The Ministry of Labor last week said the number of workers on furlough is still far below the levels it had been at during the global financial crisis of 2008 and 2009. However, it is annoying to hear company executives say that furloughs are necessary to cope with declining business.
For most workers, taking unpaid time off has become a version of getting laid off. The furloughs are, to a certain degree, good for everyone — as long as companies survive plummeting demand and declining factory utilization. Some might even find comfort in the furloughs assuming they would decrease the risk of future layoffs.
However, the trend of unpaid leave this year, compared with 2008, 2009 and 2011, shows that companies have become more resilient to economic volatility and learned how they can quickly cut payroll costs to cope with a downturn. They are also able to recover quickly when the economy turns around.
Still, the latest furlough data — according to the ministry, 1,233 workers in 26 companies were on unpaid leave last month — is just the tip of iceberg considering how the global economic slowdown is affecting Taiwanese living in an export-reliant economy and the perennial concern about the accuracy of government data.
First, last month’s furlough figures were much higher than the ones in August, which showed 669 workers were on furlough, the highest since February last year. About 5,000 workers were furloughed in the first nine months, but the actual figure might be higher, as some companies are allegedly using loopholes to avoid reporting the real number of workers forced to stay at home.
Second, the ministry’s tallies showed that as of August, more than 11,448 people in 226 companies had been laid off, an increase of 4,000 from the same period last year, with the number of people applying for unemployment benefits rising to 9,208 in August from about 5,000 in July.
Third, while some furloughed workers do not complain about fewer work hours and less income — figuring it is better than being laid off — the forced time off gives the people yet another reason to cut back on spending as they wait for the other shoe to drop, a situation that is not helpful for economic recovery.
Finally, whether furloughs can be implemented on blue-collar workers in the manufacturing sector is an open question. If the stock and property markets remain sluggish in the final quarter of the year, the involuntary unpaid leave could be making its way into the service sector, affect more white-collar workplaces across Taiwan.
Even though the ministry said it has set up a NT$20 billion (US$603.2 million) emergency fund to assist furloughed workers, this still does not fully address the problem of forced unpaid leave, which is an issue the government, businesses and the public must face. The nation might finally have come to see unpaid leave as an alternative for layoffs, but it is hardly so if companies still cannot afford it.
As global demand is unlikely to recover at a faster pace in the final quarter, Taiwan might struggle to grow GDP by more than 1 percent this year. The nation might see consumer confidence and demand capped by moderate external demand, while companies — especially those in the electronics sector — are likely to put more workers on furlough or lay them off.
However, what is more important than the number of workers on unpaid leave is the significance of this trend, which suggests that Taiwan’s competitive edge is slipping, while the industrial sector, which is more prone to market volatility than before, needs to overhaul its information technology.
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