(C) CK Sen
Despite rising geopolitical risks, intensifying trade protectionism and heightened volatility, the Directorate-General of Budget, Accounting and Statistics (DGBAS) in November last year raised its 2025 economic growth forecast for Taiwan to 7.37 percent, the best since 2010. The IMF, in its World Economic Outlook released in October last year, projected Taiwan’s nominal GDP per capita would reach US$37,827, surpassing those of Japan and South Korea. Meanwhile, total market capitalization of listed companies was NT$94.36 trillion (US$2.98 trillion) as of the end of last year, putting Taiwan in eighth place globally by market value.
The stellar performance of Taiwan’s economy and stock market reflected the nation’s sound economic fundamentals and steady growth in exports, which soared 34.9 percent year-on-year to a record US$640.75 billion last year, data released on Friday by the Ministry of Finance showed. Overall, Taiwan recorded an unprecedented trade surplus of US$157.14 billion last year.
Last year’s export growth was driven by the nation’s world-leading chips and electronics products, as demand for artificial intelligence (AI) hardware and advanced computing remained strong, with no signs of easing. That partially offset the impact of a 4.27 percent rise in the New Taiwan dollar against its US counterpart, compared with rises of 4.38 percent and 1.8 percent for the yuan and the won respectively, as well as a 0.22 percent drop for the yen.
However, academics and experts said the fruits of the progress have not been equally distributed among businesses and workers in the seemingly affluent society. Some have blamed government policies, while others point to the nation’s industrial structure and the NT dollar’s exchange rate. No matter the perspective, they warned that the situation would worsen if the issue is not addressed.
While Taiwan’s GDP per capita was forecast to outpace Japan’s and South Korea’s last year, the nation’s average wage of US$1,900 per month lagged far behind Japan’s US$2,299 and South Korea’s US$2,992 in 2024, Ministry of Labor data showed. As about 80 percent of Taiwan’s workforce relies on salaries and their average wages are significantly lower than those of neighboring countries, the growth in the nation’s GDP per capita is not a major cause for celebration.
Moreover, from an income distribution perspective, the proportion of labor compensation in the nation’s GDP has declined steadily since 2012, while the ratios of corporate profits and fixed-capital consumption to GDP have been on a gradual rise over the same period. Taiwan’s labor share of GDP peaked at about 50 percent in the 1990s, but fell to a new low of 43.1 percent in 2024, compared with 47 percent for South Korea, 50 percent for Japan and more than 50 percent for the US, Germany and France, DGBAS data showed.
The declining labor share in GDP versus the rising shares in corporate profits and fixed-capital consumption certainly underscores the effect of the government’s tax, financial, industrial and foreign exchange policies, as they helped nurture Taiwan’s chip and electronics industries during the early years, which allowed them to seize opportunities in the AI boom.
However, traditional industries have continued to face macroeconomic headwinds. Such an industrial imbalance helps explain why many feel their daily lives are disconnected from the rosy headline GDP figures.
Further study is needed on whether the declining labor share in GDP signals a worsening income disparity. Thinking of this phenomenon as simply unequal wealth distribution would be an oversimplification, whereas the share of labor compensation cannot be equated with the level of wages. The large-scale return of technology and capital-intensive manufacturing industries to Taiwan over the past few years, along with the relatively high proportion of self-employed workers, are also important factors influencing the labor share in GDP.
However, what is clear is that changes in industrial structures, production models and employment dynamics have helped lift corporate profits’ share in GDP over the past 10 years or so, and a consensus has formed in Taiwanese society that workers outside the chip and electronics industries have been mostly left out of the nation’s economic prosperity. Therefore, removing the sense of relative deprivation is more important than being complacent about the seemingly satisfying GDP figures.
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