SEATTLE — Taiwan has witnessed many cycles of economic boom and bust throughout its history. It did rather well during the 50 years of colonial rule under Japan but started experiencing an economic downturn after World War II. However, its economic growth in the mid-1960s was considered an “economic miracle.” Taiwan went through a recession just before the 2008 global recession, adding to the slump. This has been followed by a slow recovery.
The Taiwan poverty rate was estimated at only 1.5 percent in 2012. Does this mean that Taiwan has almost eradicated poverty? The answer lies in understanding that Taiwan uses a relative poverty line of 60 percent of the average national monthly expenditure over the previous year. This means that the poverty line is closely related to commodity prices.
The poverty line was raised in 2011 to include more people in the welfare system with the amendment of the Social Assistance Act. Accordingly, the Taiwan poverty rate is now measured by a new poverty line, 60 percent of median disposable income per capita.
The number of people living below the poverty line and dependent on welfare increased by 29 percent in 2013. This change is the result of people becoming aware of their rights and the government’s responsibility to take care of them. Even with the new amendment, Taiwan maintains very strict criteria for assistance and only 1.78 percent of people qualify for welfare.
Factors contributing to the Taiwan poverty rate:
- Taiwan has been independent since 1950, but China still considers it to be its territory. China insists that no country can have official relations with both China and Taiwan. Due to this, Taiwan has ended up with diplomatic ties with very few countries. Taiwan has not been admitted to the United Nations because of China’s opposition. This has a detrimental impact on trade.
- Many factories have moved to China and other countries, leaving low-skilled workers unemployed. Wages are falling and living costs are rising, contributing to the increase in the Taiwan poverty rate.
- Taiwan’s economy is driven by exports, exposing the economy to fluctuations in global demand.
- A low birth rate that has led to a decline in domestic demand, decreased tax revenues and a rapidly aging population.
- The dynamics of families are changing, with more single-parent families. However, the welfare system still takes into account the incomes of parents, previous spouses, siblings and even grandparents.
- The tax rate is low at only 12 percent, which means the government cannot always afford to provide welfare assistance.
- All-or-nothing welfare system – anyone who rises even slightly above the poverty line becomes ineligible for any kind of welfare.
The good news is that many non-government agencies such as Taiwan Fund for Children and Families are giving money and distributing food and other necessary products to provide assistance. Taiwan has also been successful in building economic links with China, bringing more opportunities for investment and a source of imports. The landmark Economic Cooperation Framework Agreement (ECFA) also shows promise to secure greater access to international markets, which would provide a large boost to Taiwan’s economy.
– Tripti Sinha