Changing times force Taiwan to raise welfare spending

24 April 2013 Last updated at 21:05 GMT

Changing times force Taiwan to raise welfare spending

By Cindy SuiBBC News, Taipei

Working six days a week at a Taipei noodle stall, Hsu Ching-ni earns only $500 a month, not nearly enough to support her family of seven including three children, or even pay rent.

Instead, they have to survive on welfare. “I’m the only one in my family working. My husband suffered a stroke and can’t work. My parents-in-law are elderly. If it weren’t for the welfare, I don’t know where we’d be,” says Ms Hsu. The number of people like her in Taiwan is on the rise. But whereas in previous decades residents mostly depended on themselves, the government has been forced to restructure its social welfare system to help them.‘Worse off’

Previously criticised for not doing enough to aid the many struggling to get by, the government has relaxed its criteria and raised the low-income threshold to allow more people to qualify for assistance.

As a result, statistics show the number of people living below Taiwan’s poverty line and dependent on welfare has surged by 29% to a record 357,000 last year, compared with mid-2011.

“We’ve never before had that many low-income people,” said Lee Pi-ju, head of the Ministry of the Interior’s social assistance section.

“It’s because of the global economic downturn and changes in Taiwan’s economy. It’s harder for low-skilled people to find jobs. Families have also changed; there are more divorces now, more single-parent families.

“But mainly it’s because people have become more aware of their rights, and hope the government can take better care of them. After all, they are economically worse off; the cost of living has increased.”

The changes are being made at a time when Taiwan’s economy, once one of the fastest growing in the region, has slowed to low single-digit growth.

Many factories have moved to China or South East Asia so it is harder to find well-paying jobs, especially for low-skilled workers. And with wages failing to keep pace with the rising cost of living, families have seen their wallets shrink.

Many people get by selling things on the streets. On Taipei’s sidewalks, it is common to see people selling breakfast from wagons, mothers carrying children enticing passersby to buy flowers, and disabled people on wheelchairs peddling tissue and chewing gum.

Changing culture

The changes in Taiwan’s welfare system are also being carried out at a time when the dynamics of Taiwan’s families have also changed, with many more single-parent families and extended family members no longer taking care of each other financially like they used to.

In Taiwanese society, like other Chinese-speaking societies, people were expected to take care of themselves and their family members; poverty was considered one’s own business.

And that has long been reflected in the welfare system in Taiwan where the income of siblings or former spouses was taken as part of a welfare applicant’s assets.

But family are no longer as close-knit as they once were. Grown children, for example, do not necessarily care for their elderly parents. And divorced spouses do not always contribute to the raising of the children – making it necessary for the government to step in to offer financial aid.

Even with the new rules, however, Taiwan’s criteria are considered strict, and the percentage of Taiwanese who qualify as being poor and eligible for monthly assistance is only 1.78% of the population.

The figure is far lower than that of Western countries, where it can be 10 to 15%.

And some of the old culture remains in the system, with the income and assets of an applicant’s parents, even if they don’t live in the same household, as well as that of grandparents who live with them, still being taken into account.

“We’re different from the West; we believe immediate family members should still try to take care of each other,” says ministry spokesperson Ms Lee.

“We don’t negate a family’s responsibility. We have to prevent dependence on welfare.”

Government officials point out that with an average tax rate of 12%, much lower than that of some European welfare states’ 40%, Taiwan can’t afford to provide many welfare services.

Poverty generation

To enable more people to qualify for welfare, Taiwan’s government raised what it considers to be the poverty line.

The thresholds differ from area to area: In Kaohsiung city, for example, one can qualify for welfare if his or her monthly income is no higher than $11,146 New Taiwan dollars (US$378), previously it was NT$10,033.

On average, welfare recipients in Taiwan get NT$4,200 (US$140) a month in public assistance money. To put that in context, the basic wage is about NT$19,000 per month.

However, many people who are barely getting by are above the official poverty line, so do not receive any government financial assistance at all.

That is why non-governmental agencies such as the Taiwan Fund for Children and Families are increasingly having to step in to fill the gap.

Besides giving money, it also distributes rice, oil, milk and other daily necessities.

“Many families might not have been categorised as poor, but they definitely need help,” says the director of the charity’s southern Taipei office, Vera Chen.

“It’s difficult for them to find long-term jobs. If they fall sick or lose their job, they become poor. They are also at risk of domestic violence and alcoholism.

“If we don’t give them some assistance their kids will not have the same opportunities as other children. We are most worried about poverty being passed on to the next generation.”

At her noodle stall, Ms Hsu is also worried about her young family. After paying the expenses, her family has nothing left. Meals are simple, with little meat.

“We’re getting by for now, but I don’t know if I can put my children through high school, not to mention college,” Ms Hsu says. “We don’t know what will happen to us in the future.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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