Taiwan Can’t Have Digital Transformation If It Doesn’t Fix Its Digital Inequality
Taiwan is offering government assistance to Taiwanese companies in China in a bid to entice them to bring their investment back home. One of the requirements for this assistance is that these companies must focus on producing at least one high value-added product.
Given that many of these companies are in the tech sector, it is pertinent to ask a few questions as Taiwan encourages higher-value investments. What will the social impact be of Taiwan’s digital transformation? And what needs to be taken note of in terms of developing corresponding social policies, such as in terms of inequality, labor and education?
The “How’s Life in the Digital Age?” report, released in March by the Organization for Economic Cooperation and Development (OECD), serves as a useful guide to exploring these questions. In particular, the report points out that digital transformation has “cross-cutting effects on the economy, society and individuals.” It therefore seeks to look at digital growth not just in terms of infrastructural development, but also at inequality in terms of access to digital tools, Internet access, and digital skills. The report also compiles cross-country statistics to look at the impact of digital transformation on the well-being of individuals using various indicators of social inclusion, including the aforementioned data on inequality, data on wage gaps, and the impact of automation on jobs and earnings.
In 2016, Taiwan’s government launched a new digital strategy: The Digital Nation and Innovative Economic Development Plan (DIGI+) 2017-2025. Much of its focus is on the economy; as the title of the plan suggests, its stated purpose is “to expand Taiwan’s digital economy […] and raise Taiwan’s standing in the global information sector.”
However, even though Taiwan says it wants to work toward a “human-centric DIGI+” and the plan also states one of its aims as wanting to “realize a fair and active internet society with equal digital rights,” there has not been a clear strategy as to how to achieve this.
Similarly, the AI Action Plan that Taiwan launched last year to train specialists in artificial intelligence (AI) also focused on the economic aspect, emphasizing the creation of a “niche market” for Taiwan in the value chain. Nonetheless, science and technology minister Chen Liang-gee (陳良基) said that since this year, the four research AI centers in Taiwan have all been required to do research in the humanities and social sciences.
According to the International Telecommunication Union (ITU), digital inclusion “means that all people, be they indigenous, persons with disabilities, women, girls, youth or children must have affordable access to information and communication technologies (ICT) for their social and economic development.” Even so, this should only be the start, as Britain’s NHS Digital points out, and there should be complementary plans to further improve inclusivity. The European Commission elaborated that digital inclusion should also include social inclusion, such as by organizing “social inclusion projects” to increase the “participation rate of disadvantaged people in public, social and economic activities.”
Taiwan has been able to develop the economic potential of its digital sector, such as by attracting international digital companies to invest. But are there adequate plans to address the social aspects? Does the population as a whole in Taiwan also have adequate access to not only digital tools, but the digital skills and social circumstances necessary to benefit from Taiwan’s digital plan?
Inequality in Household Internet Access
Although Taiwan is often seen as being well-connected to the internet, it pales in comparison with other high-income countries.
OECD’s report starts off by assessing countries in terms of their household internet access. It highlights that household internet access is close to 100% in several OECD countries (South Korea, the Netherlands, Israel and the Nordic countries), though there are still an average of 20% of households among all OECD countries which are not connected. Surprisingly, over 25% of households in Japan and the United States still do not have Internet access, although the overall number of individuals who had used the Internet in the 12 months of 2017 was still at 95% in Japan. It was only 81.9% in the United States.
Taiwan was not included in the OECD’s report, but the Survey on 2018 Individual/Household Digital Opportunity Survey in Taiwan conducted by the National Development Council (NDC) found that 84.9% of individuals in Taiwan had home Internet access in 2018 and a similar 84.9% had mobile Internet access. This puts Taiwan somewhere in the middle, between Belgium and Spain, but still below countries like Estonia and Chile. This also means that Taiwan is way off the mark when compared with South Korea and the Nordic countries.
The Global Competitiveness Report 2018 by the World Economic Forum also ranked countries according to their broadband coverage. Taiwan ranked only 42nd (out of 140 countries) in terms of fixed-broadband Internet subscriptions and 30th in terms of Internet users. Switzerland and Iceland ranked first, respectively, on the two indicators. Taiwan has said that it aims to increase coverage to 90% by 2025, where countries like Canada and Germany already are at present. In South Korea, coverage is already at 99.5% today.
This raises the question of whether the lack of access to broadband would result in parts of Taiwan not being able to benefit from Taiwan’s digital plans.
Inequality in Internet Access
We also need to look at the issue of equality in access to the Internet, which the OECD’s report also analyzes.
When looking at the activities engaged on the Internet by the fastest adopters (or the fastest 25% of the population) as compared with the broader public (or more than 50% of the population), OECD’s report shows that the widest gap in the number of activities engaged in was seen in Slovenia, Italy and Portugal, even to the extent that some people do not use the Internet at all. Engagement of activities on the Internet between the two groups is the most equal in the Nordic countries, Switzerland, Luxembourg and Israel.
Taiwan’s situation is similar: In a 2013 study by Sabrina Li (李秀珠), currently Professor at the Institute of Communication Studies at National Chiao Tung University, she found that the better educated and higher income people were faster adopters of nine Internet-related technologies: Internet Protocol Television (IPTV), digital cable, emails, Internet instant messages, Facebook, scanners, notebooks, printer and personal computers. Li’s 2015 study also showed that those with higher family incomes and who lived closer to the capital city of Taipei were more likely to adopt technologies such as Wii, Kinect, and notebooks. The same was seen among the elderly in Taiwan, where the lower-income elderly were also less likely to use the Internet.
The OECD cautions that a gap in technology adoption “has implications for the extent to which digital technologies can impact well-being in its different dimensions and for the inequality-enhancing effects that may emerge as a result.” In other words, inequality in digital access can also lead to other forms of inequality (such as in terms of digital skills, and the wage gap between tech and non-tech workers, as we will see later) and thus impact on well-being. For example, the OECD pointed out that “there is evidence that the Internet can play a role in achieving positive outcomes for the elderly in dimensions such as health status and social connections,” which means inequality in access in Taiwan can also result in health and social inequity.
Interestingly, OECD’s report also highlighted that “people from lower socio-economic backgrounds tend to use the internet more intensely than people in high-educated, high-income groups.” This is in line with a 2015 study conducted by Chang Fong-ching (張鳳琴), Professor at the Department of Health Promotion and Health Education at Taiwan Normal University, and others. They found that junior high school students who lived in rural areas in Taiwan used the Internet at a higher frequency. She also pointed out that adolescents who lived in rural areas tended to engage in “riskier online behaviors such as online game playing, from which they more often report harmful effects such as the theft of passwords or money.”
Chang’s study also found that higher levels of parental monitoring of adolescents’ activities, as well as higher Internet literacy among adolescents, would reduce such harmful effects as well as the likelihood of being victimized by cyberbullying. However, adolescents who lived in rural areas also tend to have lower levels of Internet literacy, and their parents also had “lower levels of Internet skills and intervened less in their children’s use of the Internet.”
Inequality of Digital Skills
Along with inequality to internet access, inequality of digital skills is of concern.
When analyzing the digital skills gap, OECD’s report reveals that Turkey, Chile, Slovakia and South Korea had the highest levels of inequality in digital skills. New Zealand, the Netherlands and the Nordic countries “display[ed] greater homogeneity in digital problem-solving scores among adults.”
There is no directly comparable data for Taiwan in the Survey of Adult Skills (PIAAC), which the report uses to measure the ability of adults to solve problems in “technology-rich environments.” But when analyzing Taiwan’s performance using another survey—the Programme for International Student Assessment’s (PISA)—it was found that the gap in the performance for collaborative problem-solving between schools of different socio-economic profiles is particularly wide, at 13th highest among 51 countries surveyed.
The study found that every one-point increase in the socio-economic profiles of schools in Taiwan is associated with a 78-point improvement in collaborative problem solving. (The socio-economic profile of schools refers to the “average socio-economic index of the students attending that school,” while a low score “relates to a socio-economically disadvantaged background.”)
This performance gap is much narrower in the Nordic countries, where the improvement was only 14 points in Iceland, 21 in Norway, 23 in Finland and 33 in Denmark. It was also lower in Taiwan’s neighbors: 50 points in Hong Kong, 61 in Singapore and 69 in South Korea.
Even though PISA’s indicator of collaborative problem solving looks more generally at the ability of students to “work with two or more people to try to solve a problem,” I found that countries with a smaller digital skills gap among adults also showed smaller gaps in collaborative problem solving between schools of different socio-economic profiles (such as in the Nordic and Anglo-Saxon countries). This therefore provides an indication of the inequality in digital skills among the adult populace.
The Netherlands present as somewhat of an anomaly where there is a low digital skills gap but a wider collaborative problem-solving performance gap between schools, and in Turkey where there is a wide digital skill gap but a moderate gap between schools. When these two countries are taken out of the equation, the pattern becomes clearer: Countries with greater inequality in between-school collaborative problem solving also have greater inequality in digital skills in adulthood.
Figure 1: Relationship between digital skills gap among adults and gap in collaborative problem solving between schools of different socio-economic profiles (the blue dots and lines show the relationship when the outliers (Chile, Netherlands and Turkey in red) are excluded)
Source: OECD How’s Life in the Digital Age? (data on digital skills gap), OECD PISA 2015 Results (Volume V) (data on gap in collaborative problem solving)
Wage Gap Between Tech and Non-Tech Workers
Taiwan’s skills shortage also faces another issue pertaining to inequality. In ManpowerGroup’s 2018 Talent Shortage Survey, it was found that Taiwan has been facing increasing talent shortages over the last five years. In 2014, 45% of employers indicated that they had “difficulty filling jobs in Taiwan.” This increased to 57% in 2015, 73% in 2016 and 78% in 2018.
Taiwan’s talent shortage has also grown faster than the global trend, which saw shortages grew from 36% to 45% over the same period. Also, whereas IT skills (such as cybersecurity experts and network administrators) were the sixth most difficult to find among workers globally, these were the third most difficult to find in Taiwan.
Moreover, whereas the lack of applicants was given by 29% of the employers as the top reason for the talent shortage globally, it was the top reason among a higher 51% of employers in Taiwan. Taiwan’s relatively low pay (13%) was also cited as the third highest driver for the talent shortage in Taiwan.
Indeed, the relatively low pay in Taiwan vis-à-vis other high-income countries also explains the dearth in the talent availability in Taiwan. A 2014 survey in the CommonWealth Magazine showed that Taiwan is now considered a “talent export country” where Taiwan’s “highest-caliber assets” were choosing to leave the country.
The NDC recognized early this year that Taiwan is facing the “stagnation of wage growth, [which has led to other] countries competing to poach talent” from Taiwan, and also because Taiwan’s “wages are not internationally competitive, […] and the living environment needs improving.” The irony in what the NDC said, however, is that it is precisely because Taiwan’s labor costs for companies are internationally attractive, which is why wages are low.
However, it is the case that wages have not been attractive enough to retain talent, and as much as there have been strategies to try to do so, these strategies remain very much focused on workers in the higher income tier, which undoubtedly will still perpetuate wage inequality.
Among the NDC’s strategies include “cultivating at least 1,000 high-caliber researchers in smart technologies by 2021,” whom the NDC refers to as “young elites,” and another 10,000 “pioneers” in smart applications. These would aid in developing and attracting high-tech talent, but one cannot help but also notice that there are no corresponding plans in place to boost support for workers at the lower-income levels.
The NDC has said that it encourages schools to “establish second-specialty or skill-upgrading courses, to help members of the labor force enter innovative industries.” It also encourages industries to invest and collaborate with schools to cultivate talent, but these plans do not address the inequality that persists in the system.
What about plans to increase the skills or wages of the lower income earners, to also boost their spending power so as to tap on the digital growth and be plugged into the network?
Studies in the United States and Europe have found that the highest-paying enterprises, such as digital companies, pay the most unequal wages. In Taiwan, a 1111 Job Bank survey conducted in March this year found that the highest average starting monthly salaries are found in the tech sector. Salaries in the electronics, information, software and semiconductor sectors start at an average of NT$35,413 a month due to the increasing demand for talent skilled in the Internet of Things (IoT) and artificial intelligence. In comparison, minimum wage is still at NT$23,100, or only 65% that of the starting wage in the tech sector. The average starting salary for university graduates in 2016 was only NT$28,116, which was the first time it became higher than in 1991—starting salaries have, in effect, remained stagnant for nearly 30 years.
In 2017, average monthly salaries in the information and communication (ICT) sector, at NT$69,022, were also the third highest in Taiwan (excluding overtime pay and bonuses). Meanwhile, the average salary for all employees as at the end of 2017 was only NT$39,953, or less than 60% that of average salaries in the ICT sector.
In fact, average wages in the electronic component manufacturing and in the computer and electronic product manufacturing sectors grew by the fastest and third fastest among all industries between 2001 and 2015, by 50% and 34%, respectively.
Meanwhile, total average wages only grew by NT$2,000 since 2000, and real average regular wages have stagnated for almost 20 years, since 2002. In comparison with OECD’s report which cites PIAAC data, “workers with higher digital skill levels (Level 2 or 3 in PIAAC) earn 26% more than those with basic skills (Level 1),” though it said the effect could also be attributed to “other skills and higher education.” If we could compare the wage gap between Taiwan’s tech and non-tech workers with PIAAC’s wage gap based on digital skills, Taiwan’s wage gap is still higher than the OECD average, and such inequality would have an impact on the unevenness to digital access by workers.
If we just look at the mobile phones used, in high-income countries like Australia, France, the Netherlands, United Kingdom and United States and even in neighboring Japan and Singapore, the top 10 phones sold in these countries in the last quarter of 2018 are all top-range Apple iPhones, or Samsung Galaxy S or Note series, which are generally more expensive. However, in Taiwan, the top 10 phones sold in August this year include many lower-end phones such as the Samsung A series in the 3rd, 4th and 7th places, as well as cheaper China-made brands such as Oppo in the 2nd and 5th places (which are also sold, but are far less popular, in the countries listed above).
Inequality to access has another major problem: National security. Taiwan has banned China-made phones from being used in government agencies due to fears that China’s government could use the phones for spying purposes. Even as Taiwanese might take heed to buy non-China made phones for security purposes, they may not have the financial means to do so. Basically, if Taiwan wants its citizens to be plugged into digital transformation in what is perceived as a more secure environment, Taiwanese will need higher wages in order to have access to phones not made in China.
Such is the conundrum in which Taiwan is now. It wants to remain low-cost to compete in the global manufacturing sector, but this would necessarily impede on its citizens’ ability to plug into digital transformation using more advanced technologies (if not more secure ones), notwithstanding the fact that Taiwan should no longer be competing on driving costs down.
But it is not that Taiwan’s consumer spending is in homogenous stasis. Consultancy agency Knight Frank revealed that Taipei has the eighth highest number of super-rich individuals in the world, or those with a minimum worth of US$30 million, which therefore exposes the inequality in Taiwan’s society.
If Taiwan is sincere about wanting to achieve human-centric digital transformation as DIGI+ has claimed, then increasing digital access has to be also about increasing income.
Automation: The Risk to Jobs and the Relationship With Tertiary Attainment in the Labor Force
Finally, the OECD report also looks at the risk of automation to jobs and estimates that an average of about 14% of jobs could face a high risk of automation in OECD countries, though up to 31.6% of jobs could face some risk of significant change as well. It also found that the Nordic countries of Norway, Finland and Sweden had the lowest risks of automation, with only 5% to 10% of their jobs at high risk of automation. Slovakia faced the highest risk, at 33.6%, followed by Greece, Lithuania, Slovenia and Spain, with risks of between 20% and 30%.
A similar study on Taiwan could not be located, but a 2018 survey by the 1111 Job Bank found that 51.19% of Taiwan’s employees were concerned that their jobs could be replaced by AI, especially for jobs in education, trade and logistics. However, only 7.71% of the employees had upgraded their skills to prepare for the arrival of AI at their workplaces.
The Economist charted OECD’s findings on the automation risks according to the countries’ GDP per capita and found that “workers in rich countries appear less at risk than those in middle-income ones.” I also compared the risk of automation with the share of tertiary attainment in the labor force of these countries, and found that countries with a higher share of tertiary attainment in their labor force also seems to have a lower risk of automation.
In comparison, Taiwan’s GDP per capita and the proportion of the population with a technical college or university degree—45%—would put it in somewhere in the middle of the OECD countries, which suggests a medium risk of automation.
Figure 2: Relationship between share of tertiary attainment in the labor force and risk of automation to jobs. (Data for Taiwan is not available.)
Source: OECD.Stat Educational attainment and labor-force status (data on share of tertiary attainment), OECD Social, Employment and Migration Working Papers No. 202: Automation, skills use and training (data on risk of automation)
In a Facebook Live chat earlier this year, Chen Liang-gee, the science and technology minister, shared that his ministry was concerned about the impact of automation on jobs and said this was part of the ministry’s strategy. Chen said that his ministry was in talks with the Ministry of Education to provide subsidies of NT$30,000 to NT$50,000 a month for 600 doctoral students every year as part of its talent cultivation.
Even as this should be applauded, it is a very niche program, and as mentioned, there are not yet any broad-based plans to enhance equity in the education system as a whole.
Moreover, there was no mention of large-scale programs to help workers deal with job transition, such as retraining low-skilled workers for digitalization or providing stronger safety nets to support workers who become unemployed. Talks with the Ministry of Labor should also be conducted to look into developing these programs. It is commendable that the Ministry of Science and Technology is willing to look ahead to think about how it must enhance the education system and address potential job losses, but these issues are beyond the scope of the ministry and would require cross-ministry collaboration.
Therefore, instead of leaving it to the Ministry of Science and Technology to take the lead in developing policies for digital transformation, the impact that digitalization is expected to bring to the various sectors of society requires a higher-level coordination body to look into the issues highlighted in this article, as well as others, to develop corresponding policies to address them.
Conclusion
Digital transformation will have an enormous impact on Taiwan. OECD’s report, which compiled key data on the social impact of digitalization, serves as an important guide for Taiwan in identifying social factors which Taiwan must address in order for Taiwan’s digital growth to be socially inclusive.
As OECD’s report explained, “the Internet and digital technologies also carry the risk of serving as catalysts for greater inequalities of well-being” and thus “making the digitalization work for people’s well-being would require building equal digital opportunities, widespread digital literacy and strong digital security.” Specifically, the report “takes stock of a number of fundamental inequalities that the digital transformation presents through the inclusion of indicators for specific “risks,” such as inequalities of internet use, the divide in digital skills, as well as the wage gap and job polarization induced by differentiated impacts on labor markets.”
However, this is not to say that the OECD countries have it all figured out. In fact, OECD also said that even highly digitalized OECD countries are still having difficulties managing their digital risks as well.
Nonetheless, the report highlights areas that Taiwan should take note of in its own digital transformation.
I have sought to illustrate Taiwan’s current situation in relation to these areas. It is clear that in the areas of access to both the internet and to digital skills, as well as in the wage gap, there is much that Taiwan still needs to work on before it can develop a workforce that would be equipped to handle the digital transformation on par with the standards of other top-performing countries in terms of digital development.
The Nordic countries came out as the top performers in terms of ensuring social equity in digital transformation, and the common theme among them is a greater equality in incomes, education and skills, which therefore has provided greater assurance that the larger populace would be better equipped to deal with the challenges that are to come from digital transformation, such as that of automation.
To ensure that Taiwan can come together to be prepared to meet the challenges of digitalization, it would therefore be worthwhile for Taiwan to invest resources to develop a clear strategy to strengthen its population’s ability to handle digitalization, with a view to promote equality, and to ensure that its DIGI+ strategy is truly “human-centric.” As the OECD pointed out, access to the Internet is a “prerequisite to participating in an increasingly digitalized society and economy.” And if Taiwan wants to achieve its goals, it has to develop the skills of all its workers—not just those at the top.
Roy Ngerng is an Assistant Researcher at the Risk and Society Policy Research Center at National Taiwan University.
(Cover photo by Samuel Toh on Unsplash)
