Taiwan Labor Market Overview: Structure of the Workforce, Educational Levels
Foreign companies establishing themselves in Taiwan will have access to a workforce that is well-educated and well-motivated. The Chinese have a will to succeed and employment opportunities with foreign companies are keenly sought after. Strikes are rare in Taiwan, not because they are illegal - Chinese workers generally enjoy the right to strike with few exceptions - the Chinese disposition towards harmony predisposes labor and management alike to resolve potential conflicts through dialogue and compromise.
Labor turnover rates, especially in foreign companies, are very low and a recent survey conducted by the Council of Labor Affairs indicated that worker job satisfaction island-wide stood at 65%. While the cost of labor in Taiwan is highest among Asia's four mini-dragons, a U.S. Department of Labor Survey ranked Taiwan in twenty-second place in terms of labor costs in the world's 25 most industrialized nations.
Rapid wage growth, poor labor productivity growth (thereby increasing real labor costs) and a shortage of workers remain serious problems in Taiwan, despite the legalization of foreign workers - chiefly from Thailand, the Philippines and Indonesia* . Among the sectors hardest hit by labor shortages are the manufacturing and construction industries although in the case of the latter, the recent downturn in construction activity has meant that a number of construction employees have been laid off - contributing to the recent rise in unemployment levels.
Despite, an increasing level of unemployment, Taiwan is actually suffering from a labor shortage, especially in its traditional manufacturing sector, which could restrict future growth.
As of end 1999 the labor force consisted of some 9.7 million workers, or about 44% of the total population (and 58% of the population aged 15 years and above). In recent years the labor market has been growing at around 2% annually. The official unemployment rate has averaged only about 1.5% in recent years and in 1993 reached a 12-year low of 1.45%. Since then the rate has trended upwards. As of early 2001 the official unemployment rate had reached more than 3%. The real rate is thought to be somewhat higher since many people classified as part of the labor force are actually in unpaid family work - chiefly in rural area.
There is little incentive for unemployed workers to report to the government, as Taiwan has not yet introduced unemployment compensation.
Salaried employees make up 70% of the total workforce, a percentage that has been steadily increasing over the years (in 1966, the same group accounted only for 45% of the total). Private sector employment has gone from 30% in 1966 to 58% in 1966. All other occupational groups - with the exception of those categorized as employers - have been in decline. Self - employed personnel have gone from 28% in 1966 to 17% twenty years later. In the same period, unpaid family workers have declined from 25% to 8% and government employees from 15% to 11%. The only other employment category to increase - the employer - has more than doubled, from 2.3% in 1966 to 5.35%. This reflects the strength of the small business sector in Taiwan and the strength of the entrepreneurial spirit that exists in the society. It is another of Taiwan's great assets.
Structure of the Workforce
The structure of Taiwan's workforce is changing. Not only is the workforce now more mature - the bulk of employees are now those in the age brackets between 25-39, female participation is also much higher with women now comprising almost 40% of the total workforce. Considerable effort is being expended by government to increase the female participation rate as one means of overcoming current labor shortages. This includes paid maternity leave and subsidies that are available for work-place nurseries.
While in recent years, total employment in the manufacturing and service industries has been remarkably stable - at around 58% of the total workforce, there has been a noticeable shift from the manufacturing to the service sector. In 1997, within these industrial groupings, manufacturing accounted for 52% of the total and the service industries contributed 48%. As recently as 1989, these figures were 62% and 38% respectively.
Agricultural employment continues to decline to a mere 10% of the total. There has been little promotion of modern agricultural techniques in Taiwan and little attempt to encourage higher level agricultural training. As a result, rural employment is not sought after by Taiwan's younger and better-educated workforce.
The service sector - particularly jobs in large urban centers - is emerging as the preferred sector for recent graduates. As a result of the loss of jobs in rural centers, the gap in disposable incomes between urban and rural dwellers is widening. Wage rates are highest in Taipei. Households in the capital now have nearly double the disposable income of their rural counterparts - NT$955,000 per annum, or 94% higher than in some country areas. The three largest cities, Taipei, Kaohsiung and Taichung, account for more than 55% of total annual disposable income on the island.
Average wages of Taipei residents rose by 41% between 1990 and 1993 and average annual per capita income now stands at around NT$300,000 Faced with on-going urbanization rural areas are also facing a rapid demographic aging. Real incomes in the countryside have been in continual decline since 1989, when the traditional family-based manufacturing industries started moving overseas. Beyond offering certain industry incentives to firms establishing themselves in rural areas, there appears to be no coordinated government policy able to reverse this trend.
Even though the pool of skilled labor has expanded rapidly in recent years, d emand has generally far exceeded supply, particularly in skilled areas and in commerce. Skilled foremen and managers have continued to move to high-paying jobs at factories on the Mainland and elsewhere in Asia that are owned and operated by Taiwan investors. Many recent college graduates are interested in management positions, but lack hands-on experience. Among white-collar workers, "job-hopping" is common, especially in local companies. Clerical staff working for foreign companies increasingly expect conditions well above what they would obtain working for a local company including a five-day week. Under-utilization of the female labor force is exacerbating the problem.
Although Taiwan is undergoing a transition to more advanced technology and heavier industries, reducing its dependence on labor-intensive, simple-process manufacturing will take years. By 2000 the number of engineers should grow from the current 10% to 15% of the workforce, and the proportion of unskilled workers is expected to decline from 50% to 35%.
Nine years of schooling is now compulsory in Taiwan, giving Taiwan an overall literacy rate of more than 94% and among younger workers the rate is 100%. Because Taiwanese are staying at school longer and increasingly seeking higher education qualifications, people are entering the workforce later.
Twelve years of education is now almost universal with many students - especially those who do not intend to seek higher education - attending vocational training schools in place of senior high schools where they receive basic trade or clerical skills. Others enter the junior college system which offer two-year post secondary diplomas equivalent to advanced trade certificates. Since 1993, more than 50% of the total workforce has received at least the equivalent of 12 years schooling with 20% having a post-secondary qualification. Among the new entrants to the workforce, this ratio would be even higher.
* note: The most recent labor figures (January 2001) indicate that 325,000 foreign nationals were working in Taiwan. Of these, 141,000 were Thai, 97,000 were Filipino (down from 114,000) and 78,000 were Indonesian.