It is an overly optimistic and unrealistic goal for the government to seek to reduce the unemployment rate next year to below 4.1 percent, a level reached before the 2008 to 2009 global financial meltdown, given the plodding economic recovery and lackluster job market. Unless the government utilizes more resources to improve hiring or the global economy recovers strongly, the odds of missing the target will be big.
The unemployment rate fell to 4.27 percent last month from October’s 4.33 percent the Directorate-General of Budget, Accounting and Statistics (DGBAS) has said, citing more new graduates landing jobs after a longer-than-expected job-seeking period. This brought the average jobless rate to 4.24 percent for the first 11 months of this year.
Alongside this anemic improvement in the labor market, there are worrisome signs and real challenges to be faced by the government if it wants to reduce unemployment.
As of last month, 142,000 people were forced out of work because of factory closures. This number was the highest in 16 months, indicating that improved GDP has not healed the job market and the situation is still dire.
The nation’s economy grew by 0.98 percent last quarter and is forecast to accelerate to 2.97 percent growth this quarter, according to the DGBAS’ figures. As the unemployment rate is an indicator for an economy’s development, there is still a long way to go before seeing a significant improvement. Most economists believe that the unemployment rate will increase next year from this year’s 4.25 percent.
Chung-Hua Institution for Economic Research is a think tank that has disagreed with the government’s forecast. Earlier this month, it forcast that the unemployment rate would reach 4.26 percent next year, rather than the 4.1 percent targeted by the Council for Economic Planning and Development. They are pinning their hopes on a gradual “U-shape” economic recovery next year: A much milder pick-up than the “V-shape” witnessed after the financial crisis.
In its latest efforts to boost private investment and to create new jobs, the Ministry of Economic Affairs said three companies with operations in China planned to invest approximately NT$10 billion (US$ 344 million) into Taiwan over a three-year period and that will bring 10,000 new jobs to the nation. The world’s largest chip packager, Advanced Semiconductor Engineering, along with Tailift (a forklift trucks and punch press manufacturer) and Eminent Luggage Corp have decided to shift capacity expansion back to Taiwan because of rising labor costs and the growing problem of land availability in China. The government is offering tax incentives and other benefits to encourage such moves.
These new investments will inject new energy into Taiwan’s economy beginning next year, but they will not improve the job market. New investments in factory construction will mostly create jobs for the manufacturing sector. They need production-line workers rather than well-educated, university graduates. These manufacturing companies will get what they need as they will hire more foreign laborers than local workers because of the benefits the government has promised.
It is clear these developments will do very little to help boost the job market. Local manufacturers are facing an insufficient supply of blue-collar labor and an oversupply of graduates from colleges and graduate schools. The unemployment rate for college graduates and graduate school-leavers stood at 4.65 percent and 5.48 percent respectively last month, higher than the overall 4.27 rate, reflecting that those gaining higher education are losing out in the job market. This is a problem than needs to be tackled for the nation’s future generations.