The Council of Labor Affairs recently released the results of a survey on workforce conditions in the 45-64 age group, highlighting concerns about a high rate of early withdrawal from the job market and an especially low average retirement age among the highly educated. These phenomena constitute a regrettable drain of talent from the nation’s labor pool.
The labor participation rates for Taiwan’s 50-54 and 55-59 age groups are 67 percent and 52 percent, respectively, much lower than South Korea’s corresponding rates of 77 percent and 70 percent. In the 60-64 age group, the rate in Taiwan is 32 percent, compared with 55 percent in the United States.
The survey shows that the labor participation rate for the 45-64 age group decreases as the level of education increases. Over the past decade, among those with a two-year technical college or higher degree, the labor participation rate has dropped by 9 percentage points.
A contributing factor is that, in recent years, more and more people employed in the public sector—civil servants, military personnel and teachers—have opted for early retirement. And those with higher levels of education can more easily save money, enabling them to live out their later years in relative comfort.
In contrast with the global trend toward later retirement, the increasingly lower labor participation rate of people 45 and over in Taiwan reflects, in part, the difficulties they encounter in switching professions, including the relative unfriendliness of Taiwan’s labor market toward older-age job seekers.
The graying of Taiwan’s population poses the problem of mounting fiscal burdens for public welfare and health insurance programs. At the same time, declining labor participation rates among over-45 age groups translates into declining tax revenues and a negative impact on economic vitality.
In addition to these factors, the falling rate of labor participation among older members of the population may be attributed to changes in macroeconomic structure.
According to CLA analyses, the labor participation rate of people in the 55-59 age group is 18 percentage points lower than for the same age group in South Korea. People in that age group were in their early 20s when the growth of Taiwan’s high-tech industries began to take off in the 1980s. Those among them who at the time launched careers in such industries have been able to accumulate tidy sums of personal wealth. Free of financial pressures, it is hardly surprising that many have opted for early retirement.
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Looking at the matter in terms of demographic dividend, however, it is desirable to encourage such retirees to continue contributing their specialized knowledge. To do so, they do not necessarily have to return to high-tech manufacturing. If they turn their attention to the service sector, they can create a win-win scenario wherein they boost the quality of its workforce while at the same time opening new horizons for personal development.
In earlier times, when Taiwan’s economic development focused on manufacturing, the service sector’s scale was small and its potential for contribution to economic development was limited. As a job provider it could not match the manufacturing sector.
That situation has changed dramatically over the years, however. In 2012, the service sector accounted for 33.3 percent of the nation’s GDP, exceeding the manufacturing sector’s contribution of 24.3 percent.
Despite this, the general quality of labor force in the service sector has a long way to go before it can match that of the manufacturing sector. There remains a stereotypical mental equation of service jobs with servile bowing and serving tables.
To persuade people with expertise in high-tech manufacturing to adapt their talents to the service sector, it is necessary for the government to help create an environment supportive of professional transition, providing incentives for such people as well as for service businesses that might benefit from their services.
The Council of Labor Affairs and other relevant government agencies can
move in this direction, for example, by arranging courses for transfer of specialized knowledge.
They might also take steps to help enterprises improve their management and boost their production value by facilitating the hiring of experts to serve as consultants or instructors on a flexible, part-time basis.
Former workers of the manufacturing sector entering service industries will pose no threat to employment opportunities for young people. Interaction between younger and older workers will be complementary rather than competitive.
With the accelerating development of service industries, fewer young people dream of joining the ranks of the high-tech experts. Growing numbers of college graduates want to work with people-centered service businesses. This is demonstrated by the fact that in recent years, they have ranked businesses such as restaurant chain operator Wowprime Corp., Uni-President Enterprises and the Eslite Bookstore chain as top choices for employment.
The 45-64 age group has a rich store of professional experience and a high level of dedication to their work. If the government can create a friendly environment for their professional transition, this will certainly facilitate economic restructuring.
Growth in the production value of the service sector is conducive to expansion of the domestic market. The government should not overlook the warning sign of the declining labor participation rate of older people. Only timely provision of assistance in facilitation of professional transition can produce continuous demographic dividends.
(This commentary originally appeared in the China Times, July 17)