Houston Community News >> For Taiwan's Middle Class, A Hidden Struggle
1/16/2008 (Reuters)-- The downfall of
Alexander, the largest health club chain in Taiwan, speaks volumes about
the quietly ailing economy of the island.
Candy Tang, who started Alexander 25 years ago, said last month that annual revenues had tumbled to 80 million Taiwan dollars, or $7.7 million, from 250 million dollars in just two years. Membership has plunged as the economy foundered, she said.
The club's woes reflect a broader malaise among the middle class, who have cut back on extras like gym memberships, travel and movies as wages stagnate and jobs move to China.
The populace drove home its discontent in elections Jan. 12, when it gave the ruling party just a quarter of the seats in the new legislature, while the main opposition won most of the rest.
"Consumption of midlevel items is definitely decreasing dramatically, which is a direct result of the weakening purchasing power of Taiwan's middle class," said Jeff Lin, a professor in Taiwan University's economics department.
"So even though Taiwan's overall economic growth looks good, the average person has no way to enjoy those benefits."
Hsu Wen-shen, a masseur with a shop in downtown Taipei, said his standard of living had deteriorated in the past year, as people forgo treats like massages amid rising prices and an uncertain job outlook.
"I used to go on vacation once a year, but now I don't go at all," he said, adding that business in his shop was down 10 percent to 20 percent in the second half of last year. "Now I also don't dare to drive my car because of high gas prices. I used to drive it a lot, but now I ride my motorcycle instead."
Indeed, sales of new cars fell to just 326,770 last year, the lowest total since 1987.
More businesses are shutting their doors as consumption flags. Closures reached 40,800 in the first 11 months of 2007, more than the total for any other entire year since records have been kept, government data show.
The struggle of the middle class is largely a hidden phenomenon to outsiders, masked by figures showing that the overall economy has grown between 4 percent and 6 percent annually in recent years, while unemployment has stayed around 4 percent - enviable rates compared with regions like Europe.
But, as is also the case in the United States, the benefits of growth are going disproportionately to the wealthy, leaving average folk with wages that have stagnated.
Adding to the uncertainty is the regular flow of jobs to mainland China - now home to one million of the 23 million people in Taiwan - following investment there by Taiwanese firms that analysts estimate has totaled as much as $100 billion since 1991.
The level of inequality in Taiwan has been rising, economists at Citigroup said in a recent report.
Among those hardest hit are Taiwanese youth, the future of the labor force.
A recent JPMorgan report showed that average household wages in Taiwan were in danger of shrinking and that average starting salaries for recent graduates already appear to be contracting.
Thomson Wu, the manager of Globair Travel Services, said a youth club that is one of his major clients had halved the number of trips that it offers over the past two years.
"This customer has been ours for the last 10 years," he said. "For eight of those they did 12 tours each year. But these last two years they only did six tours. This year they'll have six tour groups again at the most."
The movie business is also suffering.
Joe Chang, the president of Ambassador Theaters, one of the top chains in Taiwan, said ticket sales for films that are not blockbusters were down 20 percent to 25 percent last year.
"People will say, 'Why should I pay so much money for mediocre movies if I can get them on DVD?' " he said.
Many blame the economic problems on politics, saying that the two major parties in Taiwan focus more on squabbling than addressing economic issues. Some see hope for change coming after the opposition's landslide legislative win this month and possibly after presidential polls set for March.
"Hopefully it will change with the next president," said Hsu, the masseur. "Now the politicians aren't paying much attention to people's livelihoods."
Candy Tang, who started Alexander 25 years ago, said last month that annual revenues had tumbled to 80 million Taiwan dollars, or $7.7 million, from 250 million dollars in just two years. Membership has plunged as the economy foundered, she said.
The club's woes reflect a broader malaise among the middle class, who have cut back on extras like gym memberships, travel and movies as wages stagnate and jobs move to China.
The populace drove home its discontent in elections Jan. 12, when it gave the ruling party just a quarter of the seats in the new legislature, while the main opposition won most of the rest.
"Consumption of midlevel items is definitely decreasing dramatically, which is a direct result of the weakening purchasing power of Taiwan's middle class," said Jeff Lin, a professor in Taiwan University's economics department.
"So even though Taiwan's overall economic growth looks good, the average person has no way to enjoy those benefits."
Hsu Wen-shen, a masseur with a shop in downtown Taipei, said his standard of living had deteriorated in the past year, as people forgo treats like massages amid rising prices and an uncertain job outlook.
"I used to go on vacation once a year, but now I don't go at all," he said, adding that business in his shop was down 10 percent to 20 percent in the second half of last year. "Now I also don't dare to drive my car because of high gas prices. I used to drive it a lot, but now I ride my motorcycle instead."
Indeed, sales of new cars fell to just 326,770 last year, the lowest total since 1987.
More businesses are shutting their doors as consumption flags. Closures reached 40,800 in the first 11 months of 2007, more than the total for any other entire year since records have been kept, government data show.
The struggle of the middle class is largely a hidden phenomenon to outsiders, masked by figures showing that the overall economy has grown between 4 percent and 6 percent annually in recent years, while unemployment has stayed around 4 percent - enviable rates compared with regions like Europe.
But, as is also the case in the United States, the benefits of growth are going disproportionately to the wealthy, leaving average folk with wages that have stagnated.
Adding to the uncertainty is the regular flow of jobs to mainland China - now home to one million of the 23 million people in Taiwan - following investment there by Taiwanese firms that analysts estimate has totaled as much as $100 billion since 1991.
The level of inequality in Taiwan has been rising, economists at Citigroup said in a recent report.
Among those hardest hit are Taiwanese youth, the future of the labor force.
A recent JPMorgan report showed that average household wages in Taiwan were in danger of shrinking and that average starting salaries for recent graduates already appear to be contracting.
Thomson Wu, the manager of Globair Travel Services, said a youth club that is one of his major clients had halved the number of trips that it offers over the past two years.
"This customer has been ours for the last 10 years," he said. "For eight of those they did 12 tours each year. But these last two years they only did six tours. This year they'll have six tour groups again at the most."
The movie business is also suffering.
Joe Chang, the president of Ambassador Theaters, one of the top chains in Taiwan, said ticket sales for films that are not blockbusters were down 20 percent to 25 percent last year.
"People will say, 'Why should I pay so much money for mediocre movies if I can get them on DVD?' " he said.
Many blame the economic problems on politics, saying that the two major parties in Taiwan focus more on squabbling than addressing economic issues. Some see hope for change coming after the opposition's landslide legislative win this month and possibly after presidential polls set for March.
"Hopefully it will change with the next president," said Hsu, the masseur. "Now the politicians aren't paying much attention to people's livelihoods."
(Contributed by Reuters)