Taiwan Competes for Talent and Manpower

Low salaries and poor career prospects leave Taiwan’s pool of talent and youth vulnerable to China’s advances.

When Eileen Chang’s university professor told her about an internship at an entertainment and sports company in Wuhan in central China, she was immediately intrigued. Chang (not her real name) had heard that salaries would likely be higher than what was on offer in Taiwan, and that workers were generally more competitive and ambitious. Even more compelling was the possibility of promotion within the firm.

“In Taiwan, the senior positions are usually held by older people, but in China young people can do big things,” she says.

After six months in Wuhan, she found that many of her initial impressions were correct. Although she often worked until 11 at night, her working environment and ambitious co-workers kept her highly motivated. She was given responsibilities that she doubts would be available to an intern in Taiwan, and many of her colleagues just a little older than herself were already holding management positions.

The lure of opportunity and high earnings in China continues to attract some of Taiwan’s most ambitious young talent, and brain drain is considered a major sap on the island’s dynamism. Nearly half a million Taiwanese already work in China, according to Taiwan’s statistics, with a similar number working in other countries.

This trend became even more worrisome when China’s Taiwan Affairs Office (TAO) recently announced a package of “31 Incentives” aimed at luring Taiwanese to live, study, work, and invest in China. Billed as an “unprecedented” opportunity by TAO spokesman An Feng-shan, the 31 Incentives would allow “Taiwanese compatriots to share in the opportunities arising from China’s economic development” and provide “equality of opportunity” to Taiwanese who are studying, starting businesses, working, or living in China, An told a press conference on February 28.

The incentives, which took effect immediately, now allow Taiwanese businesses to compete freely in key government programs and projects, and Taiwanese talent is now permitted to take certification exams for 134 professions and become members of Chinese industry associations and trade groups.

Many fear that these inducements could accelerate the exodus of talented young people to China, worsening Taiwan’s already tight employment markets.

The unemployment rate as of February stood at a characteristically low 3.6%, according to the Directorate-General of Budget, Accounting and Statistics (DGBAS), and labor and talent shortages are being experienced throughout Taiwan’s economy. University departments focusing on engineering and the hard sciences struggle to turn out enough graduates to meet demand, as Taiwan’s crucial high-tech sector competes with rivals in other economies to recruit and retain engineering and technical talent.

At the same time, industry complains that university-educated engineers are often ill-equipped to handle practical on-the-job requirements. Given Taiwan’s hopes to tie its economic growth to innovative fields such as Artificial Intelligence, the Industry of Things, and biotech, a shortage of well-trained engineers and scientists could crimp its plans.

“Good quality engineers are hard to get because everyone wants them, including China,” observes the local head of a multinational technology firm with manufacturing operations in Taiwan, speaking on background due to the lack corporate permission to talk to the media.

Even junior positions are increasingly difficult to fill.

“Previously, headhunters were needed only to find high-level people such as country manager,” observes Cindy Chen, regional manager for recruitment service Adecco in charge of Taiwan and South Korea. “But companies are now asking us to find junior-level talent. It seems like there are problems hiring the right people in almost every sector.”

Wang Jiann-chyuan, vice president of the Chung-Hua Institution for Economic Research (CIER), says that Taiwan’s manufacturers annually experience a shortfall of some 100,000 workers, despite the presence of some 424,000 foreign laborers, especially from Thailand and the Philippines, to fill the gap. Another 252,000 migrant workers are employed as caretakers, according to Ministry of Labor statistics.

Taiwan’s response

Media sympathetic to the government branded anyone who would take advantage of the incentives being offered by China as greedy and unpatriotic. A cartoon in the Taipei Times, the English language affiliate of the Liberty Times, well-known for its pan-green sympathies, compared such Taiwanese to greedy geese being grabbed around the neck and forced fed slop through a funnel by a man who announces “Come, come! All you can eat!” and wears a shirt with the words “Chinese foie gras.”

The incentives scheme was quickly dubbed a “united front” effort designed to lure away Taiwanese investment and its brightest minds and most ambitious youth and ultimately sway public opinion toward unification with China. “The essence of the incentive measures or the 1992 consensus is to benefit China, which wants to annex Taiwan eventually,” Premier Lai Ching-te) told the Legislative Yuan on March 6.

Yet a poll by the Taiwan Public Opinion Foundation released on March 19 revealed that 31% of the population welcomes China’s measures and sees them as a boon for the society and economy. Support is even higher (40%) among young people between the ages of 20 and 24, and those with higher education (38%).

National Development Council Minister Chen Mei-ling said that many of China’s 31 Incentives are nothing new and others are unlikely to be effective. Photo: CNA

Minister Chen Mei-ling of the National Development Council downplayed the 31 initiatives as either old hat or ineffective, but by March 16 the government had responded with its own set of incentives aimed at countering China’s offer. Vice Premier Shih Chun-chi unveiled the government’s “Four Directions and Eight Strategies” plan, which he said would cultivate talent by improving study and work environments, offer improved financial and other support for academics and researchers, fund innovators, and help businesses reward high-performing employees.

Economists and others questioned whether the government’s response was aimed chiefly at the politics behind China’s move or the underlying economic factors challenging Taiwan’s competitiveness.

Hank Huang, president of the Taiwan Academy of Banking and Finance, describes current economic conditions as deeply unfair to young Taiwanese, who receive meager salaries but are faced with rising living expenses and a housing market that has declined slightly from its peak but remains in the stratosphere.

Stagnant salaries are generally cited as the key factor making Taiwan susceptible to brain drain. Average monthly earnings in Taiwan hover in the NT$40,000-$45,000 range (US$1,370-$1,540), where they have remained for years. Average starting monthly salaries for university graduates reached a peak of NT$28,116 (US$963) last June, a gain of NT$100 on its previous high, recorded in 2000. Taiwan’s economy slowed dramatically after the 2008-2009 financial crisis, and since then it has struggled to revive, with salaries reflecting this stagnation.

Meanwhile, China’s booming economy now generates salaries that often vastly outcompete what is paid for similar jobs in Taiwan. One joke holds that the numerical figure for monthly salaries in Taiwan and China are actually the same – they are just in different currencies. As of March 28, the NT dollar stood at 4.6 to the Chinese RMB.

While the differential in salary levels is definitely a consideration for those with a high level of technical or professional skills, recent graduates can likely expect to earn less in China than in Taiwan, as Eileen Chang discovered during her internship. She says that in the firm where she worked, even managerial positions paid significantly less – around 4,000RMB per month or NT$18,600 – than entry-level positions for university graduates in Taiwan at NT$28,000

This finding coincides with data from sohu.com indicating that a bachelor’s degree is worth 4,500RMB on average in Wuhan, a second-tier Chinese city, but rises only to 4,793RMB (NT$22,181) in Shanghai. Yet the cost of living in these cities is even higher than in Taipei. Chang says her rent in a shared apartment was 2,000RMB – which amounted to her entire internship salary, and she needed to rely on family support during her stay in Wuhan.

Despite their low salaries, Chang was impressed by how fashionably dressed her colleagues were, and their tastes in luxury handbags. “I don’t know how they do it!” she says.

Salaries seems to be a lower priority for Taiwanese millennials, with industrial jobs paying higher-than-average salaries left vacant while white-collar administrative and pink-collar retail and hospitality jobs have a surplus of college graduates.

CIER’s Wang notes that Taiwan’s abundance of universities – 160 for a population of 23 million – has led to a surplus of college graduates. Many of those universities were upgraded from institutions that previously focused on technical or vocational training. “Nearly all Taiwanese go to college, and they won’t go into the manufacturing sector,” he says. “If you have a college degree but you work in manufacturing, people will look down on you, even though these jobs might pay well.”

Taiwan’s economy is driven by its thousands of small and medium-sized enterprises (SMEs), many of them engaged in the light manufacturing of components for bigger manufacturers, and these companies are increasingly finding it difficult to fill their manpower needs, even with the help of recruiters.

Older generations criticize millennials as being fragile “strawberries.” On the other hand, Taiwan is replete with SMEs that often have inferior working environments – dingy offices or workshops with outdated technology, harsh management, and no Wi-Fi. Who would choose to work in an electroplating workshop rather than a coffee shop or modern office?

“It’s not just about the money, but the environment,” observes Chen of Adecco. “Even if they are doing a traditional business,” local SMEs need to consider how they can make their company’s working conditions seem more attractive, she says.

Chen notes that these days a company’s personnel often comprises three or even four generations of workers, ranging from Baby Boomers in their 50s and 60s to Gen-X-ers in their 30s  and 40s, millennials from their mid-20s to mid-30s, and even members of Gen-Z, just entering the workforce.

Millennials have grown up with technology and have a very different perspective from the aging Boomers that still run the companies, says Chen. “That makes it very complicated for the old bosses, who don’t understand that now a young talent has multiple choices for their career. If the boss is not aware of this and is not creating a suitable environment, they won’t be able to keep good people.”

To the list of vital attributes for a company, CIER’s Wang adds another aspect: vision. “If you don’t have industrial vision, you will lose workers to China,” he says. “Young people have a high willingness to embrace a new job – they want to contribute to the job and they aren’t lazy,” adds Adecco’s Chen. “But they want to do something big.”

Many local SMEs lack such a vision of their role in the future economy and a strategy to get there. By many accounts, Chinese companies are more ambitious, with clear goals and vision while offering a faster rise through the ranks.

Though the passionate reaction that China’s 31 Incentives inspired in Taiwan seems to reveal a deep-seated fear that the initiative will set off a stampede to China, many economists are more sanguine. They note that the quality of life in Taiwan far surpasses that in China, where air pollution and other environmental hazards are always present; the food is heavy, oily, and suspect; and people continuously remind them that China claims Taiwan as its own.

Even if many are attracted by job offers in China, “I do believe that Taiwan’s freedom and the trust within society will draw them back,” says TABF’s Huang. “Whether they meet success or failure over there, they will come back to Taiwan.”