The secret to success in retail, as any veteran shopkeeper or real-estate agent can tell you, is "location, location, location." As Taiwan begins to grapple with the vexing problem of rapidly climbing unemployment, it may help to bear a similar mantra in mind: "training, training, training."
For most of the past five decades the extent of joblessness was one of the last things Taiwan's policymakers needed to worry about. The country's export-driven economic surge constituted a virtual job-creation machine--first in the manufacture of textiles and plastic shoes, then TVs and other consumer electronics, and most recently with computer products and semiconductors. Historically the unemployment rate rarely poked even as high as 2 percent, a level generally regarded as well within the range of full employment.
Quite abruptly the situation lately has changed. From the start of last year through August of 2001, the jobless rate more than doubled to exceed 5 percent. Though that might seem mild by world standards, it is already a new peak for Taiwan. And prospects for any quick turnaround in the economy faded with the impact on world markets of the September 11 terrorist attacks in the United States and the domestic destruction wrought by Typhoon Nari a week later. Taiwan, along with most of the world economy, seems destined for a long stretch of difficult times.
In confronting the new challenges after so many years of prosperity, Taiwan has little to draw on from past experience to offer guidance. The last time the economy spun into severe decline was nearly a generation ago, when the first Oil Crisis hit in the early seventies. Most companies responded by adopting strict hiring freezes, and many--particularly the larger corporations--reluctantly laid off workers for the first time. Yet the unemployment rolls never reflected the seriousness of the downturn. Many out-of-work factory hands simply returned from the cities to the country villages they had left not so long ago, and they were temporarily re-absorbed into the rural economy. Others appeared on city roadsides and in night markets, "spreading a carpet" to sell garments and other excess export goods.
That kind of economic flexibility is no longer so easily available. The size of the agricultural sector has been steadily shrinking over the past few decades, and the contribution of farming to GDP now comes to less than 2 percent. With increased mechanization, there is also much less need for extra hands to pitch in. In the urban areas, stricter licensing regulations control the numbers of street vendors so as to protect the environment as well as the livelihood of existing, tax-paying retailers.
One continuing advantage in Taiwan's employment picture is the predominance of small- and medium-sized enterprises (SMEs) in its manufacturing industries. Whereas many large businesses tend to be cold and impersonal, the boss at an SME is more inclined to feel close to his employees and may know many or even all of them by name. He has attended their weddings and their parents' funerals, and hosted them at lunar New Year's dinners. When it comes time to tighten belts to fight recession, he generally prefers to cut other costs first--or put employees on reduced hours--rather than hand out pink slips.
What options can the government and businesses then turn to for relieving the burden of domestic unemployment? One measure already being utilized is a gradual reduction in the number of foreign laborers as their contracts expire. The government is aiming at a 5-percent yearly decline. This approach is unlikely to offer more than a very partial solution, however, as many of the jobs filled by foreign workers (gritty and risky work in heavy industry and construction, disdained service as domestics or care-providers) may find few takers among local nationals.
A more positive recourse will be to channel resources at an unprecedented level into advanced training of all kinds to upgrade employees' skills--not only directly vocational techniques but also computer knowledge and foreign language capability, as well as management and marketing. Taiwan already possesses numerous occupational training programs, and plans are under way to expand their scale. But what is needed now is a national mobilization to a degree never previously contemplated when the economy was humming along smoothly.
For the government to play a leading role may be unavoidable. SMEs enjoy some noteworthy advantages, especially their agility in adapting quickly to market changes, but they generally lack the personnel, equipment, and experience to provide thoroughgoing worker training on their own. Public sector involvement, perhaps by arranging subcontracts to professional organizations to conduct the actual training, can ensure the economies of scale and levels of expertise needed to make these programs effective.
The results should bring benefits at both micro- and macroeconomic levels. For individual companies willing to make the investment, keeping employees on the payroll but assigning them to training courses is an opportunity to build for the long term. During the good times when plants are faced with backlogs of orders and pressure from impatient customers, training is a luxury that often receives scant attention. Doing it now means companies can later emerge from the recession with sharpened competitiveness. For the economy as a whole, the exercise, if carried out on a broad scale, is a chance to ratchet up the standard of Taiwan industry to a whole new level. Upgrading the quality of the workforce is one of the best means of staying ahead of regional economic rivals such as mainland China. Matching their low prices is impossible, but continuing to outperform them in product design, engineering, quality control, technical service, R&D, and other aspects requiring topflight manpower is an attainable objective.
Training will never serve as a cure for unemployment. But it can alleviate some of the worst pain and help put Taiwan on the road to better economic health.