AmCham has a couple of good articles in their latest Topics magazine, including an important article on income inequality by well-known commentator Ting-yi Tsai:

Economists attribute the rise [in income inequality] to three main factors: soaring real estate prices beginning in 1986 that created a new upper class overnight; the breakdown of larger households into groups of smaller households, skewing how income appears to be distributed; and the creation of a group of highly paid specialists in knowledge-intensive jobs who command incomes far beyond their peers in traditional industries.

Others have blamed the growing income inequality on the import of foreign laborers since 1992, and on the exodus of small and medium enterprises in the 1990s in search of cheaper labor overseas, particularly China. These two trends have led to higher unemployment and to salaries that fell below those earned by workers at similar levels in South Korea.

Starting in the late 1980s, Taiwan faced a growing shortage of workers for the so-called “3D” jobs: those that were dirty, dangerous, or difficult. Responding to appeals from industry, the government lifted what had been a longstanding ban on blue-collar labor from abroad, opening the market first for construction and factory workers and later for domestic help and care givers. As of the middle of this year, the number of foreign laborers in Taiwan had reached 350,684 – up from fewer than 5,000 in 1992 and 294,967 in 1999.

Now enterprises are urging the government to remove restrictions on the number of foreign workers they can import and to lower the minimum wage, which rose to NT$17,028 (about US$528) per month in July 2007 after having stayed at NT$15,840 (about US$487) for the previous decade.

Some labor experts have argued that the 350,000 low-paid foreign workers in Taiwan have diminished the willingness of local employers to raise the salaries of local workers, but others contend that employees should reflect on their failure to retrain themselves for higher-paying positions rather than fight for the labor-intensive jobs currently taken by foreign workers.

Ah, economists. As if unskilled labor can retrain to be knowledge workers…..just another example of blaming the victim….

…the article leaves out a number of factors. For example, Taiwan’s weak or non-existent unions are not mentioned at all in the article. Another factor not often discussed is the increasing formalization of the economy — in the 1980s huge swathes of the economy were off the books, aiding household perceptions that they had plenty of money. As SMEs have fled to China and large retail and manufacturing firms expanded their share of the economy, the off-the-books economy has receded and the service economy expanded. Service economies may provide jobs, but few of them are good jobs. Further, I can’t prove it, but I suspect widening public debt is also a mechanism for wealth transfer to the upper 1% or so.

Taiwan’s income inequality shows how the sparring over the economy between Greens and Blues is in reality an empty political game. As long as economic growth is the object of discussion, then no re-arrangement of the current social order need be threatened and the System that hands out wealth and power can be preserved. Both sides can talk about “the problem of economic growth” in full knowledge that such conversation threatens no one. But a frank discussion of income inequality might lead to changes in the ordering of society that threaten the interests of the rich and powerful.

SPECIAL: Don’t miss this brilliant and insightful piece by Steve Crook on traveling with children here, which cites the always-sensible veteran Taiwan expat Jeff Miller, Taichung’s own Cheryl Robbins, and a certain pudgy, balding blogger.