TAIPEI (Taiwan News) — Taiwan’s labor share of GDP fell to a record low last year despite rapid wage growth, as an AI-driven boom lifted corporate profits while traditional industries faced pressures from China’s excess capacity, exchange rate fluctuations, and tariffs.
The Directorate General of Budget, Accounting and Statistics (DGBAS) said operating surplus grew 16.29% year on year in 2024, while employee compensation rose 7.27%, the fastest increase in 27 years, per CNA. However, the labor share of GDP fell to 43.1%, marking a new low.
Tsai Yu-tai (蔡鈺泰), head of DGBAS’ Department of Statistics, said companies are sharing the fruits of growth but cannot allocate all operating surplus to wages. Firms must retain part of their earnings for future investment, he added.
Taiwan’s exports have repeatedly hit record highs in recent years, fueled by AI-related opportunities. According to DGBAS, the 2024 economic growth rate was revised to 5.27%, with the 2025 forecast raised sharply to 7.37%.
The share of employee compensation in GDP stood around 50% in the early 1990s before gradually declining and staying below 45% over the past decade. Although the 2018 US-China trade war spurred a return of Taiwanese investment, the share fell to 43.66% in 2021 and then to 43.1% in 2024, as profits in capital- and technology-intensive industries grew faster than wages.
Concerns have emerged that the declining labor share could signal worsening income distribution, even as the economy grew 5.27% in 2024. Tsai said the trend reflects changes in Taiwan’s industrial structure.
Industries driving growth are mainly in electronics and ICT, which are capital- and technology-intensive with relatively low labor cost shares. Tsai noted that engineers in science parks earn far more than average office workers, but capital and technology inputs still far exceed labor costs in these sectors.
However, Wang Jiann-chyuan (王健全), vice president of the Chung-Hua Institution for Economic Research, said the impressive output from electronics and ICT masks growing industry polarization. “Taiwan cannot rely solely on TSMC,” he said.
Traditional industries employ far more workers but have been squeezed by China’s excess capacity, exchange rate pressures, and tariffs, leaving them under strain. Without timely support, weakness in these industries could spill into the labor market and affect consumer confidence.
Wang said traditional industries must both transform and upgrade. The government should act as a “pathfinder,” helping these industries link with emerging opportunities such as AI, drones, and robotics.
Keoni Everington
Taiwan News, Staff Writer