Taiwan's economic growth rate hit a 15 year high of 7.37% in 2025, driven by robust exports in AI and semiconductors. The head of Taiwan's statistics bureau estimates that the country's per capita GDP will reach $40,951 in 2026, ahead of both Japan and South Korea.
Yet these impressive gains have not translated into tangible benefits in the day-to-day lives of most Taiwanese workers, notes Chang-Tai Hsieh, an economics professor at the University of Chicago Booth School of Business.
"Employee compensation in Taiwan accounts for only 43.1% of GDP. This is a historic low largely caused by the weakening of the New Taiwanese Dollar, which makes it difficult for workers to share the fruits of economic growth," he says.
The son of an aircraft maintenance engineer, Chang was born in Taiwan and moved through several countries in his youth before earning a PhD in economics from the University of California, Berkeley.
In an exclusive interview with Storm Media, Chang analyzes the substantial social cost Taiwan bears by maintaining a weak currency, the crisis triggered by currency mismatches in insurance, and the government's policy response.
Taiwanese wages as a percentage of GDP are among the lowest globally
A surge in global demand for AI and semiconductors has pushed Taiwan's trade surplus to over $140 billion in 2025, possibly exceeding 16%of the country's annual GDP, far ahead of either China or South Korea.
But official statistics also show that labor compensation's share of Taiwan's GDP has steadily declined in recent years, dropping to a record low of 43.1% in 2025.
"Labor accounts for 60% of GDP in the United States. Taiwan sits at 43.1%, among the lowest in the world. This makes it difficult for workers to enjoy the fruits of economic growth," Chang notes.
Low Exchange Rate
Taiwan's ministry of statistics attributes this drop in wages as a share of GDP to changes in the structure of certain industries.
But most experts agree that one of the key reasons for this drop is the government's decision to maintain a weak currency to stimulate export competitiveness.
"While the policy helps exporters, it hurts non-exporting small enterprises, consumers, and workers," Chang explains.
Chang uses a comparison between two common products, a Big Mac and an Iphone to explain the problem.
While the undervaluation of the currency does not cause products made in Taiwan - such as a Big Mac - to be significantly more expensive, Chang notes that it does cause imported goods like iPhones to be priced considerably higher than in other countries.
"Export growth is significant in Taiwan, imported goods are more expensive under a low exchange rate policy...This causes Taiwanese consumers to pay more for iPhones and pushes Taipei's housing price-to-income ratio past London and New York," he analyzes.
"Taiwan's economic growth is impressive, with the export industry benefiting significantly. But low exchange rates disadvantage workers and lead to wage rates that lag behind growth in profits."
"Meanwhile, consumers purchase imported goods such as iPhones, wine, and various daily items, classified as consumption expenditure. It's like creating income through exports and spending on imports.
Several Taiwanese scholars noted in a recent book that long-term undervaluation of the country's currency taxes importers, travelers abroad, and those purchasing imported goods. This contributes to Taiwan's lower wage levels compared to neighboring countries, causing brain drain and hindering the attraction of international talent.
Life Insurance Industry Faces Currency Mismatch
A side effect of a low exchange rate policy is the risk of currency mismatches in Taiwan's life insurance policies, which almost every citizen holds.
According to the Taiwan Insurance Institute,Taiwan's life insurance industry holds over 67% of its capital in foreign investments as of September 2025. At around a total of NTD 22.07 trillion, this figure is close to the size of the island's annual GDP.
Chang notes that Taiwanese insurance companies routinely skirt regulatory loopholes to purchase moreoverseas investments than the legally permitted cap of 45%, because U.S. funds typically have more stock-heavy, bond-light portfolios. This increases annual returns, but also adds systemic risks.
"These companies collect premiums in New Taiwan dollars, and then invest in U.S. treasuries for returns denominated in dollars. If Taiwan's currency appreciates, life insurance companies will face a significantly greater risk of bankruptcy, which then might require the government to intervene and ultimately burden taxpayers."
History has seen multiple financial crises follow such a pattern, such as when theU.S. Federal Reserve intervened to save the insurance corporation American International Group from the brink of collapse in 2008.
Lax Financial Regulation
To lower the risk of a similar situation occurring in Taiwan, Chang suggests stricter enforcement of local regulations.
But Taiwan's supervisoryfinancial organization - the Financial Supervisory Commission, or FSC - has done just the opposite, altering accounting rulesat several critical moments in recent years to allow insurers to acquire more overseas funds, such as when U.S. interest rates hiked in 2022 and 2023 or when Taiwan's currency appreciated nearly 10% in May 2025.
In January 2026, the FSC further revised accounting regulations that saved the life insurance industry approximately NTD 92 billion annually on foreign exchange hedging.
"These repeated adjustments to accounting standards have not addressed the asset mismatch issue within the industry," Chang remarks.
