Economists often analyze three aspects of economic welfare: income, distribution and fluctuations. The higher the income, the more even the distribution. The lower the fluctuations, the higher the welfare. This article is a compilation of data from these three aspects in an attempt to provide an objective comparison of economic performance between the two government administrations of the past 13 years.
The health of the economy must be judged from an overall perspective. It cannot be determined by looking at the earnings or losses of one particular company or at the export growth or decline of a certain product. To remain as objective as possible, this report relies on official national data. It includes all commonly used indicators, rather than selectively picking only some of those indicators.
The average economic growth rate between 1999 and 2007 was 4.4 percent. Between 2007 and last year, it was 2.93 percent, and projected growth for this year is about 2 percent.
“Economic growth rate” means growth in GDP, which is calculated based on fixed prices. GDP measures production rather than income, and it includes capital depreciation, which does not benefit the public. This is why the Directorate-General of Budget, Accounting and Statistics (DGBAS) compiles its National Income Index that better reflects public well-being. According to DGBAS data, real national income growth averaged 2.56 percent between 1999 and 2007 and 1.17 percent between 2007 and last year.
According to the government’s data, nominal national income per capita grew by only 5.27 percent between 2007 and last year, while consumer prices grew by about 7 percent during the same period. Deducting the price increase factor, the real purchasing power of national income per capita last year was only 98.3 percent of the same value for 2007, a 1.7 percent decrease.
The government creates part of national income with the help of its financial deficit. On one hand, the public receives government spending, and on the other, the public has to shoulder a larger government debt. In 2007, total government debt increased by only NT$23.7 billion (US$800 million), while last year, it increased by NT$247.6 billion. Between 2008 and last year, government debt increased to NT$1.8155 trillion, equal to NT$78,000 per capita.
Real income per capita can be found by deducting the increase in government debt from national income. Real income per capita last year, which offered the best performance over the past five years of the Chinese Nationalist Party’s (KMT) rule, was 3.5 percent less than in 2007. The figure for the worst performing year, 2009, was 12 percent worse than in 2007.
This is evidence that the complaints about economic performance in recent years is not just based on an impression, but on a very real drop in income.
Real wages have regressed to the same level they were 16 years ago. However, this does not mean that salaries have dropped every year for the past 16 years. Under the Democratic Progressive Party (DPP) government, salaries increased. In 1999, the average monthly wage for a worker in the manufacturing industry was NT$37,738.
By 2007, it was NT$43,169. When the KMT returned to power, salaries dropped, but by last year, they had increased to NT$43,994, only 2 percent more than in 2007. During this time, commodity prices increased by more than 7 percent, which means that real salaries have dropped by 4.9 percent since 2007. In addition, because the DPP government decreased the legal number of work hours, the hourly wage increased even more. Calculated based on 2011 commodity prices, adjusting for work hours and commodity prices, the hourly wage in the manufacturing industry stood at NT$213.73 in 1999, NT$242.20 in 2007 and NT$234.43 last year, thus showing an increase by 13.32 percent under the DPP government, compared to a drop by 3.21 percent under the KMT government.