Last week the Directorate-General of Budget, Accounting and Statistics (DGBAS) released a set of very strange numbers on Taiwan’s wealth distribution. Duly quoted in the Taipei Times, the report said that “The Gini coefficient for Taiwanese households… was 0.606 at the end of 2021, lower than Australia’s 0.611, the UK’s 0.620, Japan’s 0.678, France’s 0.676 and Germany’s 0.727, the agency said in a report.”
The Gini coefficient is a measure of relative inequality, usually of wealth or income, though it can be used to evaluate other forms of inequality. However, for most nations it is a number from .25 to .50 (or 20-50 depending how it is presented), not a number over .60, and certainly not for European nations with histories of social democracy. As a longtime observer of Taiwan noted in a private email to me, it appears that the DGBAS actually inverted the numbers.
ABNORMAL NUMBERS
Photo: Chou Min-hung, Taipei Times.
The Gini coefficient for Taiwan and most other advanced economies is usually a number in the low to mid-30s. For example, a paper from a group of scholars at National Taiwan University (NTU) and other top research institutions on trends in Taiwan’s income inequality published last year states: “Today, the official Gini coefficient is around 0.33.” A glance at the World Bank website shows this is broadly true for the whole world. For Germany, it is not .727 as the DGBAS states, but around .32 according to the World Bank, .31 for France (2021), .32 for Japan (2013), .32 for the United Kingdom (2021) and .38 for the US (2021).
Whatever its problems, the DGBAS report glosses over the extent of wealth disparities in Taiwan in other ways. It uses the Gini coefficient for household wealth. As the paper quoted above observed, the household tax data represents only about half the income in Taiwan. The other half consists of government income, untaxed income, and corporate income. There is also a significant income component, capital gains, that is not counted in the Gini. Further, as the paper notes, top incomes are under-reported, while the Gini itself is a only a broad measure that is less sensitive to changes in higher income groups — precisely the groups making the greatest gains since 2000.
That paper goes on to develop another measure of income inequality, and not surprisingly, it finds that income inequality is much higher. The Gini measures households, but their measure assigns the distribution of income to each individual in the nation. Readers will probably not be very shocked to find the DGBAS presentation deprecates Taiwan’s actual wealth and income inequality, which has been a key bragging point for decades by successive governments.
Photo: REUTERS
When capital income is taken into account, inequality in Taiwan began worsening visibly nearly three decades ago, because of the distribution of capital income. “Overall, we find that the rising income inequality after the middle 1990s in Taiwan is a capital income phenomenon.” By their methodology, inequality in Taiwan reached US levels in the 2010s and Taiwan now belongs in the tier of inequality with the US, just below the highest level, which includes nations such as India and Brazil.
The high income inequality is evidenced by other numbers. Statistics show that labor’s share of the take of Taiwan’s GDP has been in decline for many years, and is now less than half. Corporations receive a disproportionate return thanks to the low salaries here relative to labor productivity. “Overall, the net primary income of corporations to national income share increases two-fold from the 1990s to the 2010s,” observes the 2023 paper above. A ThinkChina piece last year said that “over 68 percent of wage earners have a salary lower than the average,” partly because a few high wage earners skew the average.
Another signifier of high income inequality is the increase in tall buildings in Taiwan. Several thinkers, Alex Marshall and Jason Barr among them, have argued that building height and income inequality are correlated. That does not hold true for every nation (Brazil, for example), but for more advanced economies, it seems to be broadly true. Two nations with high levels of income inequality and great wealth, the US and the People’s Republic of China (PRC), lead the world in skyscrapers.
The rise in income inequality is paradoxical: globally, income inequality is declining across countries, but within countries, it is rising, according to the International Money Fund (IMF). “Excessive” inequality reduces social cohesion and increases political polarization, the IMF says. As any economist knows, it reduces overall consumption and slows economic growth. Jonathon Ostrey, an IMF official, warned in an interview that “Too much inequality can undercut the ability to sustain growth.”
The IMF asks the key question: when is inequality excessive? The IMF says that is a question for each country to answer, based on its unique social and economic context. There are actually studies that attempt to address that question. In a 2005 study Robert Macculloch found that a 1 standard deviation increase in the Gini coefficient of income explains 38 percent of the standard deviation in revolutionary support. MacCulloch argued that since high income people rarely revolt, increasing incomes should reduce support for revolution.
CROSS-PARTY FAILURE
In Taiwan, the failure of either of the major national parties, the Chinese Nationalist Party (KMT) and the Democratic Progressive Party (DPP) to address the inequality (and numerous other social welfare issues) has led the public to search for alternatives. The major winner of this has been Ko Wen-je (柯文哲) and his Taiwan People’s Party (TPP). The TPP is not a left-wing alternative party, but has taken the position of another right-wing, pro-China party, which a large number of disaffected DPP supporters voted for, especially males.
This suggests, as some of us have been noting, that the DPP failure to make meaningful change, has left the door open for right-wing candidates who can position themselves as outsiders. Indeed, a prominent academic suggested on Twitter/X that another split presidential election vote and further failures on the economic welfare front could well let Fu Kun-chi (傅崐萁) squeak by into the presidency.
I do not think Fu will be acceptable to the public at large, but there are several slick opportunists with local fan bases who could slip into that role. But the larger problem with the eight-year DPP failure, as the KMT knows, is that when the public gives up toying with alternative candidates over the next couple of election cycles — it may well conclude that annexation to the PRC is a potential cure for what ails their economic welfare.
Last week KMT lawmakers, led by Legislator Niu Hsu-ting (牛煦庭), sought to amend the Labor Standards Act (勞動基準法) to allow employers to pay new workers 80 percent the standard wage during their probationary period. The law was a direct copy of a PRC law, the DPP’s Wang Ting-yu (王定宇) pointed out.
Is it only to help their big business supporters that the KMT pushes bills like this?
Notes from Central Taiwan is a column written by long-term resident Michael Turton, who provides incisive commentary informed by three decades of living in and writing about his adoptive country. The views expressed here are his own.
March 24 to March 30 When Yang Bing-yi (楊秉彝) needed a name for his new cooking oil shop in 1958, he first thought of honoring his previous employer, Heng Tai Fung (恆泰豐). The owner, Wang Yi-fu (王伊夫), had taken care of him over the previous 10 years, shortly after the native of Shanxi Province arrived in Taiwan in 1948 as a penniless 21 year old. His oil supplier was called Din Mei (鼎美), so he simply combined the names. Over the next decade, Yang and his wife Lai Pen-mei (賴盆妹) built up a booming business delivering oil to shops and
Indigenous Truku doctor Yuci (Bokeh Kosang), who resents his father for forcing him to learn their traditional way of life, clashes head to head in this film with his younger brother Siring (Umin Boya), who just wants to live off the land like his ancestors did. Hunter Brothers (獵人兄弟) opens with Yuci as the man of the hour as the village celebrates him getting into medical school, but then his father (Nolay Piho) wakes the brothers up in the middle of the night to go hunting. Siring is eager, but Yuci isn’t. Their mother (Ibix Buyang) begs her husband to let
In late December 1959, Taiwan dispatched a technical mission to the Republic of Vietnam. Comprising agriculturalists and fisheries experts, the team represented Taiwan’s foray into official development assistance (ODA), marking its transition from recipient to donor nation. For more than a decade prior — and indeed, far longer during Chinese Nationalist Party (KMT) rule on the “mainland” — the Republic of China (ROC) had received ODA from the US, through agencies such as the International Cooperation Administration, a predecessor to the United States Agency for International Development (USAID). More than a third of domestic investment came via such sources between 1951
For the past century, Changhua has existed in Taichung’s shadow. These days, Changhua City has a population of 223,000, compared to well over two million for the urban core of Taichung. For most of the 1684-1895 period, when Taiwan belonged to the Qing Empire, the position was reversed. Changhua County covered much of what’s now Taichung and even part of modern-day Miaoli County. This prominence is why the county seat has one of Taiwan’s most impressive Confucius temples (founded in 1726) and appeals strongly to history enthusiasts. This article looks at a trio of shrines in Changhua City that few sightseers visit.
RSS