Closer cross-strait trade ties are positively correlated with unemployment and income inequality in Taiwan and have differentially affected the voting behavior of rich and poor, a recent study showed.
Management and professional personnel and the rich, tended to support the Chinese Nationalist Party (KMT) while laborers, farmers and poorer people appeared to support the Democratic Progressive Party (DPP), said Lin Thung-hong (林宗弘), an assistant researcher at Academia Sinica, at a forum on Taiwan’s national economic development organized by the Taiwan Advocates.
Lin unveiled his findings in a thesis titled The emerging markets’ impact on unemployment and inequality in Taiwan, which compiled and analyzed statistics on Taiwan’s macroeconomic performance over the past three decades.
Foreign trade dependence on China and direct investment in China are both highly correlated with the poverty rate in Taiwan and the more investment in China, the higher the unemployment rate in Taiwan, Lin said.
Expansion in cross-strait trade and investment directly contributed to the rising unemployment rate and stagnant wages for farmers and laborers. However, the incomes of the middle class and those who engage in cross-strait trade continued to rise, the study found.
The phenomenon also appears to have political implications, with the rich and managerial class more likely to support the KMT and its cross-strait policy while the poor and working class tend to support the DPP, he said.
That was in line with a previous survey on public attitudes toward the Economic Cooperation Framework Agreement (ECFA) with China, which found that most managers believed closer cross-strait trade ties would benefit the economy and supported the agreement, while people with lower incomes disagreed.
Lin said his survey also found that while tax increases stop the rich from getting richer, they did not stop the poor from becoming poorer.
Lin said that the findings suggest several policy recommendations, including the promotion of trade with other major economies, such as the US, Japan and the EU, to help lower the jobless rate; improvement of social welfare, because tax increases do not help fight poverty; and placing income distribution high on the government’s agenda so as to not further exacerbate class conflict and political division.
Academics on another panel also warned against economic dependence on China and urged the government to offer help to businesspeople who wish to return to Taiwan.
Chang Chia-ling (張嘉玲), an economics professor at National Chung Hsin University, said the government should provide a better investment environment and upgrade industry to entice back Taiwanese businesspeople and reduce dependence on China.
Lin Yuh-jiun (林昱君), a researcher at Chung-hua Institute for Economic Research said that “the business model Taiwanese businesses have become used to over past decades has been rapidly vanishing” because of the changes in China’s own economic structure, which has become more influenced by domestic demand.
It will not be easy for Taiwanese businesses to change in response, she said, adding “that should be where the government comes in and helps them find new markets in other emerging economies.”