63 MARTINDALE CENTER FOR THE STUDY OF PRIVATE ENTERPRISE high, but total GDP begins declining due to the shrinking population (Goh et al., 2023). The aging population will have significant effects on the social welfare network broadly as well as on caretakers for the elderly. The dependency ratio, or the ratio of the working-age population to nonworking individuals, has been increasing year over year and is predicted to continue growing (Goh et al., 2023). Most recently, in 2023, the dependency ratio was 26.3% (National Development Council, 2024b), which means that for every 100 people who are working, there are 26 depending on them for care. This imbalance between the number of working and nonworking people leads to increased social burden placed on individuals and families, as well on as the government through the provision of public goods, to financially support those not working. Taiwan has already realized increases in social support for its aging population. In 2001, NT$420B (~US$12.7B) was expended on social benefits for the elderly, but by 2021 the annual spending had increased by 163% to NT$1.1T (~US$33.3B) guided by the 2017 Long-Term Care Services Act. These benefits target the elderly population through living allowances, home care services, development of senior centers, growth of retirement pensions, and other social welfare provisions. On the whole, NT$2.41B (~US$82M) was allotted to social funding in 2021, with 46.4% of that directed toward those over age 65 (Cheng-yu & Pan, 2023). The Long-Term Care Services Act details that this increase has multiple sources but stems primarily from increased tax rates on estate and gift taxes, from 10% to 20%, along with a 2.7-times increase on tobacco and alcohol sin taxes. In addition to the large costs of and increased demand for social spending, there will be less revenue from taxation available as the population and labor force shrink. Though the government is turning to alternative methods of taxation—other than income tax—that could lead to significant budget challenges: increased borrowing, budget deficits, and higher taxation on corporations and the labor force (Goh et al., 2023). These consequences would add fiscal strain and affect crucial areas like education and defense. Recommendations The next 10 years are critical for Taiwan’s economy and geopolitical power. Ultralow fertility is a topic of major concern, with a 0.87 birth rate in 2023, significantly below the replacement rate of 2.1 required to keep the population stable (United Nations, 2023). The Department of Human Resources Development recommends a five-pronged approach to the population issues: working to increase the birth rate through raising people’s willingness to have children, encouraging older workers to retire later and providing women with enhanced childcare opportunities, increasing efficiency in utilization of resources in the labor market, updating immigration policies to increase inward migration, and increasing resources for the aging population (National Development Council, 2022). Long-run interventions are essential to address the declining population. The low birth rate can be targeted by working to alter social norms and liberalize fertility care while incentivizing immigration to the island. Sociocultural evolution As cultural norms continue to evolve, women’s roles in the family and in the workforce have changed. Waning interest in marriage and child-rearing has contributed significantly to the declining number of births. Surprisingly, the Ministry of Education has been tasked with reversing the low birth rate. It began addressing this issue in October of 2022 by requesting increased funding for child-rearing allowances and childcare subsidies (Executive Yuan, 2022). Countries suffering from ultralow birth rates, like Taiwan, have been focused on leveraging fiscal policy to incentivize child-rearing without compromising careers. In Singapore, government packages were created to include fully paid maternity leave, subsidies for childcare, one-time stimulus checks, tax rebates, and incentives to companies that accommodate work arrangements for families (Tan, 2020). Although appealing, these measures did not effectively mitigate the low birth rate. Singapore continued to see a decline in births, specifically in younger women ages 20–24 years. As Taiwan continues to shape policies to address its low numbers, leaders can learn from cases like Singapore and implement policies well adapted to its citizens’ needs or take other routes entirely. Beginning January 2023, a budget increase of approximately NT$5.1B (US$171M) alongside an adjustment of multiple fiscal policy measures were aimed at supporting child-rearing (Executive Yuan, 2022). The government eliminated tax bracket restrictions for childcare subsidies to include those above the 20% tax bracket, increased salaries in public and quasipublic childcare to promote adequate staffing, and provided grants to childcare facilities to improve conditions (Executive Yuan, 2022). Alas, changes in birth rate have not yet been seen.
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