaohsiung, creating the Central and Southern Taiwan Industrial Parks, moving part of ITRI (Industrial Technology Research Institute) to Tainan etc. These create tons of high quality job opportunities which in turn provide job opportunities for services, real estate, education, medicine, etc.
ReplyDeleteThe point you've made is a good one. I'll note it for next time around.
Arty, the majority of increase in income inequality has nothing to do with the number of children. It is a structural feature of the American system and has been since the US started offshoring its jobs in the late 1970s.
ReplyDeleteThere are many brilliant analyses, but you should start with Mark Ames very accessible _Going Postal_.
Stop saying off-shoring jobs is the problem. You are blaming the problem on others. If it is a structure problem then give me a country that in its structure don't have an increase in income inequality. Even the Western European nations have shown an increase in inequality (and they are social capitalists). All I am saying is that the gap is increasing because the rich population is getting smaller and the poor ones are getting populated through birth and migration.
ReplyDeleteStop saying off-shoring jobs is the problem. You are blaming the problem on others. If it is a structure problem then give me a country that in its structure don't have an increase in income inequality. Even the Western European nations have shown an increase in inequality (and they are social capitalists).
This is kind of disjointed. In the US 1% of the population now owns half the wealth. That is not because there are so few of them. That is because of changes that took place under Reagan, under which well-paying jobs were destroyed and workers fired wholesale -- 128,000 from GE under Jack Welch, for example -- by companies whose CEOs then took massive bonuses. Like Welch's $1 billion, for example. This was not part of the American way of life prior to 1970 -- not acceptable behavior, and not practiced or condoned.
As I said, _Going Postal_ is a good place to start. Income inequalities cannot be explained in terms of birth rates or immigration. They can only be explained in terms of the new, more brutal neoliberal culture of corporate capitalism that became part of the US society after 1981.
Michael
Michael,
ReplyDeleteDo you know how much those workers make with high school education? I am sorry. If someone think they can make 60k with full benefits forever i.e. United Auto Workers while producing sub-standard goods. They should be put to the poor house. Actually, if you look another way, you can argue that the freaking Union is the problem.
Btw, 3.16% (I think is 2004 data) of US families have net worth over a million dollars EXCLUDING primary residents, and we still have the largest middle income class in the world.
Also, what happened to personal responsibilities?
Stop blaming Regan (I don't like him either), but I won't say he started all the bad things either.
Also, what do you propose is the causes of income inequality? Oh fyi, Paul A. Volcker is a democrat, and it is well documented in Allan Greenspan's book. Also, if I want to read a book, I will read one from someone who is at least successful if not smart...Mark Ames bios don't strike me as one. He hates Bush, yet he lives in a country rule by a strong man (talk about a hypocrite or just like his picture on wiki labeled whore1.jpg lol). Go read Freakonomics, it was actually written by an economist (a good one, too), who contributed to the decrease in crime rates in the US to one factor with tons of data backing it up. I personally think income inequality maybe just like crime rates. I will find that academic research and hopefully post it.