China has been copying Taiwan’s development model by setting up industrial technology research institutes to nurture scientific and technological growth. Along with China, Taiwan’s neighboring countries like South Korea, Hong Kong and Singapore are also actively luring talent away from the island. Concerned with this issue, President Ma Ying-jeou called a National Security Council (NSC) meeting in early April to hear from scholars and experts. In summary, they warned him that Taiwan is encountering a talent deficit crisis.
According to the United Daily News, the NSC special group found that the influx of foreign workers arriving in Taiwan are mainly non-professionals from the Chinese mainland, but there is a gradual outflow of Taiwanese professional talent. In particular, Singapore is attracting medical professionals, Hong Kong is recruiting professors, and South Korea is poaching scientific and technological personnel. Hence, Taiwan’s Industrial Technology Research Institute (ITRI) is facing a significant drain. ITRI chairman, Tsay Ching-yen, said that China has established industrial technology research institutes in 38 provinces and cities. One by one, it has targeted and attracted talent away from Taiwan’s ITRI.
Established in Hsinchu (northern Taiwan) in 1973 as a non-profit organization under the supervision of the Ministry of Economic Affairs, the ITRI has played an instrumental role in creating Taiwan’s economic miracle and fostering the island’s information technology development.
An ITRI executive said the essence of the institute is in the personal contacts they have been established in industry over the years. The Chinese are not stingy in paying headhunters or offering a generous salary, at least four to five times higher than that in Taiwan. They also provide housing to reduce worries and ease the transition. Once the executives are lured away, the industrial professionals will inevitably follow. If the industrial talent pool leaves, where will Taiwan be?
The Central News Agency reported that Wong Chi-huey, president of Academia Sinica (Taiwan), told the Legislative Yuan that 62 people have retired and 61 have resigned from his institution in the past five years. Among these people, half of them were recruited by organizations in Hong Kong, Singapore and China. Wong expressed his worry about the “talent deficit.” With regard to himself, he said he would never accept a foreign offer after his retirement.
The Economic Daily News reported that Taiwan’s wages have been stagnant for almost a decade. The average wage grew at 0.8 percent per year from 2000 to 2010, adjusted for inflation, real wage growth is negative. Last year, Taiwan registered a 10.82 percent domestic economic growth rate, pushing up the average salary increase by 5.3 percent, but this increase only makes up for the losses brought on by the financial tsunami the previous year. The real wage level is not as high as 13 years ago.
More worrisome is that 3.6 million workers earned a monthly salary of less than NT$30,000 (US$1,000) last year. Among them, 1.04 million people earned less than NT$20,000 (US$670) per month. The wage gap between the highest-paid and the lowest is widening, with fewer higher paying jobs avaliable in Taiwan.
In China, wages have risen much faster than in Taiwan. Except during the financial tsunami in 2009, the average annual salary of Chinese enterprises has risen by more than 10 percent in the last five years. The average wage levels in Shenzhen, Shanghai, Beijing, Guangzhou and other cities are about 35 to 45 percent of that in Taiwan. Based on the current rate, the wage level in China’s coastal provinces may catch up with that of Taiwan by 2020.
The higher pay offered in the prosperous regions of China is a strong magnet for Taiwan’s professional workforce who are the target of Chinese recruitment companies. Taiwan has a serious shortage of upper level professionals and needs to study how to neutralize China’s magnet attraction.
In order to reverse the plight of ill-managed recovery achieved through economic growth, but not wage growth, the government has initiated a 3 percent salary increase for the military, public servants and teachers starting July 1. President Ma hopes that businesses will do the same for their employees.
The Economic Daily News said in a review that it is up to market mechanisms to decide the level of a pay rise in the corporate sector. The government will have little effect in urging companies to increase their wages. If companies increase salaries, it is not because of the government’s pleas, but because they are earning a profit and have a good corporate culture embedded in their business plan that includes a pay rise. The vast majority of low-wage workers will hardly reap any benefits from these recommendations. Therefore, rather than urging corporations to raise pay rates, the government could drive wage growth by creating new job demands. This can be done by making Taiwan a more attractive investment and operational environment, thus attracting more local and foreign capital investments.
In order to retain Taiwanese talent, the government must spare no expensive to promote industrial restructuring and upgrades, transforming businesses and enhancing their long-term competitiveness. These are the enterprises that are needed and are capable of offering better pay to retain talent, stressed the Economic Daily News.