As Taiwan grows wealthier as a nation with GDP per capita exceeding US$30,000 in recent years, its gap between rich and poor increases, while there have also been significant changes in household incomes and spending patterns since the COVID-19 pandemic emerged about three years ago.
Data released by the Directorate-General of Budget, Accounting and Statistics (DGBAS) in late August showed the average disposable income per household was NT$1.11 million (US$34,465) last year, 1.7 percent higher than the previous year, and NT$392,000 per person, up 3.8 percent annually.
DGBAS data showed that the average disposable income among the top 20 percent of households was NT$2.24 million last year, up 1.8 percent from 2021, while the average for the bottom 20 percent was NT$365,000, an annual increase of 1.8 percent, the agency’s 2022 Survey of Family Income and Expenditure showed. The agency attributed the increase in disposable income to the nation’s economic growth, with GDP expanding 2.35 percent last year from the previous year despite the impact of the pandemic.
Even so, the figure for the top 20 percent was 6.15 times higher than for the bottom 20 percent, the same as the previous year, but still the highest since 2011, when the number was 6.17. In other words, the wealth gap has not improved despite increases in people’s average disposable income and GDP.
The Gini coefficient — a measure of inequality where zero indicates complete equality of income and one indicates complete inequality — reached 0.354 last year, the highest since 1983, when it was 0.357. Unlike disposable income data that focuses on a comparison between the top and bottom 20 percent of households, the Gini coefficient summarizes inequality in terms of overall income distribution, and last year’s figure shows that income inequality in Taiwan has been more serious than expected in recent years.
Furthermore, the agency found that average household savings were NT$274,032 last year, the second-highest on record and lower only than NT$275,000 a year earlier, with families in the top income bracket continuing to accumulate wealth as their average savings rose to NT$869,559 from NT$864,115 in 2021, whereas those in the bottom bracket were still not able to make ends meet as the situation of negative savings remained unchanged for the 16th year in a row with a debt of NT$17,334 last year.
Former US president Barack Obama once said income inequality is the “defining challenge of our times,” while Pope Francis tweeted that “Inequality is the root of social evil.” Many experts believe income inequality inevitably leads to social instability and disorder, and even political turmoil.
In Taiwan, facing an increasing number of Chinese military movements in its air defense identification zone and territorial waters in recent years, a deteriorating income distribution would also affect citizens’ willingness to defend their country, according to an analysis by Wu Wen-chin (吳文欽), research fellow of the Institute of Political Science at Academia Sinica.
In an article published by the Journal of Asian and African Studies in April, Wu argues that perceived unfair income distribution reduces citizens’ attachment to their country and inhibits their willingness to fight. Wu’s analysis also found that perceived unfairness in wealth distribution reduces non-rich citizens’ willingness to fight for their country by dampening their national pride, a key element in psychological attachment to national identity.
Wu’s research highlights the importance of an equitable distribution of wealth and resources, and, more importantly, it suggests that unfairness in wealth distribution threatens national security. As Taiwan faces rising threats from its big neighbor China, policymakers should take heed of worsening wealth distribution, as the nation would be most vulnerable when neither the rich nor the poor are willing to stand up and fight for their country.
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