Economic Roots of Angry Youth
China Times editorial (Taipei, Taiwan, Republic of China)
May 2, 2014
Summary: We hope that the government will realize that many factors are behind
the phenomenon of angry youth. But the economy is definitely one of the
most important. Economic problems must be resolved immediately. If one
fails to appreciate the underlying cause of the public protests, but
treats them as isolated incidents, then one fire will follow another.
Eventually the fires will be impossible to extinguish. They will burn
even more fiercely, and become a prairie fire. By then Taiwan may be
mired in unrest akin to the Arab Spring, and people will pay a terrible
Full text below:
The student movement is behind public protests everywhere. Every other day protests have obstructed traffic and incited incidents. Their impact on people's lives has become increasingly noticeable. Their demands have become increasingly numerous. New issues may emerge at any moment, one after another. There are two main reasons for this phenomenon. The first is ideology. The other is discontent with the existing social and economic order. These have led to the so-called "angry youth" phenomenon. This phenomenon is not unique to Taiwan. Large-scale protests have taken place in many countries with high youth unemployment, including Egypt, Greece, and Spain. Such protests are unlikely achieve their goals. But the ensuing turmoil has attracted attention and forced their societies to confront the issues.
Two economic factors are responsible for cynical youth. The first is too low salaries. The second is too high prices. The main solution to too low salaries is increased employment. This must be achieved through increased investment in human resources. Past employment growth on Taiwan relied heavily on investment in manufacturing jobs. Manufacturing remains important for the future of Taiwan. It remains the backbone of Taiwan's economy and employment. But manufacturing is increasingly capital intensive. Many international competitors are emerging. Expecting the creation of large numbers of
manufacturing jobs is no longer realistic. For example, tens of billions of dollars invested in a semiconductor plant only creates a few thousand jobs, mostly for high-level engineers. It does little for youth employment.
The service sector deserves attention. It has far more room for job creation. Taiwan's service sector accounts for about 70% of its GDP. But service sector employment amounts to only 60% of total employment. Attempts should be made to bridge the remaining 10% gap. We must increase the demand for manpower services. The most important way is to increase value added service industries. If this is our goal, the Taiwan market alone is not enough. We must go international. The STA could provide a solid foundation for the revitalization of Taiwan's service industries. Many service industries could open up markets on the relatively backward Mainland. They would have an excellent opportunity to grow and prosper, providing many high-paying jobs. But the STA appears to have run aground. Its future remains uncertain.
This being the case, we must attempt to grow our service industries within the existing WTO framework. We must allow service industries to expand outward. We should see how the Ministry of Economic Affairs trained foreign export talent, improved young peoples' English ability, and prepare for internationalization. Only internationalization offers a way out for Taiwan. Only it will enable workers to enjoy world-class salaries.
The second direction is one we have pushed for many times in the past. This newspaper has discussed it in our editorial columns. But so far no one has implemented our recommendations. Most government agencies charged with overseeing the service industries think in terms of "managing" them. This mentality must be changed. They must think in terms of "aggressively investing" in them. They must promote investment and employment. Government agencies charged with overseeing the service industries should set sector based GDP growth targets and employment growth targets. If the agencies mobilize simultaneously, coordinate their efforts, attract businesses, and promote investments, then over time, they will produce results. If they can achieve the above two goals, unemployment rate will decline. Salaries will increase.
Real estate prices are the highest in Taipei City and New Taipei. Ironically, that is also where the most employment opportunities can be found. Current Taipei real estate prices are higher than New York City's. This makes no sense whatsoever. The real estate price to income ratio is 15, among the highest in the world. Rental prices on the other hand, are among the lowest in the world. Clearly real estate prices are much too high. Premier Chiang said he would like the real estate price to income ratio to fall 30%, to a reasonable level. That is not difficult to achieve. All it requires is determination.
Letting the bubble for luxury real estate burst is the first step toward achieving justice in home ownership. It is the most important step. Allow luxury real estate prices to fall, and prices for all real estate will follow. Influencing the price of luxury real estate is actually very simple. Just do three things. First. Tighten home loans for luxury real estate not occupied by the owner himself. In other words, home loans should be restricted for residential real estate exceeding a certain size and certain price per unit of area. They should be reduced from the current 70% to under 40%.
Secondly, change the property tax system. Increase the cost of ownership for those not living in their own housing units, and for ultra luxurious housing units. The actual tax burden for luxury real estate should ought be at least as high as it is for New York City. It should be increased from 1% to 2%. Also, profits derived from the sale of luxury real estate should be calculated according to the assessed cost, and included in consolidated income tax returns.
We hope that the government will realize that many factors are behind the phenomenon of angry youth. But the economy is definitely one of the most important. Economic problems must be resolved immediately. If one fails to appreciate the underlying cause of the public protests, but treats them as isolated incidents, then one fire will follow another. Eventually the fires will be impossible to extinguish. They will burn even more fiercely, and become a prairie fire. By then Taiwan may be mired in unrest akin to the Arab Spring, and people will pay a terrible price.