Last year, many of us in Taiwan were worried as we watched other countries struggle to contain outbreaks of Covid-19 and wondered how the government should cushion the financial blow for affected citizens. But there was not a pressing need for economy-wide Covid-19 relief measures with the pandemic under control.
Due to the recent surge in infections, the entirety of Taiwan has been in a semi-lockdown, with schools, restaurants, and entertainment venues closed and companies encouraged to allow employees to work from home. It is now time that we talk about how to help those who have been struggling financially during these difficult times.
Taiwan’s targeted Covid-19 relief programs last year were well-intended and can be effective in helping some companies and workers. Now is the time for Taiwan to issue direct cash payments, following most of the world which used cash to alleviate the financial pain of the pandemic and lockdowns.
The closest Taiwan came to direct cash payments during the pandemic is when it launched the Triple Stimulus Vouchers program, which allowed citizens and foreign spouses to purchase an envelope of vouchers worth NT$3,000 for the price of NT$1,000. The idea was to encourage consumption within the year to get the economy rolling.
There are reasonable arguments to issue stimulus vouchers again, but the primary goal of the plan now should not be to stimulate the economy. It should be to ensure everyone is financially protected from the economic harm of Covid-19 and the semi-lockdown. Also, vouchers do not help achieve financial security because of the restrictions on how they can be spent. For example, Taiwan’s vouchers could not be used to pay housing, water and electricity fees. Similarly, Korea’s more generous stimulus vouchers could only be spent in smaller offline businesses. Research by the IZA Institute of Labor Economics found Korea’s stimulus restrictions to offline businesses likely harmed consumer welfare and efficiency because consumers may have to pay more for goods under these restrictions. In Taiwan, another problem is that the distribution of the vouchers could be delayed due to printing and the application process, making the program less efficient and popular than direct cash payments. Stimulus vouchers could be a supplement to an immediate cash transfer.
Protecting workers
Taiwan’s measures in protecting workers’ rights during this time have been disappointing. The government has only encouraged, instead of required, companies to allow at least half of their employees working from home. Employees have no legal recourse if they are required to work in person.
Also, there is little discussion of how this semi-lockdown will affect the economic situation of local households. It seems that there has been more immediate action to help businesses, particularly manufacturers, rather than workers. The government has said manufacturing companies will continue production, but it remains unclear how it will help workers who feel uncomfortable going to work.
During a time like this, some are more likely to have the opportunity to work from home or have other options to protect themselves economically and from the virus itself. But some either have their income shut off during the lockdown, or are forced to go to work, risking being infected with or spreading the virus.
With companies forced to shut down or operate with limited capacity, the research team at UBI Taiwan estimates that millions of Taiwanese households have had their incomes already affected by the lockdown. A poll by the Taiwanese Public Opinion Foundation found 65% of Taiwanese were concerned the situation will affect their work and income. Those who were already the most vulnerable, such as migrant workers and street vendors, may face even worse conditions. There are reports that some Taiwanese fear they will not be able to pay their rent without their normal incomes during the semi-lockdown. For job seekers, a poll by 104 found 76% of job applicants have already had their job search disrupted by the outbreak.
One example of the current economic disruption is Taiwan’s restaurant sector, which directly provides over half a million jobs as of 2016 data. A poll by iChef found that the food and beverage business sector has declined by over 70%. With reduced demand across many sectors, it is unclear how many employees are working under reduced hours or are not working at all.
Learn from what works
UBI Taiwan’s Emergency Basic Income proposal aligns with the global response to Covid-19 outbreaks of providing direct cash relief. The proposal is the fastest and most efficient way to compensate for the economic pain of Covid-19 and the semi-lockdown. For each month when Taiwan is under Level 3 alert or above, we advocate for an NT$15,000 payment for adults and NT$5,000 for dependents.
We also call on Taiwan’s government to incorporate foreign workers, including migrant workers from Southeast Asia, who form a critical backbone to the economy, into this relief scheme. This allows everyone living in Taiwan to have an immediate and flexible safety net that prevents extreme hardship.
The United States emerged from the pandemic with a new understanding of the power of cash. Unrestricted cash relief to families with children during the pandemic is projected to cut the rate of child poverty in half this year. This wave of support has been called “unprecedented,” helping families become better off than they were even before the pandemic.
In Asia, many governments paid out an amount between around NT$25,000 in Singapore and NT$35,000 in Hong Kong to all citizens in cash last year. Japan provided a universal payment of ¥100,000 (around NT$26,000) per resident, which research found allowed an immediate improvement in consumption, especially for the most hard-hit families. In Korea, their universal stimulus gave a family of four an NT$25,000 NT payment. A survey found 82% of Koreans used the transfers to buy necessities, like food and medicine.
Taiwan can learn from how these other countries help their citizens deal with the economic impact of Covid-19 as it grapples with the recent outbreak, though they handed out the cash in response to a much more dire situation. We have seen some plans to support people who are struggling financially due to Covid-19 related restrictions.
The path ahead
There are hopeful signs of the payments becoming popular within the governing party. Premier Su Tseng-chang has indicated support for a direct payment of up to NT$20,000. DPP legislator Chao Hao-Liu (劉櫂豪), too, has called for a one-time cash transfer of NT$24,000 to all Taiwanese citizens, not including the wealthy. These are a great foundation for helping Taiwanese get through the lockdown and avoid financial hardship. But the amount should be adjusted as the level of alert changes or the restrictions are extended. If Taiwan remains under Level 3 alert for another month, the government should make another round of payments. The proposal also should not exclude the “wealthy.” It will slow down the distribution and even if we need to do so, it is more efficient to impose an extra levy on their income in the following year to claw back these funds.
There has been another proposal to pay NT$683 per day to parents on unpaid leave who must stay at home to watch their child. This proposal is a good start, but it neglects childless households who may be involuntarily pushed out of work due to the outbreak but are not eligible for the subsidy. Also, the more targeted these proposals are, the more difficult it is to apply. It is unclear, for example, if workers who are involuntarily put on unpaid leave are still eligible even though they did not take leave work for their child? What about workers who were unemployed before the current outbreak? Does the government have to receive documentation from the business, and how much will this delay the roll-out? Will these subsidies be easily accessible and promoted to the families who need them most?
Giving out cash to a limited number of people risks creating new problems. Last year, many waited in long lines to apply to receive their targeted subsidies. The complicated application process left many confused and likely deterred them from applying at all. Those who are most in need are probably the least likely to make it through the application process.
Last year, part of Taiwan’s Covid-19 relief program earmarked more than NT$400 billion to subsidize companies in particular industries. But companies should not be subsidized if they do not provide services that benefit all. Otherwise, it is almost always preferable to use most of the money to send the cash directly to the workers and households rather than to the business owner and hope they give it to their employees.
Many other countries are slowly emerging from this crisis, realizing they have a powerful tool to alleviate financial precariousness immediately: cash. As Taiwan enters its most critical stage of the pandemic yet, the question is if we will stick with the old system that leaves millions behind? Or will we rethink our approach to social assistance to prioritize human flourishing over business profit? The answer is in Taiwan’s hands.
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TNL Editor: Bryan Chou, Nicholas Haggerty (@thenewslensintl)
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