Taiwan's unemployment rate has recently risen to nearly 4 percent, returning to the level of the early 1960s. Unemployment rose from an annual average of 1.8 percent in 1995 to 2.6 percent in 1996. Since then, the unemployment rate has remained high and the situation has worsened. With this grim state of affairs, which has been exacerbated by constant criticism from the media, is the government going to adopt desperate measures and cause the short-term recession and the problem of industry's structural readjustment to evolve into a long-term systemic problem?
The country's economic woes are not simply a product of the DPP government. Monthly statistics show that the unemployment rate suddenly began to rise in the latter half of 1995. It rose from 1.77 percent to 1.95 percent in July of that year. In August it rose again to 2.09 percent, after which it very rarely dipped below 2 percent. Then last year, to make matters worse, the rate rose a step higher after the new government had been in office for two months (ie at the time of school graduations) and, when it should have fallen back after September, it stubbornly refused to do so. Instead, it continued to climb.
It is easy to give an explanation for the rise in unemployment that took place after the government came to office. Throughout this period, high-tech companies the world over have been laying off workers and cutting salaries left, right and center. The fact that highly internationalized Tai-wan should face an economic slump under such conditions is only to be expected.
But what factors caused the unemployment that began in the latter half of 1995? One theory is that it resulted from a slump in the real estate market. There are also people who worry that Taiwan suffers from China sucking away capital and other economic assets. Making a purely superficial judgment from statistics, there would seem to be no direct relationship between the rise in Taiwan's unemployment rate and the relocation of industry overseas. It may be, however, that we may yet see some long-term cumulative effect or even irreversible damage. What are the factors causing this international economic slowdown? And what permanent solutions are there for maintaining economic prosperity and a flourishing labor market?
To solve the problem, we must understand its causes before we can take appropriate action. One factor causing the international economic slowdown is the structural readjustment of industry. There are two reasons for the current large-scale readjustment. The first is that the collapse of communism (including in China in terms of its economic system) suddenly set free the capacity for production that had been locked inside planned communist economies. Thus the production of low-tech and especially labor-intensive products naturally shifted to these countries. The original manufacturing countries have had to adjust their industrial structures, and at the same time, these changes have resulted in short-term over-production.
Another reason is the rapid advance of technology, especially "e-products." The structural readjustment of industry that results from this is swift and continuing. The unemployment caused by these two phenomena is primarily structural in nature, while there is a small amount of cyclical unemployment that is due to the sluggishness of the economy. To lower structural unemployment, it is best to readjust the structure of industry. But to do so takes time. Thus, if the government seeks to eradicate unemployment in the short term, I fear that there will be negative after-effects and no positive benefits.
RSS