This old bit of wit is, unfortunately, all too true for many in Taiwan now facing the scourge of unemployment. All each individual can do is grin and bear it. Has Taiwan picked up the same "disease of development" afflicting many advanced economies? What is causing the current wave of unemployment? What can be done to resolve it?
It is June, when the cicadas are chirping and the singing of graduation songs has begun. Schools graduate tens of thousands of students into society and the job market. This year, unfortunately, these young people are being greeted by a series of stories of unemployment and layoffs.
According to the Council for Economic Planning and Development (CEPD), the unemployment rate has been steadily rising since the latter half of last year. Currently it stands at 2.6%, the highest in a decade. Every day, the newspapers carry alarming stories of layoffs and cutbacks. A casual culling of the papers tells the tale:
Yue Loong Motors, of the longestablished CAC auto manufacturing firm, last year moved its Taipei offices to Miaoli as part of a program of "combining production and managerial offices in a single plant"; thus far it has "downsized" 500 people. Wei Chuan Foods, which is rapidly expanding in mainland China, recently announced that it will shave its Taiwan staff by 40%-or over 1000 people-over the next four years. After the Ministry of Defense (MoD) announced that its Chungshan Institute of Technology was being privatized, hundreds of researchers facing termination of their contracts took to the streets in protest. In June, the Taoyuan operation of the US computer company Digital gave pink slips to over 100 workers. And, in perhaps the most turbulent recent incident, the Taiwan Daily News, connected to the military, announced without any forewarning that it was halting publication.
Nobody is safe
For a number of years now, traditional sunset industries have been moving factories overseas or closing up shop altogether. But the current wave of unemployment involves a far broader range. Everyone is being caught in this undercurrent: high tech and heavy industries as well as traditional manufacturers, multinational corporations as well as small and medium enterprises, white collar workers as well as blue, senior managers as well as unskilled laborers, and even state-run enterprises-long thought of as sinecures-as well as the private sector. The feelings of many working people can be summed up in the expression, "Nobody is safe."
Crunching the numbers, in June of this year, the number of unemployed in Taiwan was 241,000. This was an increase of 79,000 compared to one year before. Of the increase, more than half (41,000) lost their previous jobs because of factory closures or declining business. And this is only the tip of the iceberg: Many other firms have not been replacing workers lost through normal turnover, have not hired new employees, or have cut back on salaries and performance bonuses. They are using every possible approach to reduce labor costs, like "having one person do the work of two." Many people who would not otherwise be laid off have been leaving their jobs because of harsher working conditions. Consequently, the number of people who left their position "because of job dissatisfaction" increased 24,000 over the past year.
Why the sudden increase in the number of unemployed? One answer that comes readily to mind is, "The economy is not doing all that great." Since the middle of last year the economy has been on the downswing of a business cycle. In particular, as relations between Taiwan and mainland China grew tense, and the PRC fired missiles near Taiwan, economic links between the two sides suffered a severe blow, and many industries were hurt. Recently the Chung Hua Institution for Economic Research revised its projections for economic growth for 1996 downward, to 5.88%, which would be the lowest since 1991.
Things seems even more painful because so many firms expanded willy-nilly when times were good. They raised salaries, added new staff, upgraded facilities, and opened new plants. Now that the economy has shifted, "even the bosses are finding it hard to make ends meet, so how can they secure the jobs of their employees?" sighs one personnel manager at a large corporation. Having "gorged themselves," it is now even more painful for enterprises to "slim down."
One may ask: Can't the economy be stimulated to provide employers with a breathing space and their workers with a lifeline? That's not as simple as it might seem. The most effective policy to stimulate the economy is generally thought to be "loose money." Beginning last year, interest rates have been steadily lowered, while the government has offered low interest loans to small business and to would-be home buyers. Despite the fact that banks are flush with cash, willingness to invest has remained low in the business community, and the unemployment rate has continued to rise. Obviously it's going to take something else to resolve the problem of joblessness.
The aristocratic proletariat
Looking only at the unemployment rate, as Table 1 indicates, Taiwan's situation does not seem serious compared to conditions in Europe (where joblessness stands at 10%), the US (5.3%), or Japan and Hong Kong (above 3%). But the unemployment rate in itself is only a very narrow definition of the problem. It is derived by looking only at the number of people who are willing and able to work, and who are looking for employment, but have still not found jobs, as compared to the total labor force (see Table 2).
Instead, if one looks at the "labor rate," (i.e. the percentage of possible workers in the work force), Taiwan stands at only 58%, which is substantially lower than the figure of 70% in many other countries. Moreover, there are 120,000 people who say they want to work but are not actively looking for jobs. (These are so-called "discouraged" job- seekers). Because these people have not been looking for work, they are not covered in the unemployment statistics of people "unable to find work," which indicates a blind spot in the official statistics.
"If you include these people who have no confidence that they will be able to find a job, the idle population in Taiwan would surpass 400,000. This could lead to many social problems," says Chien Hsi-chieh, a legislator and former secretary-general of the Taiwan Labor Front, who has long been an expert concerning the unemployment problem.
Of course, there are many reasons for joblessness. In many underdeveloped countries, the main reasons for unemployment are that the government lacks an effective industrial policy and there is insufficient capital and/or technology to put people to work. In more advanced countries in North America and Europe, on the other hand, the problem is that labor costs have steadily risen. The "aristocracy of labor" demand much from their employers, and many firms are unable or unwilling to pay the price. Such companies may move operations overseas, or, by relying on new technology and management techniques, reduce demand for home-country manpower to a minimum. In other words, unemployment in these countries is an unavoidable side-effect of prosperity and modernization. How is it that Taiwan has been unlucky (or should we say lucky?) enough to feel what it is like to get this disease of development?
Deconstructing unemployment
Looking in more detail at the underlying reasons for Taiwan's current unemployment woes, the Manpower Planning Department at the CEPD notes some important things to keep in mind. Each year demand for jobs rises between August and October after students graduate, and there is also a surge of people leaving their jobs after Chinese New Year (when annual bonuses are awarded). At both these times of the year, joblessness inevitably rises in a phenomenon known as "seasonal unemployment." After deducting this purely seasonal situation, unemployment can be divided into three main types: structural, cyclical, and frictional. Of course, as with any social problem, everything is inter-related, and it is difficult to draw a clear-cut line between these, but the distinction is still useful.
"Structural unemployment" is the most deeply rooted. It derives from changes in the overall production structure, when old jobs disappear and new ones arise. In the process, some workers who can only offer outdated skills and who cannot adapt to the new jobs will, inevitably, find themselves washed out of the labor market.
In the past several years, Taiwan's industrial structure has changed significantly. In 1986, manufacturing accounted for 34% of the labor force; by the first quarter of this year that figure had fallen to under 27%. Meanwhile, the service sector has burgeoned by ten percentage points, and now accounts for over 51% of the workforce. In this sector, commercial services, finance, insurance, and real estate have all grown at an average annual rate in excess of 9%.
In addition, there has been a remarkable shift within manufacturing. Lin Tsong- ming, head of the Employment and Vocational Training Administration in the Council of Labor Affairs, points out that 30 years technology-intensive industry was virtually non-existent; today it accounts for about 60% of local manufacturing. Those labor- intensive sectors that have not been squeezed out altogether have had to upgrade in order to remain competitive in an era when it is hard to find low-wage labor.
Take for example the paper industry, where working conditions are very demanding. Recently Yuen Foong Yu Paper Manufacturing Company, one of the industry leaders in Taiwan, made headlines when it decided to lay off 100 women employees at its Chiutang plant in Kaohsiung County. Stephen Lin, who is executive manager of the Personnel Department at corporate headquarters, explained the reasons for the decision in detail. At the end of this year, the Chiutang plant, which originally employed 1000 people, will complete installation of a new paper-making system. The machine, extending 100 meters in length, can produce 500-600 tons of paper per day, several times more than the previous smaller machines, and with 100% automation. After the paper pulp is put in, the entire process-pressing, washing drying, and rolling-is fully automated, with rolls of paper being sent directly on to a packaging machine.
This high degree of automation is done in part to save labor costs, and in part because of the consistent quality and high volume of production. Looked at another way, paper manufacturing is a strenuous industry, with shifts working 24 hours a day in a noisy and hot environment. Few young people are willing to stay in the job for long. But the automated machine changes all that: Every moving part has a monitor, and employees need only sit in a quiet, air-conditioned room and keep an eye on the screens, handling glitches through the computer. But this leaves all those people who had mastered the various skills of paper-making without any jobs to do.
Is it possible for those whose long-familiar jobs have disappeared to shift to new ones? That is in fact difficult. At the Chiutang plant, which has been around for 46 years, most of the older employees have only middle school educations. Forget about anything else, they can't even understand the English instructions for the computer. And even if these are translated into Chinese, they find the detailed procedures and principles hard to remember. Nevertheless, Stephen Lin says with frustration, even as the old plants in southern Taiwan find themselves with too many workers, the company's factories in Yangmei, Taoyuan, and Hsinwu in northern Taiwan have always been short of hands, and have been continually looking for workers. "It's not that the company has no jobs for these people, but it is virtually impossible that they will accept being transferred and having to move their families to northern Taiwan."
Too heavy around the middle
"Right now the employment market can be summed up as 'lacking in laborers but not lacking in people.'" So says Chan Huo- sheng, who is vice-chairman of the Council of Labor Affairs and a professor in the graduate school of sociology at National Taiwan University, going right to the heart of the problem. He notes that in terms of numbers, supply and demand in the labor market are roughly in balance. In fact, the demand for labor may even slightly exceed supply. But often there is no way to match up the idle people with the available jobs. Thus, rather than saying "unemployment is high," it might be better to say that "supply and demand are out of step."
Further, "many people have a misconception that, in a period of rapid industrial transformation and upgrading, unskilled workers with low educational levels are at a disadvantage, and will be left out in the cold. In fact, it's exactly the opposite," states a report written by Li Cheng, vice-director of the Chung Hua Institution for Economic Research. In recent years, the level of education and technical skill in Taiwan has risen sharply, surpassing rather than lagging behind the pace at which industry is upgrading. As a result, unemployment caused by "workers firing their employers" (quitting) is more serious than that generated by layoffs. Low-skilled workers need only retain their habits of hard work and perseverance and they will not lack work opportunities.
Looking at the facts, after the government permitted investment in mainland China, within a short period traditional labor-intensive industries either folded or moved. But not only did the unemployment rate not increase, remaining local industries commonly couldn't find base-level workers, and their biggest headache was figuring out how to get approval to bring foreign laborers in. Statistics from January to May of this year show that the situation has not changed. The unemployment rate for those whose educational level is middle school or below was 1.71%. Though there has been a slight upward trend in this figure, it is still far lower than the rates of 2.58% for high school graduates and 2.56% for those with university degrees or higher. Thus low-skill labor has by no means been at a disadvantage in the labor market.
In ironic contrast to the situation of poorly educated workers, the old proverb that "there is a golden palace in books" seems no longer to apply. In this era of the "highly educated unemployed," bookish students lacking in either a special skill or physical strength are the "disadvantaged group" in the job market.
In recent years the government has considerably expanded higher education, transforming "vocational schools" into "management institutes" and "industrial junior colleges" into "institutes of technology." It is still not certain whether the students are actually going to be learning at a higher level, but in any case the diplomas have been upgraded. In a brief ten years, as the number of institutes of higher learning expanded, the number of college and university graduates doubled from 97,000 to 182,000 in June of 1995. If the large number of returning overseas students is included, not only is the sky filled with the mortar boards of university graduates, the per capita figure for holders of MA and PhD degrees is the highest in the world.
Education does not equal quality
A university degree makes most young people feel, "I'll never work in a factory!" But it is not so easy to find a well-paying, low-demand desk job in an air-conditioned office building that is close to home and gives two days off each week (as opposed to the day and a half in most factories). And if what one studied doesn't conform to market demand, the situation gets even stickier.
Peng Tai-lin is a department director in the National Youth Commission; his department is in charge of surveys and studies of youth problems. He states that there are, on average, 2.85 job openings for each person with a college education or above. That may sound quite upbeat, but, when you look more closely, fully three-quarters of these jobs are concentrated in a few hot fields like mechanical engineering, electronics, and information technology. Moreover, most of these still require the employee to work on the factory floor, rather than sitting in an office. In contrast, there is little demand in the fields of humanities, law, or sociology, where supplies are in excess. Thus it is rather difficult to find a job where one's skills in these fields can be put to use.
"A lot of education doesn't necessarily indicate a lot of ability. What multinational corporations really need is people who have special skills in international commercial law, taxation, management, or research and development leadership. But there is still a serious shortage of this type of high-level manpower," sighs Peng Tai-lin. A report by the CEPD's Manpower Planning Department states that both basic level labor and high level skilled personnel are in short supply, while there is a surfeit of middle-ranking manpower. The labor supply is unsuitable, and this has become one of the structural imbalances most in need of attention at the present time.
Since high unemployment among the highly educated reflects an overall structural imbalance, one may ask whether there is too much higher education in Taiwan. Should there be a significant reduction in the quota of students allotted to departments of humanities and social sciences, whose graduates find the going harder in the job market? Should individual interests, or future career prospects, be given top priority? Lately these have become hot topics of debate in many circles in society. Meanwhile, young people, who are the ones most directly affected, have their own ideas.
Stay if you fit, go if you dont
Mr. Shih, who came to the Kuanghua Employment Services Station in Taipei to look for a job, is a case in point. Shih, 29 this year, graduated from the Department of Administration of the National Open University, and has six years of work experience. He recently resigned his position as director of a factory warehouse, and came to the employment center to try his luck. Why did he give up his good job and its NT$35,000 per month salary? "It wasn't interesting to me," he says, not beating around the bush. "I've always wanted to have a job in the legal profession."
Of Mr. Shih's six years of employment, he spent the first three doing clerical work in the inspection department of a pharmaceuticals manufacturer. After seeing an ad in the paper in which an advertising company was looking for a legal assistant, he rushed to apply. In the company, he wrote letters demanding loan repayment and drafted complaints to be used in lawsuits.
The job was extremely interesting to him, but, unfortunately, "the boss was too demanding and the workload was too heavy." He grew unhappy, and quit. Naturally there aren't that many jobs in the legal field, and most want people who studied law in school. So Shih decided to turn his focus to taking the high-level civil service exam and the bar exam. Later he took a job as an assistant to a member of the Legislative Yuan. However, the job required too many hours, "and that cut into my study time," so soon thereafter he resigned that post also.
Experiences like Shih's are typical for the unemployed among Taiwan's "new youth." Yet, rather than say his academic background hasn't fit well with the job market, it would be more accurate to say that he has been constantly looking for jobs that are ever more suitable for himself. Taking into account the fact that he has no family responsibilities, he takes the attitude, "if it suits me, I stay, if it doesn't I go." He is unwilling to "sell" himself to just anybody merely to get a paycheck. The temporary periods of joblessness which inevitably appear on a resum* like Shih's are known as "frictional unemployment."
Voluntary unemployment on the rise
"Compared to Europe and North America, in the past frictional unemployment was very low in Taiwan," says Ma Kai, a researcher at the Chung Hua Institution. One reason is that Taiwan's economy has been very vibrant, and has constantly given rise to new fields of employment, so people who have wanted to change jobs have been able to find new ones quickly.
Another, less upbeat reason, is that in the past, few people dared give up their jobs lightly, and even fewer bothered to spend time out of work to find their true direction. Instead, many resigned themselves to a lifetime spent doing a job that they found uninteresting. While these considerations contributed to keeping the frictional unemployment rate lower, "they caused great pain to individuals and also prevented the nation from getting the most from its manpower."
Ma Kai suggests that one reason for the current rise in frictional unemployment is that, now that Taiwan is wealthy, far fewer young people need to be so careful about hanging on to an "iron rice bowl" (as secure jobs are called by Chinese). In addition, the implementation of national health insurance means that job-seekers have one major worry off their minds. It was thus only to be expected that frictional unemployment has risen rapidly.
Frictional unemployment usually is voluntary. Just a few years ago, when the economy was bubbling and industries like commercial services, finance and insurance, information technology, construction, and national infrastructure were growing rapidly, they could absorb all the "floating" manpower, and frictional unemployment was not a serious problem. Similarly, when times were good, many medium and large enterprises priding themselves on "lifetime employment" could keep around excess staff, thus ameliorating the problem of structural unemployment. But as the economy has turned downward these past couple of years, multiple problems have accumulated.
"Cyclical unemployment" comes and goes in waves, and is the most direct cause of the most recent surge in joblessness. Looking again at the case of Yuen Foong Yu's Chiutang paper factory, Stephen Lin reveals that the Chiutang plant had begun its "renovation" six years previously. Automation proceeded apace, and many people were made redundant by machines. But because profits were still good, people with no other jobs to go to were kept around in the factory, with their status "temporarily undetermined." Little did anyone expect that last October the Chiutang factory would experience its first financial losses in 46 years. Add to this that NT$5 billion was being invested in equipment coming in at the end of the year-an investment decision that looked not at all problematical when times were good-and the result was a financial crisis. The only thing to do was cut back the workforce.
Useful as it may be to be able to analyze unemployment in structural, cyclical, and frictional terms, all of these assume a closed labor market. But the actual situation is not so clear-cut. Today the world is a global village, and international labor migration has brought startling changes to the world's labor market(s).
Low-wage labor sweeps the world
"Over the past decade, the greatest development in the global labor market has been the unleashing of labor in less-developed countries, which has had a serious impact in the labor markets in high-wage countries," notes Ma Kai. In the past, countries like mainland China and India adopted closed, protectionist policies. Though they lacked the capital and technology to utilize their labor forces in industry, they preferred to keep it idle or down on the farm rather than have it be contaminated by foreign capitalists.
However, over the last decade or so, mainland China and all of southeast Asia have opened their doors to foreign capital by offering tax incentives and, most enticing of all, cheap labor.
"A conservative estimate is that this unleashed labor force numbers between one and two billion people," says Ma. Besides offering sheer numbers, this labor force also has the advantage of being made up of people hungry to become well-off and willing to work hard for "wages so low that it is hard to imagine." Ma adds that this labor force substitutes for high-wage domestic labor in three ways: First, foreign labor is brought into the country (Taiwan has, by conservative estimates, at least 300,000 foreign laborers at this time). Second, capital flows out, setting up factories where the cheap labor originates. And third, products from low-wage factories enter the international marketplace, undermining high-wage factories at home.
It's hard to say whether Taiwan's proximity and cultural similarity to mainland China is a blessing or a curse. But, given those conditions and Taiwan's wealth of capital and technology, "Taiwan was one of the earliest countries to feel the impact of this wave of low-wage labor, and has been one of the most severely affected." Fortunately Taiwan's economy is healthy, and upgrading has been happening fast enough, so that no serious unemployment problem has resulted. Unemployment remains below that in Japan and Hong Kong, which is a rare situation indeed.
But there is no end to economic adaptation and upgrading. Now that there is a large labor force available in surrounding nations, Taiwan's only choice is to continually upgrade to maintain its edge. It must use ever greater efficiency and knowledge to stay in the lead, and employ this low-cost labor force skillfully to help it secure its place and create new employment opportunities at home.
In only one generation, Taiwan has gone from itself being a "low-cost labor supplier" in the 1950s to being the "low-cost labor consumer" it is today. Once Taiwan stagnates, and is caught from behind, what will Taiwan's aristocratic labor force of nine million rely on to secure its "iron rice bowl" in competition with the more than one billion workers in surrounding countries who will work hard for a pittance?
Unemployment looms large
How can the situation be turned to advantage, so that competition proves helpful? Ma Kai, looking at the manufacturing sector, argues that the most important thing is not production, but "taking the orders," which is where the profits are. Meanwhile, the tasks of manpower training, raw materials supply, and development of key components can remain in Taiwan. In other words, even though the production base moves overseas, the "headquarters" and "logistical support center" remain in Taiwan. Operations items stay in Taiwan, along with capital sourcing, legal, tax, and financial planning, and training of internationalized personnel. All these could service the production bases located in surrounding countries. When the branches of the enterprise blossom overseas, naturally the root in Taiwan will reap rich rewards.
This type of operations center, focused on Taiwanese firms, is different from the "Asia-Pacific Regional Operations Center" plan currently being weighed, which aims at multinationals whose home countries are elsewhere. Just as European countries have in recent years strongly promoted "green industries" in the environmental and cultural fields, not only improving the quality of life but creating tens of thousands of jobs as well, there are many things in Taiwan worth investing in, and sufficient profits to be had. Enterprises need not think that their only choice is to head abroad. By striving in this direction, both structural and cyclical unemployment can be moderated.
Unemployment is not just a matter of "one hole for each peg." It is a matter of "finding the right holes." At the same time, unemployment is a chronic ill, and one that comes with development. The only thing to be done is to patiently work to alter the economic structure; nothing can be resolved overnight. How can Taiwan's workers find jobs that they are technically prepared for and that they enjoy? The key to whether Taiwan's economy can reach a new peak lies somewhere within that question.
p.26
(drawing by Tsai Chih-pen)
p.27
Caught in the privatization wave, employees in state-run corporations, long able to sit tight in their jobs, now face salary cuts and layoffs. The photo shows staff from the Chungshan Institute of Technology protesting to keep their jobs. (photo by Diago Chiu)
p.28
At the Chunghsiao East Rd. employment services center of the National Youth Commission, an endless flow of people come for help in finding jobs. Yet, despite being unemployed, most of these young people seem unworried, and they are not for the time being crushed by the pressures of life.
p.30
Since there are few help-wanted ads, why not create your own opportunities?
What stories lie behind the specially designed "situations wanted" ads?
p.32
A shortage of labor and rising wages have left businesses with no alternative but automation. It's just that, as this progresses, people willing to work hard are replaced by machines. The photo shows Acer Computer's automated factory. (photo by Vincent Chang)
p.33
A few years ago, at the peak of factory closings, workers shifted en masse into the service industry. But once the economy slowed up, all businesses were affected, and the latent unemployment problem came to the surface. (photo by Shih Wei-kang)
p.34
Bringing in low-cost foreign labor can slow the exodus of industry, but it also reveals the awkward situation of Taiwan labor. Under the impact of a wave of cheap labor becoming available in neighboring countries, Taiwan workers now urgently need to adapt and upgrade their skills.
p.35
It's graduation time, and groups of students pass into society. Are they well-prepared to meet the challenge of today's labor market? (photo by Diago Chiu)
p.36
Recently the US firm IBM has begun trying out a "mobile office" policy. The company has moved toward downsizing and mission orientation. The coming of the information era may very well change the way people have looked at work for over a century.
Since there are few help-wanted ads, why not create your own opportunities? What stories lie behind the specially designed "situations wanted" ads?
A shortage of labor and rising wages have left businesses with no altern ative but automation. It's just that, as this progresses, people willing to work hard are replaced by machines. The photo shows Acer Computer's automated factory. （photo by Vincent Chang）
A few years ago, at the peak of factory closings, workers shifted en masse into the service industry. But once the economy slowed up, all businesses were affected, and the latent unemployment problem came to the surface. （photo by Shih Wei-kang）
Bringing in low-cost foreign labor can slow the exodus of industry, but it also reveals the awkward situation of Taiwan labor. Under the impact of a wave of cheap labor becoming available in neighboring countries, Taiwan workers now urgently need to adapt and upgrade their skills.
It's graduation time, and groups of students pass into society. Are they well-prepared to meet the challenge of today's labor market? （photo by Diago Chiu）
Recently the US firm IBM has begun trying out a "mobile office" policy. The company has moved toward downsizing and mission orientation. The coming of the information era may very well change the way people have looked at work for over a century.
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