Taiwan’s services sector is finding it hard to hire enough staff to contend with a post-pandemic pickup in tourism and spending, further pressuring an economy that is already struggling to return to growth.
(Bloomberg) — Taiwan’s services sector is finding it hard to hire enough staff to contend with a post-pandemic pickup in tourism and spending, further pressuring an economy that is already struggling to return to growth.
Restaurateur Mai Bach finds the labor shortage problem impossible to avoid: “Almost every restaurant” is dealing with a lack of workers, she said, adding that a longstanding ban on foreign labor in the sector has made it tough to find a fix.
“Everyone’s just working double shifts,” said Bach, who co-founded the vegan restaurant group Ooh Cha Cha Ltd. in northern Taiwan. She said the problem has affected her industry friends, including one woman who was forced to reduce her restaurant’s operating hours because of a lack of staff.
Concerns about meeting demand will likely grow in the coming months as Taiwan tries to dig itself out of a deep economic slump.
Official data on Friday is expected to show gross domestic product contracted 1.25% in the first quarter of 2023 from a year prior, according to the median estimate in a Bloomberg survey of economists. Given that GDP shrank in the October-to-December period, another fall would mark the first time since early 2016 that Taiwan recorded two consecutive quarters of contraction.
Manpower Demand
The surging demand for manpower is rooted in several factors. Like in many developed economies, Taiwan’s population is rapidly aging, with the elderly expected to account for more than 20% of the populace by 2025. Historically low wages in hospitality have complicated things, discouraging potential workers.
The pandemic created more problems as workers retired or left their jobs. The labor force dropped sharply after reaching a record high in August 2019. While the number of people in the labor market has steadily risen in recent months, it still hasn’t returned to pre-pandemic levels.
The staffing crunch described by Bach and others also comes as the jobless rate hit a record low of 3.58% in February — suggesting the problem is more related to the lack of workers.
The shortfall has stretched across the hospitality industry. Popular hotels are afraid to take bookings due to a manpower shortage, local media reported, citing comments made at a March trade meeting by Steven Pan, chairman of Regent Hotels & Resorts. His hotel chain is one of Taiwan’s largest.
“The shortage is everywhere and it’s creating huge pressure right now,” said Elliott Fan, a professor at National Taiwan University’s Department of Economics. Labor market shocks from short-term factors — such as the pandemic — can take up to two years to resolve, he added.
That’s troubling news for an economy already under strain from a big dropoff in global demand for computer chips, which is usually a key contributor to Taiwan’s growth. Tourism only accounted for 4% of GDP prior to the pandemic. But the economy now needs all the help it can get, according to Lloyd Chan, economist at Oxford Economics.
“Taiwan is looking at a semiconductor downturn, so the tourism and services sector could now have an impact on GDP,” Chan said.
Foreigner Ban
Like Bach, the restaurant owner, Fan also said there’s been demand among businesses in hospitality for foreign workers — something the government has so far been unwilling to allow.
More than 700,000 migrant workers — predominantly from Southeast Asia — live and work in Taiwan. But the types of jobs they are allowed to do is tightly restricted by the government. The majority work on factory floors, fishing fleets and in homes looking after the elderly. Labor rules limit them to jobs where there is a clear shortage of Taiwanese workers.
“I do think it would help our whole sector immensely” if Taiwan would open up to Southeast Asian workers, Bach said. “You can look at the US and see the whole industry is built on immigrant labor. Without them, the whole industry would collapse.”
Taiwan labor officials say they have to safeguard jobs for Taiwanese before they can consider opening up other sectors to overseas workers — a contrast with places like Hong Kong, Macau and Singapore, which have allowed Southeast Asian migrant labor in their service sectors for years.
Shortage Solutions
It’s not clear whether the Taiwanese government would consider changing its policy. But authorities have acknowledged broader issues with worker demand.
Taiwan’s Ministry of Labor announced a NT$1 billion ($32.6 million) program on Thursday intended to solve post-pandemic labor shortage issues. The plan entails offering monthly subsidies worth about $200 to people who join industries that are short-staffed, with more money for elderly workers. Additional subsidies will be available for companies to encourage them to hire.
The government will see if the program has the desired effect before considering opening services to overseas workers, a labor official told Bloomberg News on Thursday.
Fan of National Taiwan University said he doesn’t expect any dramatic policy changes before January 2024, when the next presidential election is held.
“The ruling party often highlights their intention to protect workers a lot,” he said. “This is a very controversial issue for them.”
–With assistance from James Mayger, Chien-Hua Wan and Cindy Wang.
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