Council for Economic Planning and Development Minister Kuan Chung-ming (管中閔) was overly optimistic about economic prospects when he took the post in February. At the time, the government predicted that GDP would grow 3.53 percent this year, but Kuan said he believed that the annual growth rate could attain the “golden cross” — where GDP growth rises over 4 percent and the jobless rate drops below 4 percent — suggesting the economy had a bullish future.
The government had high hopes that strong economic growth would have a trickle-down effect, meaning that better economic growth would help improve the job market and pay rates.
However, Kuan’s wishful thinking rings hollow now. There was no magic over the past eight months. GDP growth is losing steam and is under 2 percent this year, short of the government’s 2.3 percent target. The jobless rate is still well above 4 percent.
The job market has also showed no significant progress. The unemployment rate improved to 4.24 percent last month, compared with August’s 4.33 percent, according to the latest statistics released by the Directorate-General of Budget, Accounting and Statistics (DGBAS). The reduction is primarily due to seasonal factors — university and college graduates landing their first jobs after summer.
During the January-to-last month period, the unemployment rate only went down 0.05 percentage points to 4.18 percent. That makes Taiwan’s job market the weakest among its Asian counterparts including Japan, Hong Kong and South Korea. Hong Kong’s jobless rate held pat in June and has stayed at 3.3 percent for four months, according to statistics provided by DGBAS. Japan and South Korea’s unemployment rates stood at 4.1 percent and 3.1 percent respectively in August, latest figures showed.
Taiwan’s chances of attaining the golden cross this year are slim. The last time this happened was in the fourth quarter of 2009. During a question-and-answer session at the legislature on Monday, Kuan said that it would be difficult to reach the goal this year. However, he felt no shame at all and refused to accept that he had done anything wrong.
“We do not predict. That was just a proposed target,” Kuan told legislators.
Kuan’s theory was wrong from the beginning. It is difficult to rely on strong economic growth to improve the job market, given the nation’s special economic structure. GDP depends heavily on trade and a big chunk of the trade is so-called “triangle trade” — Taiwanese firms take orders in Taiwan, but manufacture products elsewhere, such as China. Triangle trade helps manufacturers reduce costs and boosts GDP, but it does not help — and likely harms — the job market, private consumption and investment.
Most Taiwanese pay no regard to reports on the economy, but they do feel the pinch of economic weakness through job losses and stagnant salaries.
If the government wants to gain favor and keep its promise of economic growth, it needs to take new and creative measures to reduce the jobless rate and raise salaries.
Premier Jiang Yi-huah (江宜樺) told reporters last week that the government would try to create more jobs and to boost wages and that GDP did not mean anything if its growth did not help people. How true those words are. People need to see action, not just hear words.