The ongoing local outbreak of COVID-19 has seen Taiwan engulfed in heated debates about how best to tackle it.
Among the issues, the migrant worker economy, highlighted by a cluster infection at King Yuan Electronics in Miaoli County, and domestic vaccines are two that could be further explored using the economic principle of externality.
Ministry of Labor data show that in 2010 and 2011, when annual imports and exports showed double-digit percentage growth, the number of industrial migrant workers also grew at a double-digit percentage rate.
In 2014, the number of migrant workers began to exceed the Aboriginal population, accounting for 5.93 percent of the labor force last year, up from 3.4 percent in 2010.
Migrant workers have made a significant contribution to Taiwan’s long-term care and economic growth.
Taiwan has a large population, but only limited land and natural resources. While the introduction of migrant workers can solve short-term labor shortages in industry, it exacerbates the lack of land, and limited water and electricity.
The average price of housing is high, and water and power shortages are increasingly serious. These can be viewed as negative externalities stemming from the decision to implement a migrant worker economy.
As everyone shares the costs of these negative externalities, the government needs to reassess the benefits of its policy on the migrant worker economy.
I personally believe that the best policy is to encourage companies to cooperate with universities, to improve the teaching and training of workplace skills, and to explore and make use of the potential workforce already in society.
The second-best option is to consider the negative externalities of the migrant worker economy when evaluating the total cost of a policy so that the best migrant worker policy can be advanced.
The prospects of domestic vaccines has filled the government with confidence, while the public remains relatively cautious, given that the vaccines have yet to start phase 3 clinical trials, and cannot compare with the vaccines on the market in Europe and the US.
If COVID-19 did not mutate and one vaccine lasted people a lifetime, domestic vaccines could never compete for market share with rival brands, unless they were of high quality and low price.
However, COVID-19 is not only mutating rapidly, the variants are spreading throughout the world.
The US has an ample supply of vaccine doses and a 43 percent vaccination rate, but it is preparing for the possibility that booster shots would be needed to strengthen the immune system and fight off more deadly variants.
If Taiwan could succeed in developing domestic vaccines, it would possess the fundamental capacity needed to develop vaccines to fight future mutations, as well as to promptly increase vaccine production whenever there is an outbreak and demand for inoculation soars.
This flexibility to respond to an evolving virus situation is a positive externality of developing domestic vaccines. It benefits the entire population.
As ignoring the value of vaccine research and development would overlook this positive externality, the government’s insistence on the development of domestic vaccines is to be applauded.
The feasibility of a policy depends on the analysis of its profit and loss. Ignoring the economic externalities resulting from policies greatly increases the probability of making wrong decisions.
Policymakers must take note.
Chen Hsiu-lang is an associate professor of finance at the University of Illinois in Chicago.
Translated by Lin Lee-kai
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