Taiwan’s benchmark stock index has surged past the 30,000 mark, and shares of Taiwan Semiconductor Manufacturing Co. have climbed above NT$1,700, pushing the island’s economic growth rate to a multi-year high. Yet for many households, the headline figures have failed to translate into a tangible sense of economic improvement. According to Wei‑Wen Lai, an assistant research fellow at the Chung‑Hua Institution for Economic Research (CIER), the disconnect stems from a deepening “K-shaped” divergence in both industrial development and wage structures. The high-tech export industries have experienced rapid expansion. However, this growth has not translated into an overall increase in domestic demand or employment income. It has widened the gap between macroeconomic performance and the day-to-day experiences of the public.
Lai noted that recent stock market gains have been heavily concentrated in high-value-added sectors such as semiconductors and information and communications technology. Returns on capital have significantly outpaced returns on labor, a trend that risks further widening income inequality. The same pattern is evident in wages, with the pay gap continuing to grow between technology-related industries and sectors such as food service and other service industries, underscoring the long-term challenge posed by uneven industrial development.
Export Strength Offsets Weak Domestic Demand as Structural Divergence Takes Hold
The polarization of Taiwan’s industrial landscape reflects both market forces and policy choices. On the one hand, high-tech industries naturally attract capital and talent due to higher value-added output and economies of scale. On the other hand, long-standing policy priorities—including the development of science parks and the allocation of research and development resources—have reinforced this concentration over time. While industrial imbalances may not immediately weigh on gross domestic product, they could undermine long-term economic and social stability.
Addressing the difficulties faced by traditional industries undergoing transformation, Lai said Taiwan’s small and medium-sized enterprises are constrained by limited scale and resources. Subsidy programs that focus primarily on sustaining survival are unlikely to drive meaningful upgrades in business models or branding. Instead, Lai argued, policy support should be more targeted toward industries with growth potential, combined with clearer strategic guidance and advisory mechanisms to help firms raise their value-added capacity, rather than relying on broad-based resource distribution.
Looking ahead, Lai said, narrowing the K-shaped economic divide will require balancing export momentum with stronger domestic demand. Expanding markets, improving service quality, and developing the experience economy could help ensure that the benefits of economic growth are more widely reflected in employment opportunities and everyday living standards.
Author: CIER Editorial Team
Date: February 2, 2026