In response to concerns over conflicting government reports on the risks of an economic pact with China, a high-level government official on cross-strait affairs said at a seminar: “Don’t take these figures [estimated jobless rates] too seriously. They’re just academic studies.”
Unemployment hit a record high of 6.14 percent in August. The latest figures from the Directorate-General of Budget, Accounting and Statistics (DGBAS) indicate that unemployment in the first 10 months of the year averaged 5.86 percent — the highest among the four “Asian Tigers” and higher than Japan.
“Broad unemployment,” which includes those who are seeking jobs and those who want work but are not looking, hit 7.37 percent. The jobless population totaled 1.37 million.
It is difficult for college graduates to find a job fresh out of school, while a majority of the unemployed had jobs but were laid off. Layoffs are largely hitting the main breadwinners of families.
Traditional wisdom has it that the higher your degree, the easier it will be to find a job. In reality, the majority of unemployed today are those with higher education. Meanwhile, losing your job today can mean being jobless for a long time or even losing all chance of returning to the job market. The result is that one-time breadwinners are struggling to support their families and losing hope.
Investment encourages employment, which in turn generates consumption and stimulates supply and demand, finally leading to more investment. It is therefore clear — considering the state of private investment, consumption levels and the average growth of salaries — that high unemployment is has the potential to become a vicious cycle.
DGBAS figures show that domestic investment this year has contracted 17.8 percent year-on-year, following a drop of 10.6 percent the previous year, meaning double-digit contractions for two consecutive years.
Private investment in particular saw its second year of double-digit decline, shrinking 13.28 percent this year and 27.43 percent the previous year. And the subdued economic growth has taken its toll on wages, causing salaries to stagnate.
Salaries grew an average of more than 10 percent before 1992. Since the IT bubble burst in 2001, everything has stagnated — except, that is, the price of daily commodities.
In the first eight months of this year, the average monthly salary shrank 6.4 percent to NT$43,300 compared with the same period last year. That was a return to 2004 levels.
The combination of stagnating or even declining salaries and the pressure of housing mortgages has had an impact on consumption.
Private consumption is the major component of GDP in terms of expenditure and has always played a significant role in the nation’s steady economic growth. Between 1988 and 1997, private consumption grew about 12.4 percent on average each year. This figure shrank to 4.2 percent between 1998 and 2004. Between 2005 and this year, the figure is forecast to drop to only 2.2 percent. Worse yet, private consumption has contracted 1.21 percent year-on-year this year for the first time since records started.
Unemployment is a concern that is as important as national security. The government should make solving this problem its top objective. High unemployment brings with it a host of social problems with costly and long-term repercussions. The government must tackle the root of unemployment and offer smart initiatives for established and emerging industries alike.
Hong Chi-chang is a former chairman of the Straits Exchange Foundation and a former Democratic Progressive Party legislator.
TRANSLATED BY TED YANG
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