Fri, Dec 30, 2011 - Page 8 News List

Truth about the growing disparity in income

By Lue Jen-der 呂建德

The increasing income gap in Taiwan has attracted a lot of attention and debate over the past few years. However, during the last presidential debate, President Ma Ying-jeou (馬英九) surprised many when he said that things on this front had improved and were now better than they were when the Democratic Progressive Party (DPP) was in power. Ma’s remarks were far removed from the truth and showed just how out of touch he is with reality and the public.

If we look at the trends evident in statistics released by the Directorate-General of Budget, Accounting and Statistics over the years on the income differential between the highest and lowest 20 percent of income earners, then the gap between the rich and poor was at its lowest from 1970 to 1990. It was not until after then that the gap started to grow. By 2000, the gap in income between the richest and poorest was 5.55 times. By 2001, that figure had reached 6.39 times. After the DPP gained power and introduced a string of social welfare and labor policy measures, the figure fell to a difference of 6 times.

In contrast, during the Chinese Nationalist Party’s (KMT) time in office, the income gap has been wider every year. In 2008, it was 6.06, in 2009 it was 6.34 and last year it was 6.19. These figures were calculated based on the differences in income between the highest and the lowest quintile of income earners. If we look at the differences between the top and bottom 10 percent of income earners and even the top and bottom 1 percent and 0.1 percent, the gap is even more shocking.

It has been reported that during a recent KMT Central Standing Committee meeting Ma expressed dissatisfaction with media reports based on information from the Financial Data Center that the gap between the richest and the poorest has increased to 75 times. Ma should ask tax reform expert Cyrus Chu (朱敬一) to use the same data to analyze the income differential for the top 1 percent and bottom 1 percent of household income earners. Then Ma would understand why Taiwanese are so unhappy.

Experts have offered various analyses of the growing income gap with most citing the outsourcing of production and the establishment of global supply chains that have resulted from an over-reliance on investment in China, atypical development of the labor market and a tax structure that favors the rich. Especially after the KMT came into power, it promoted tax reduction policies similar to those implemented by the Republicans under former US president George W. Bush when they became obsessed with supply-side orientated neoclassical economics. It is estimated that these policies helped large corporations and businesses save a total of NT$207.5 billion (US$6.9 billion) in tax, while taxes for ordinary citizens were reduced by only NT$81.8 billion.

The DPP’s piggy bank campaign has been hugely popular and the small sums of money people are donating to the party’s presidential candidate demonstrates how unhappy and worried they are about the rapidly widening wealth gap and growing poverty over the past three years.

Lue Jen-der is convener of Taiwan Thinktank’s employment and social security unit.

Translated by Drew Cameron

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