Premier Wu Den-yih (吳敦義) has declared that unemployment would be pushed below 5.5 percent. He then promised that he would take responsibility if he failed to accomplish this, adding that “taking responsibility” would include resigning. As the highest administrator in the land, we should applaud the fact that he is prioritizing unemployment, which is the most important of all issues.
One-and-a-half years ago, I wrote that we were facing an economic winter and that this was disastrous to small and medium-sized enterprises (SMEs). The reason was that in the wake of the global financial crisis, the business management of SMEs, which are economically disadvantaged because of the structure of their division of labor, was much more difficult. Because SMEs employ about 77 percent of the work force, the quality of their management is closely related to the employment situation. SMEs’ employees and their dependants are among the most disadvantaged groups in society. As expected, analysis of economic data shows there were 53,000 fewer employers last year than in 2007, before the financial crisis. Each of these represents an SME or a shop. The government does little to take care of these disadvantaged groups, so it is not surprising that the army of unemployed grows as shop after shop and company after company closes down.
The average unemployment rate for last year was 5.85 percent, the highest on record. In January, it fell slightly to 5.68 percent as a result of the government’s strategy of employing temporary workers and promoting short-term employment programs for the sake of appearances. Long-term and hidden unemployment continue to be big problems, because the employment structure and salaries are the true source of the employment problem.
In terms of employment structure, the Directorate-General of Budget, Accounting and Statistics’ (DGBAS) announcement of the manpower utilization survey for last year did not include the 687,000 people working in the “atypical employment” sector, that is, those who work part time, take temporary jobs or work for manpower companies. This group is even larger than the total number of reported unemployed, 626,000 people. In other words, if we use the traditional, stricter definition of employment — full-time employment — the unemployment figure breaks through 11 percent. The salaries in this group are a mere 49.7 percent of full-time salaries.
We can look at this from the point of view of the domestic growth rate of investment, taking the example of private investment. For the past two years, growth has been negative 13.28 percent and negative 27.43 percent. The lack of investment to drive economic growth is reflected in the stagnation of salaries. DGBAS figures showed the nominal average salary level last year was NT$42,500, a drop of 4.31 percent from 2008, the largest fall since the manpower utilization survey began. If we then look at the average salary in real terms after inflation has been factored in, the figure is a mere NT$40,600, taking us right back to 1997 levels. In other words, there has been precious little room to save at the vast majority of salary levels over the past 12 or 13 years.
If we now delve a little deeper, we find that most long-term unemployed, 49.5 percent, fall in the 20 to 34 age group, and 40 percent graduated from high school or higher institutions. The unemployment rate for the 15 to 24 age group stands at 13.22 percent. With the bulk of the long-term unemployed consisting of the young and highly educated, one can see just how dire the situation is.
The government ought to start from industrial policy and actively try to stimulate public and private investment, taking a holistic approach to the root of the unemployment problem.
The government should direct its resources to the sectors with the capacity for job creation and those that can absorb the numbers of unemployed, such as the service industries or SMEs. The powers that be need to drop the “bigger is better” mindset and their preoccupation with the scale of investment. How many jobs are going to be created in the wafer fab or panel industries, industries that require investment measured in the hundreds of billions of NT dollars?
It’s true that these industries have driven nominal GDP growth for the country as a whole, but this has not really done anything for unemployment per se. The investments would be better used financing or supporting promising SMEs or businesses in the service industry, such as chain franchises like coffee shops, the guesthouse and tourism industry, or the long-term care industry, currently on the rise to meet the demands of an aging population. All of these have the potential of creating stable job opportunities.
Hong Chi-chang is former chairman of the Straits Exchange Foundation and a former Democratic Progressive Party legislator.
TRANSLATED BY PERRY SVENSSON AND PAUL COOPER
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