New Council for Economic Planning and Development (CEPD) Chairwoman Christina Liu (劉憶如) said last week a proposed trade pact with China would help improve the still-ailing labor market, but economists argue that it would be difficult for the government to lower the high jobless rate amid a fragile economic recovery.
Liu said in a statement on Friday that a proposed economic cooperation framework agreement (ECFA) with China would likely prompt China-based Taiwanese businesspeople to invest back at home and therefore increase employment opportunities.
“An ECFA with China suggests stable cross-strait relations, which would substantially increase Taiwan’s international profile and boost overseas investment in the nation,” said Liu, the former Chinatrust Financial Holding Co (中信金控) chief economic advisor who replaced Tsai Hsun-hsiung (蔡勳雄) as the head of the CEPD on Thursday.
Citing the latest report by the International Institute for Management Development (IMD), Liu said Taiwan’s impressive improvement in global competitiveness, now ranking in the top eight in the world, was because of cross-strait trade liberalization.
Kenneth Lin (林向愷), a professor of economics at National Taiwan University, said by telephone yesterday that the government has spent more than NT$100 billion (US$ 3.11 billion) on employment incentive programs since last year, measures that have only marginally lowered the unemployment rate.
Attributing the root cause of high unemployment to insufficient domestic investment, Lin said Taiwan’s employment ranking in the IMD report actually edged down from a year ago, indicating that the local labor market didn’t become more competitive.
“It will be extremely difficult for the government to bring down the unemployment rate to below 5 percent by the end of this year,” Lin said.
As many Taiwanese manufacturers now receive orders in Taiwan but produce in China “how can this model improve the job market in Taiwan?” he asked.
Hsu Chih-chiang (徐之強), director of Taoyuan-based Research Center for Taiwan Economic Development, said the government needs to improve infrastructure and increase private investment before it can effectively reduce unemployment. Hsu said the nation’s economic recovery would not immediately benefit the job market and that the unemployment rate may even increase during the summer when new graduates enter the labor market.
Wu Chung-shu (吳中書), an economic research fellow at Academia Sinica, told a forum on Monday last week that most businesses still worry that the recovery is not sustainable and therefore feel reluctant to increase their payrolls.
Wu said the unemployment problem would persist because the nation’s industrial structure has gradually changed and the manufacturing sector doesn’t need as many workers as before.
“The unemployment rate may even increase when the economy is recovering because those who gave up looking for a job during the economic downturn have now returned,” Wu said.
Wu cast doubt on the government’s plan to reduce unemployment by spending more money, which he said might worsen the state’s already strained coffers and derail the recovering economy.
The Directorate-General of Budget, Accounting and Statistics is scheduled to release last month’s unemployment figures today. The rate fell to 5.67 percent in March from 5.76 percent in February.
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