The COVID-19 pandemic has changed how people approach daily life — with masks, hand hygiene, extensive disinfecting and social distancing becoming common practices for most — and led to changes in household incomes and spending patterns.
Last year, Taiwanese saved more and spent less, but wealth was unevenly distributed among households, and the gap between rich and poor continued to widen, Directorate-General of Budget, Accounting and Statistics (DGBAS) data showed last month.
Average household savings last year reached a record NT$264,548 (US$9,554), up NT$34,016, or 14.76 percent, from 2019 — the highest annual increase since 1994 — the agency’s 2020 Survey of Family Income and Expenditure showed.
While their savings increased, people spent as little as possible. Average household spending last year fell 1.7 percent to NT$815,000, the largest decline on record, the data showed.
Household savings last year increased substantially as people chose to keep more cash on hand for emergencies, the agency said, adding that a drop in oil prices and a reduction in spending on leisure and transportation, as people were unable to travel abroad due to border controls, also helped curb their spending. People’s spending on medical care rose, while tobacco sales fell, and the average life expectancy continued to rise and awareness of healthcare increased, the agency said.
As household incomes rose and spending fell, average household savings last year were 24.5 percent, up 2.75 percentage points annually and the highest since 2001, DGBAS data showed. In the early 1990s, average household savings exceeded 30 percent, before falling to 19.71 percent in 2011, the lowest in the past 35 years. While average household savings have remained above 20 percent over the past decade, last year’s spike represented a marked increase in the past few years, the data showed.
The volatile COVID-19 situation has over the past 20 months exacerbated wealth inequality, as fallout from the public health crisis has only mildly affected high-income earners, while leaving low-income earners less financially secure.
The DGBAS data showed that average disposable household income was NT$1.08 million last year, up 1.9 percent from 2019, with the top 20 percent of households earning an average of NT$2.18 million, or 6.13 times as much as the bottom 20 percent, who earned an average of NT$355,000 — up from 6.1 times in 2019 and the largest difference in eight years.
Low-income earners and disadvantaged groups saw their finances hit by pay cuts, unpaid leave and layoffs as the pandemic took a toll on economic activity. A widening wealth gap could reduce social mobility, aggravate class stratification and curb private consumption, which in turn would affect GDP growth and harm Taiwan’s economic development and social stability in the long term.
The government, industry and academia must combine their efforts to improve uneven wealth distribution and a worsening wealth gap. For example, they should focus on improving care for disadvantaged groups through social welfare measures, such as increasing the minimum wage and offering relief aid, providing education subsidies to economically disadvantaged people to encourage social mobility and creating a fairer tax system and promoting public awareness of a levy on capital gains.
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