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Wealth disparity continues to expand

The lingering domestic economic recession and rising unemployment rate have further widened the wealth gap between Taiwan's richest and poorest families, government sources said yesterday.

According to tallies compiled by the Directorate General of Budget, Accounting and Statistics, the 1.34 million households at the bottom of the country's five-rank income scale failed to make ends meet last year, while the top 20 percent high-income families managed to post gains in their annual income.

Directorate statistics show that the nation's household disposable income last year dropped an average of 2.6 percent from the year-earlier level.

Only families in the top rank enjoyed an increase in their household income last year, going up an average 2.1 percent, while all the remaining families saw their income shrink.

Family incomes of those in the second, third, fourth and fifth bracket declined 2.8 percent, 4.9 percent, 1 percent and 11.34 percent, respectively, according to the directorate's tallies.

Worse still, the statistics show that the average household income of the lowest-income families totaled only NT$279,000 (US$8,205.88) last year, while their household expenditures reached NT$284,000, for a deficit of NT$4,500 or a negative savings rate of 1.62 percent.

In contrast, the household savings rate of the richest families rose from 37.4 percent in 2000 to 38.2 percent last year.

As to the savings rates of middle-income families, they fell to between 8 percent and 22 percent from a range of between 12 percent and 25 percent recorded the previous year.

No work, no money

Directorate officials attributed the negative savings rate seen in the lowest-income families mainly to the high unemployment rate which made it more difficult for unskilled workers to land jobs. Many of the unemployed now have to rely on their past savings to finance their daily expenses.

If the trend holds, social analysts said, the wealth gap between the rich and the poor will continue to widen. As the wealth gap is usually the result of a combination of complex economic and political factors, there is no easy solution to the phenomenon.

Nevertheless, the analysts warned that if the government fails to adopt appropriate measures, the trend will worsen quickly over the next few years.

With an army of 500,000-plus unemployed people in the domestic job market, the most effective way to narrow the income gap is to revitalize the economy and create more job openings.

The goal, however, cannot be realized easily as the global economic prospects remain unclear and high-tech companies have generally become more reserved about their business targets for the second half of this year.

Even if Taiwan manages to post a 3.14 percent economic growth this year as projected by the Cabinet, analysts said, the local job market will still be unable to absorb all of the current unemployed.

Better educated

Education has also been an effective tool in promoting wealth redistribution to narrow the income gap.

A directorate estimate based on statistics compiled in 2000 showed that the percentage of children from high-income families who received university education reached 59 percent, compared to 37 percent seen among children from low-income families. The figures indicate that rising tuition fees might have affected access to high-level education for kids from poor families.

An effective progressive taxation system could also be a tool to help prevent an increasing wealth gap. A number of tax reduction measures adopted by the government in recent years, such as the suspension of the securities transaction tax, the cancellation of the commodity tax, a 50 percent cut in the land-value increment tax and the integration of personal and business income taxes, seem to have favored rich families.

Analysts said all these measures have increased the tax burden of salaried people while undermining the government's ability to open new welfare service programs because of dwindling tax bases.
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