China Impact, Income Inequality and Its Discontents in Taiwan

Written by Thung-Hong Lin.

Image credit: Taipei by Steffen Flor/Flickr, license CC BY-SA 2.0

In March 2014, the Sunflower Movement, a student-led protest to oppose the Cross-Strait Service Trade Agreement (CSSTA), shocked the Taiwanese public. For 24 days (March 18–April 10, 2014), Taiwan’s legislature was paralysed by protesters occupying the chamber, nearby roads and surrounding alleys, which prevented their eviction by police. The protesters claimed that the CSSTA would favour large companies investing in China, damage local small and medium-scale enterprises’ (SMEs) business and have a devaluing effect on local labour’s wages. Observers believed that the Sunflower Movement empowered the Democratic Progressive Party (DPP), which won the national election in 2016. However, the failure of the DPP administration in the 2018 local elections indicates a strong resistance from the populist politicians belonging to the pan-KMT interest groups. Such resistance included some precarious workers in the tourist, catering and manufacture industry that still deeply depend on China. The distressing flux of Taiwan politics in the last decade was deeply embedded in the social cleavages of income inequality under the “China Impact.”

Similar to the discontent toward globalisation, which is evident in other industrialised countries, open trade to China increases poverty and income inequality as well as political polarisation in Taiwan. It might not be a surprise that the rich would benefit from globalisation, but would open trade also damage the poor? As my study of poverty and globalisation demonstrated, the increase in population under the official poverty line—which had not adjusted at all during 1992~2008—was strongly associated with Chinese trade dependence. After 2009, as a response to the global financial crisis and economic recession aftermath, the Taiwan Government increased the income level for means-testing, which led to a poverty boom throughout the population. The statistical relationship between open trade with China and low-income population continued and confirmed the young protester’s argument who participated in the Sunflower Movement (Figure 1). If economic globalisation—measured by Taiwan’s trade openness to China—did do damage to the poor among different socio-economic groups, then one must ask who suffered the worst from it?

Figure 1. Trade Dependence to China and Percentage of Poverty Population in Taiwan, 1992~2018 (Extended from Lin 2016)

Figure 2. Young Generation and Their Real Monthly Income in Taiwan, 1992~2017

Partly because of the global recession during the last decade, younger generations suffered more than the older generations from the “China impact.” According to the Taiwan Social Change Survey—which took place during 1992~2017—a recent study I co-authored with Yi-Chun Chang calculated the real purchasing power of wages among different cohorts. We found that the birth cohort, who were born after 1977, will lose wages of up to five thousand NT dollars than the other older cohorts. This is discounting the cohort born before 1946 during the World War and Chinese civil war (Figure 2). This detailed analysis demonstrated that trade dependency on China would increase the youth unemployment rate from 2002—when the post-1977 cohort was 25 years old—as the labour market usually offered them precarious jobs with low wages and a permissive career. The global recession began in 2007 and made the life and wages of the post-1977 cohort worsen over the next decade. The result showed that the millennials, the principal organisers of the Sunflower Movement, did have a good reason for their voice.

Similar to the Rust Belt in Western industrial countries, economic globalisation relying on China facilitated deindustrialisation and capital concentration in Taiwan. In a study of Taiwanese business groups, myself and Bowei Hu discovered that the SMEs in Taiwan encountered harsh market competition from the Taiwanese-invested world factories in China. Taiwanese SMEs lost their advantage and went bankrupt due to low-wages and a cost-down strategy of sweatshops in China. The category “self-employed/non-wage family business employee” in Taiwan’s employment structure reduced from 32% in 1982 to 16% in 2017. The decline of SMEs also led to middle-aged male workers being laid off. They mostly came from the traditional labour-intensive manufacture sector. Some of these skilled workers had been hired as foremen and managers by the Taiwanese business groups in China. These unskilled workers, unfortunately, might fall into precarious and low-wage jobs concentrated in the service sector, such as transportation, tourist, catering, wholesale and retail industries. After 2010, Taiwan opened direct cross-strait flights to China, it relied more on the benefits from mainland tourists, who offered their business to the precarious service sectors.

The increasing class inequality originating from deindustrialisation fuelled the populism with Taiwanese characteristics. Utilising Taiwanese social surveys, Wen-Cheng Lin and I investigated the class coalition of the two populist leaders, Ko Wen-Je (柯文哲) and Han Kuo-Yu (韓國瑜) in the 2018 Taiwan local elections. Based on the literature, we linked Ko and Han to two different populist typologies: outsider and maverick. We also analysed their class coalition by two waves of Social Image Survey between June and December 2018, which was conducted by Academia Sinica. We also compared the supporters of Pan-Blue, Pan-Green, and Ko.

Moreover, we uncovered the “Han-Fans (韓流)” and “Ko-Fans (柯粉)” from the changes of the two waves of the survey. The study also discovered that the maverick absorbed the middle-aged self-employed and precariat associated with their economic difficulties due to industrial change and globalisation. In contrast to the traditional Pan-Blue wing, the additional Han-Fans was similar to the populists’ social origin in the West. The Outsider Ko’s source of supporters came from the marginalised voters, such as the younger generation and the female middle class, which as separated from the mainstream Pan-Green camp.

The China impact explained the increasing income inequality, poverty, and political polarisation in Taiwan during the last decade. In Tsai Ing-Wen’s first presidency, the DPP Government had noticed the working-poor issue. Hence, it tried to improve minimum wage and attract investment for creating more and better jobs. However, her Government was also blamed on the decline of cross-strait tourist businesses. It was also trapped by other contentious issues such as pension reform and same-sex marriage. The rise of populist politicians once attracted those that lost out under economic globalisation. Although President Tsai won the election 2020 by a wide margin, the income inequality and poverty issue might return and worsen again after the pandemic. Nevertheless, it will, still, be a political challenge in the next decade.

Thung-Hong Lin is a Research Fellow at the Institute of Sociology, Academia Sinica, Taiwan.

This article is part of a special issue on poverty and inequality.

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