Up against the wall for Taiwan's college graduates?

What's wrong and who is to blame?

Not so fast. The unemployment problem in Taiwan is the product of so-called “growth recession”: a slow or moderate economic growth coupled with a stubbornly high unemployment rate.

Take a look at the U.S. economy: 5.3% growth rate with 9.9% unemployment rate, which has barely budged despite more than a trillion dollars having poured in from the government. The reason is simple: General Electric lost billions of dollars last year in the U.S. but made more than US$10 billion abroad.

As a result, it helps economic growth but hurts domestic employment. The same can be said of Taiwan: those movers and shakers of Taiwan's economic growth often move factories abroad (mainly to China). It certainly is a plus on the profit account but a minus on the domestic employment account.

Nonetheless, it is a global tide that we cannot shovel against. ECFA, much like NAFTA (North America Free Trade Agreement), is not likely to produce the “giant sucking sound” of factories moving south of the border as warned by Ross Perot if proper remedial policies are implemented.

Exactly how are we going to reduce this high unemployment phenomenon for Taiwan's college graduates? Fortunately for countries like Taiwan with light government debt (below 40% of her gross national product) and a hefty foreign exchange surplus, it is rather straightforward: In the short run, government must create jobs especially through investing heavily in the green energy industry, building more national parks and high speed mass transportation modes, and expanding organic food markets.

Where does the money come from?

The crux of the matter is to tax the booming high tech industries abroad in the least harmful way (such as a moderate profit tax) so that they will not curtail production much. If the tax does not produce enough revenue, raise the debt a bit.

From the supply side perspective, Taiwan simply produces too many college and post-college students: how are you going to absorb over one hundred thousand students from undergraduate and graduate schools in a year? With all my due respect for Confucianism, higher degrees may bestow great honor to families but it distorts Taiwan's limited resources.

Nowadays, students can get into a college if they can fog a mirror. College education is not commodity egalitarianism which is available to everybody who can afford it. It is too late to blame the previous administration. More importantly, the teaching of English in public schools and colleges must be strengthened in order to boost English competency of locals and help them contend with fierce competition in the global market.

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