Labor income share in Taiwan GDP drops


TAIPEI, Taiwan — The share of labor income in Taiwan’s gross domestic product (GDP) has been declining over the past two decades, with the ratio having dropped from 51.4 percent in 1990 to 45.8 percent in 2005, according to a report released yesterday by the Directorate General of Budget, Accounting and Statistics (DGBAS).

The DGBAS attributed the trend to the limited growth in employment opportunities and earnings as a result of industrial exodus and labor outflow to China.

The report said over the past 20 years, the globalization of businesses and the release of huge labor force by emerging markets, including China, India and the former East Bloc countries, have impacted the global labor market considerably.

As shown in the 2007 employment outlook report published in June by the Organization for Economic Cooperation and Development (OECD) , the combined labor force provided by Brazil, Russia, India and China (BRICs) accounted for 45 percent of the world’s total in 2005, compared with less than 20 percent by OECD countries, the report said.

The participation of a large amount of cheap labor force by developing economies in the global market has put advanced economies under the pressure of trimming down the pay for their workers, which has led to the fall in labor income shares in their GDPs, according to the report.

For example, the report noted, the labor income shares in the GDPs of advanced economies declined 6.8 percentage points on average during the 1980-2005 period,with that of the United States decreasing by 3.9 percentage points, Europe by 9.5 percentage points and Japan by 11.5 percentage points.

According to the report, the globalization of labor has had greater impact on workers in unskilled sectors than on those in skilled sectors. While unskilled workers in Europe and Japan have seen a decrease of more than 10 percent over the past 20 years, those in the United States have also been decreasing since 2000.

In Taiwan, the income disparity between skilled and unskilled workers have also been expanding as a result of the globalization of labor, the report said, adding that the government has tried to lessen the impact by introducing measures such as completing the social security network, subsidizing vocational training programs, providing unemployment allowances, and upgrading the skills of workers.