Thu, Jul 20, 2006 - Page 8 News List

Lies, damn lies and Taiwanese GDP figures

By Lin Chia 林洽

Two contrasting news items were reported on Monday last week. First, the government vowed to double Taiwan's per capita GDP to US$32,000 by 2015. The second news story said that the average salary in Taiwan has dropped over the past five years, regardless of employee educational levels. The latter serves as a negative footnote to the former.

Taiwan's economy has grown over the past five years, so why have average employee salaries dropped rather than increased? Obviously, all the benefits of Taiwan's economic development over the past five years have gone to business.

The reason for this is either a decrease in the demand for labor or an increase in the labor supply. Judging from the salary cutbacks, I am sure that it is the result of a falling demand for labor, caused by insufficient domestic investment. According to investment statistics, the lack of domestic investment is mainly caused by Taiwan's excessive investment in China.

If Chinese investment really is as complementary and beneficial to Taiwan's economic growth as those who advocate "actively going west" claim, then such investment should improve and upgrade Taiwan, and not result in the country's economy being undermined; nor should it replace Taiwan's salaried classes, but rather boost the demand for labor and bring about salary increases. Indeed, falling salaries in the face of economic growth is indirect evidence that excessive investment in China is bad for the nation's economy.

Several issues regarding the government's pledge to double Taiwan's GDP in 10 years also require clarification.

To begin with, doubling GDP does not automatically translate into doubling employee salaries. Whether salaries increase will depend on the policies used to advance the government's pledge. If the nation's economic policies from the past few years remain unchanged, with merely formal restrictions on China-bound investment and a tax system that encourages the outflow of capital, then the salaried classes might be further disadvantaged even if the goal of doubling Taiwan's GDP is achieved.

Further, the government's forecasts are calculated in US dollars. If the US maintains an annual inflation rate of 7 percent, then the US dollar will depreciate by the same amount, 7 percent, yearly.

In other words, even if Taiwan's real economic growth in dollar terms remains at zero over the next 10 years, the government can still reach its goal.

Finally, the government should amend its statistical methods and definitions in conjunction with its GDP goal.

The salaried classes, farmers and small vendors account for a major portion of Taiwan's total population. Since the incomes and expenses of salaried households are closely related to the incomes of farmers and vendors, one could say that the interests of the salaried households are also the interests of the people of Taiwan.

The goals of doubling GDP per capita and doubling salaries require very different economic policies. If a consensus on increasing the percentage of capital that a company is allowed to invest in China is reached at the Conference on Sustaining Taiwan's Economic Development, then the future of the salaried class will look even bleaker.

In the interests of the majority of Taiwanese, even a pledge to increase salaries by half is much more meaningful than a pledge to double the nation's GDP.

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