The document analyzes the effect of foreign labor on Taiwan's labor market. It finds that the relationship between foreign labor numbers and domestic unemployment rates varies between counties, with some showing a negative relationship and others a positive one. The paper suggests the government should recruit foreign labor to assist corporations without negatively impacting domestic workers, and should not decouple foreign wages from minimum wages.

1. GPAC 2012
Labor Economics
The Effect of Foreign Labor
on Labor Market
Member
98301049 Eason 98301010 Allen
98301052 Chloe 98301068 Ken 99202008 Debbie

2. Framework
Introduction
A. Motivation
B. Objective
C. Hypothesis
Methodology
A. Literature Review
B. Hypothesis Test
 Conclusion

3. INTRODUCTION

4. A.Motivation
• On going growth of both unemployment rate
and number of foreign labor
• The main purpose of foreign labor
• The doubted necessity of importing foreign labor
• Reaction of governmental labor policy

5. B.Objective
• The relationship between foreign labor and
domestic labor market
– Measurement ： Unemployment Rate
A. Significant relationship between foreign labor
and unemployment rate
B. Current condition of each city in Taiwan
C. Is foreign labor a substitute for domestic labor?

6. C.Hypothesis
• Number of Foreign labor↑
unemployment rate ↑
• Foreign labor and domestic labor are
substitute
unemploy
ment rate
Number
of Foreign
labor

7. METHODOLOGY

8. Literature Hypothesis
Review Test
A. History of Foreign Labor A. Regression Model
B. Foreign Labor Policy B. Controversial Issue
C. Controversial Issue Discussion

9. A. History of Foreign Labor
1. In 1990, importation of
1. Importation of low-skilled
foreign labor was officially
labor was forbidden.
allowed.
2. Importation of other types
2. After Taiwan joined WTO in
of foreign workers was
2001, it was imperative for
1989
the government to ensure
strictly restricted.
fair treatment and basic
rights to foreign labor.
1990
3. In 1984,14 major
infrastructure projects—
low-skilled foreign labor was
3. Until 2011, the total
hired to cover a labor
number of foreign labor is
shortage.
about 425660.

10.  Origin
• Why recruit foreign labor:
Implement the shortage of domestic labor force
on certain industry. Adopted by implement
principle.
• Policy objectives:
Make good use of foreign labor to
promote the employment of nationals and
increase country’s competitiveness .

11.  Origin
Three major Industries
• Manufacturing Industry
Flexible to adjust the foreign labor regulation of
manufacturing
• Nursing
Recruit foreign nursing workers to assist the
development of domestic long-term care system
• Public Construction
Implement the expansion of domestic demand of
employment.

12. Numbers of Foreign Labor Employment in Taiwan
- Industry
(Persons)
2004 2005 2006 2007 2008 2009 2010
Total 314,034 327,396 338,755 357,937 365,060 351,016 379,653
Manufacturing 167,694 166,928 169,903 183,329 185,624 165,790 182,192
Construction 12,184 13,306 11,745 8,594 6,144 3,831 3,608
Crew 3,089 3,147 3,322 3,786 4,865 6,452 7,745
members
Caregivers 128,223 141,752 151,391 159,702 165,898
174,943 186,108
Maids 2,844 2,263 2,394 2,526 2,529

13. Numbers of Foreign Labor Employment in Taiwan
– Sources of Labor (Persons)
2004 2005 2006 2007 2008 2009 2010
Indonesia 27,281 49,094 85,223 115,490 127,764 139,404 156,332
Malaysia 22 13 12 11 11 10 10
Philippines 91,150 95,703 90,054 86,423 80,636 72,077 77,538
Thailand 105,281 98,322 92,894 86,948 75,584 61,432 65,742
Vietnam 90,241 84,185 70,536 69,043 81,060 78,093 80,030
Mongolia 59 79 36 22 5 0 1

14.  Quotas
• Quotas for imports of foreign labor based on
the percentage of foreign labor in each.
• Originally, the maximum percentage of foreign
labor allowed was 15%, 18% and 20% (three
levels) of the total numbers of employees in
different industry sectors.

15.  Quotas
• Enterprises argue that the previous regulation
didn’t fit their needs.
• In 2010, the maximum percentage of foreign
labor allowed was adjusted to 10%, 15%, 20%
25%, 35% (five levels)of the total numbers of
employees in different industry sectors.
• 35% is for the 3K industry.

16. B. Current Foreign Labor Policy
 Qualification
Family Caretaker
• Wards shall have a professional evaluation
conducted by a medical institution through a
team method, which determines whether the
ward requires 24-hour care.
• Or wards with one of the items listed as
having a serious physical or mental diseases.

17.  Qualification
Domestic Helper
• The employers make initial recruitments, they
shall have one of the following qualifications:
1. Have multiparous children of triplets and/or
above, and under the age of three.
2. Have accumulated over sixteen points.

18.  Qualification
Manufacture
• The employers make initial recruitments, they
shall have one of the following qualifications:
1. For those industries of specific production
procedures.
2. For those industries of specific timeframe.

19.  Qualification
Construction Jobs
1. Major public construction projects under the
Twelve Major Infrastructure Programs controlled
and audited by the Executive Yuan.
2. Public-enterprise construction projects cost
exceeds certain amount and the duration of
construction is over certain period .

20.  The Number of Foreign Labor in Each City
We choose the city with more than 10,000 foreign
labor.
Taipei Taipei Taoyuan Hsinchu Miaoli Taichung
City County County County County City
Foreign
Labor 38026 49469 63207 14566 11739 14631
Amount
Taichung Changhua Tainan Kaohsiung Kaohsiung
County County County City County
Foreign
Labor 29170 23808 17021 12506 13912
Amount
Resource: 2009

21.  Wage System
• Minimum Wage:
– In order to ensure that labors earn enough
to cover their basic living expenses, the
government promulgated the Temporary
Minimum Wage Procedure in 1968 and set
the domestic minimum wage at NT$600 per
month.

22.  Wage System
• Minimum Wage:

23.  Wage System
• Summary
Minimum wage 1956 Minimum wage as 40.3%
system was percent of average
established wages in the
manufacturing
industry
Existing regulation Labor Frequency of Adjusted
that governs Standards minimum wage irregularly
minimum wage Act adjustment
Minimum wage NT$103 Model of minimum National
(per hour) wage implementation
Minimum wage Yes
system applicable
to foreign labor?

24.  The Effect of Increasing Minimum Wage
• For Foreign Labor
– Get benefit and cause strong pull force
• For Domestic Enterprises:
– Make cost increase
– Decrease the investment
– Facilitate the enterprises to move out Taiwan

25. C. Controversial Issue
 Implement principle: Labor Shortage↓
Manufacturing Industry
Amount of Labor Shortage Labor Shortage Ratio
2002 94,952 3.30
2003 91,990 3.17
Should we adjust the foreign labor policy
2004 93,251 3.08
2005 96,071 3.16
2006 to protect domestic labor from
102,523 3.31
2007 supplanting by foreign labor?
95,646 3.05
2008 77,598 2.46
2009 71,861 2.43
2010 101,925 3.25
2011 92,488 2.86

26. C. Controversial Issue
 Decoupling
• Minimum wage↑ Labor costs for employers↑
• Enterprises want to decouple foreign labor costs
from the minimum wage in order to help decrease
operating costs and enhance competitiveness.
The
Move to other Affect investment
Higher cost competitiveness
countries where and generation of
of foreign of Taiwanese
labor costs are new employment
labor manufacturers
lower opportunities.
will drop

27. Literature Hypothesis
Review Test
A. History of Foreign Labor A. Regression Model
B. Foreign Labor Policy B. Controversial Issue
C. Controversial Issue Discussion

28. A. Regression
To testify our hypothesis
• take monthly data from 2004~2009 as resource
• deseasonalize each variable

29. A. Regression
<In General>
Dependent Variables:
• Unemployment Rate
Independent Variables:
• Numbers of Foreign Worker
r = 0.046101

30. A. Regression
<In General>
Dependent Variables:
• Unemployment Rate
Independent Variables:
• Minimum Wage (Dummy Variable)
• Number of Foreign Labor
• GDP Growth Rate
• CPI

31. A. Regression
<In Counties>
Dependent Variables:
• Unemployment Rate
Independent Variables:
• Minimum Wage (Dummy Variable)
• Number of Foreign Labor
• GDP Growth Rate
• CPI

32. A. Regression
<In Counties>
Where foreign workers above 10,000
6 out of 8 counties show significant negative relation
New Taipei City、Taoyuan County、Hsinchu County、
Taichung City、Taichung County、Changhua County、
Tainan County、Kaohsiung City

33. A. Regression
<In Counties>
Where foreign workers below 10,000
5 out of 7 counties show significant positive relation
Keelung City、Ilan County、Hsinchu City、Hsinchu
County、Nantou County、Yunlin County、Penghu
County

34. A. Regression
<In Counties>
The relation between foreign and domestic
labor:
• Complement in foreign-labor abundant county
• Substitute in foreign-labor scarce county

35. A. Regression
<In Counties>
Possible reason:
• Industry Structure – Manufacturing, Nursing
• Government Policy

36. A. Regression
<Conclusion>
To unemployment rate, the number of foreign labor
is NOT a significant factor
The effects of GDP and the minimum wage on
unemployment are more significant

37. B. Controversial Issue Discussion
 Necessity of foreign labor in labor market
Before • Filling job vacancies
• Doing jobs that domestic
Now labor is not willing to do

38. 5
Labor shortage ratio
4.5
4
3.5
3
2.5
工業
2
礦業及土石採取業
1.5 製造業
1 水電燃氣業
0.5 營造業
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

39. B. Controversial Issue Discussion
Decoupling of minimum wages

40. Minimum Wage
Quantity of foreign labor
18500
450000
18000
400000
17500
350000
17000
300000
250000
16500
200000
16000
150000
15500
100000
50000
15000
0
14500
2004 2005 2006 2007 2008 2009 2010 2011 Time

41. B. Controversial Issue Discussion
Decoupling of minimum wages

42. CONCLUSION

43. A. Summary
In
general
Motivation Literature Test
Objective Review Result
In
counties

44. B. Outlook
Suggestion
for F-Labor
policy
Corporate
with Do not
Recruit
F-Labor decouple
without
effecting
D-Labor