Taiwan's poverty level needs a boost

According to statistics released by the Directorate General of Budget, Accounting and Statistics (DGBAS, 主計處) up to the third quarter of this year, the number of domestic low-income households exceeded 80,000 or roughly 200,000 people, a new high since 1981, when such figures began to be compiled. Compared with figures for the same period last year, low-income households have increased by 7.8 percent, or a bit more than 12,000 people.

With economic growth and unemployment at their best level in the last three years, some might wonder why the number of low-income households has reached this peak. I believe there are two reasons for this. First, the constant hike of commodity prices nudged up the poverty line, increasing the number living beneath the poverty line. Second, an "all-or-nothing" system of government relief makes people living beneath the poverty line reluctant to rise above it, and encourages those close to the poverty line to fall below it, to gain the benefits of low-income households.

In Taiwan, the poverty line is currently defined as 60 percent of the average national monthly expenditure over the previous year, with some restrictions relating to ownership of personal assets and real estate. As this definition is based on consumer expenditures it naturally has a close relationship to commodity prices. Since the beginning of 2004, skyrocketing oil prices have caused land, sea and air freight costs to rise, which have in turn pushed up domestic commodity prices. In July this year, the annual rate of increase in the Consumer Price Index (CPI) was 3.32 percent, the highest in six years.

In addition, the Wholesale Price Index (WPI), which is a lead indicator for increase in consumer prices, registered double-digit growth for the first time in 23 years in August, with an increase for the year at 12.2 percent as of October. This caused the "misery index," a combination of the unemployment rate and the consumer price index on an annual basis, to reach a 22-year high.

According to the Social Service and Rescue Law (社會救助法), low-income households are entitled to 13 benefits provided by the government such as living subsidies (including childcare, education, childbearing, home help), medical subvention (including subsidies on health insurance premiums), emergency funds, disaster relief and so forth. A family need only rise above the poverty line ever so slightly and they will lose all these benefits. Given this "all or nothing system," low income households do not wish to rise above the poverty line, for if they do they would really fall into poverty. Last year, the bottom 20 percent of households below the poverty line only had an average of 0.62 persons in employment, a three-year low.

Even those who subsist just above the poverty line hope to reduce their income so that they also can be classified as low-income households.

According to the survey conducted by the Taiwan Fund for Children and Families (家扶基金會), one out of five poor families will remain poor in the next generation. Although this study was conducted for poor families rather than those actually below the poverty line (and the correlation is not exact), the fact that poverty has, somehow, become hereditary is something well worth our attention.

In theory, Taiwan is now a liberal and democratic society, and social mobility should be the norm. Regrettably, according to a study of disposable income in Taiwan by the DGBAS, households with the highest disposable incomes number 2.6 persons on average, while families with the lowest disposable income number 4.7 persons. With rising commodity prices and the pluralization and privatization of the education market, economically disadvantaged families will find themselves in an increasingly weak position to take care of and educate their children.