Taiwan After Its Demographic Dividend: Invest More and Dare to Innovate

Taiwan’s next step after its demographic dividend is exhausted. I still believe Taiwan’s greatest economic predicament is the exhaustion of its demographic dividend, visible in super-aging, low birthrates, and the risk of bankruptcy in labor and health insurance funds. The solutions are “invest more” and “dare to innovate.” The first demographic dividend: a very high proportion of newborns, plus military personnel and civilians brought from China by the Kuomintang. In the 1960s, Taiwan had over 400,000 births each year, continuing almost into the early 1980s. Its population in the 1960s was approximately 11–11.5 million, yet its annual births were at a level normally associated with a country of over 40 million. Large numbers of military personnel and civilians brought by the Kuomintang in the 1950s also helped establish the demographic foundation for decades of economic development. The second demographic dividend: Taiwanese companies moving west to use China’s large rural population. China began reform and opening in the 1980s, and Taiwanese businesses expanded there in force in the 1990s. Taiwan no longer had enough labor for labor-intensive textiles, footwear, electronic components, and assembly. Successive waves of companies established operations in China, drawing on abundant, inexpensive workers moving from farms to factories. Electronics companies such as Hon Hai could therefore assemble workforces a million strong in China. Taiwan’s economic development over the past half-century rested on fully using these two enormous demographic dividends. Looking ahead, however, it no longer has such a vast dividend. Births in 2022 fell below 140,000, roughly the number expected in a country of 13 million. It is clear that 130,000–140,000 newborns a year cannot sustain Taiwan’s future development needs. For the next generation, we should put the wealth accumulated through those two demographic dividends into new-era ventures: “innovate boldly” and “invest proactively and on a greater scale.” Make better use of people and resources worldwide and develop global markets further.