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International Labor Migration in Taiwan – A Missed Opportunity?

Author: Hafizha Dea Iftina

Modern-day care migration should not be regarded as modern-day slavery, but rather, as a tool of human capital development and women empowerment. Although blue-collar workers from South-East Asia do not enjoy the same labor law protection as their Taiwanese counterparts, they are highly respected in terms of their contributions towards their families back home. Many Indonesian migrants go abroad as mothers, breadwinners and sole providers for their families. A large wave of women going abroad to work represent Indonesia as the frontline of hardworking and empowered women. This phenomenon breaks with the stereotype of women serving only as homemakers. For these women, becoming a migrant worker is not regarded as the “last resort”, but rather, a competitive option. Given migrant women’s contributions to the development of their home communities, it is important to consider how Taiwan can best capitalize on this dynamic to strengthen its international reputation and existing developmental assistance scheme.

Yet despite the benefits of migration, there are certain costs that these women need to shoulder. First, there is emotional burden. Leaving one’s country, family and culture is not easy. On top of that, the nature of the job often does not allow migrant women to keep up to date with family back home. Additionally, most migrants are burdened to pay back the debt they borrowed to finance the migration, which is then deducted by the broker from their monthly salary, often constituting comprises a large chunk thereof. Before going abroad, many migrant workers must go through a strenuous application process and may be required to pay excessive broker fees up to 10,000 USD or more. In order to make these payments, many of them need to take out loans that shave up to 60 per cent annual interest from brokers who, doubling as lending companies, trap them in debt. If the borrowers cannot make payments, lending companies and migrant brokers are known to go as far as issuing death threats to the family. Brokers often mistreat their workers, and use corrupt practices to exploit them. Despite pressure from activists, Taiwan government refuses to replace the broker system with direct hiring.

Although the cost-benefit equation of migration is complex, mainstream labor economists agree that migration has positive impact on developing countries’ economies. In 2014, only thirty per cent of Indonesian migrants came from an urban area. A large portion of migrants come from rural areas, where access to education and formal employment is very limited. For many in rural villages of Indonesia, going abroad seems to a change so grand it is hard to conceive of. An overseas opportunity which offers workers earnings which exceed what they could earn in their home country appears to be an optimal way to support their families.

In my work, I focus on the impact of remittances on migrants’ families. The result is unsurprisingly encouraging. Families that include migrants are exceptionally better off than those without migrants. The idea is fairly simple. According to the World Bank, Indonesian migrants typically earn six times higher than what they would earn back home. A study entitled "Both Sides of the Coin: The Receiver's Story," by US-based international payment company UniTeller, shows that the amount of money that Indonesian migrant workers send home to their families every month often exceeds three times the monthly income of their spouses who decide to stay at home. In light of this finding, I analyze the effect of remittance on children’s schooling in Indonesia using micro data from Indonesia Family Life Survey from 2000 to 2014. Although migrants’ level of education is, on average, below high school, they are found to view the education of their children as their top priority. My work demonstrates that a rise of the probability on having migrants abroad significantly increases the percentage of children between six to eighteen years old in school by 34 per cent. Education policies do not reach children from poor family because they are most likely not in school, or rarely attend school. Education should be seen as a catalyst for change, as a tool for poverty eradication, therefore an increase in children enrollment in school will have a long-term effect on development in the rural area.

Remittances also prove to be a statistically effective means of tackling the increasing problem of child labor in rural areas of Indonesia. Children in the rural areas see a better opportunity in pursuing a factory job in the city than continuing their education. Thus, they willingly quit school. As expected, as migrants send remittances in the household, the percentage of children working outside in the house decreases. The expenditure share analyzed throughout the migrants’ families proves the same. For households who sent migrants in both 2007 and 2014, an increase of 1 US dollar in the total income of the week, will increase the expenditure specifically for education by 1.30 US dollar, four times higher than the counterpart. Child labor is one of the triggers of the vicious cycle of poverty, as children who work and do not go to school end up in lower-paid jobs later in life, perpetuating the generational poverty.

Indonesian migrants generally have extremely limited net value when they first leave their country. But upon their return they are often able to build a “castle” for themselves back in their village. Housing exemplifies drastic differences in the spending behavior of migrant-households versus non-migrant households. An increase in the total spending will increase the expenditure specifically for housing-related matters 36 times higher. The effect of the housing expenditure unsurprisingly exceeds the share of other type of expenses. Quality housing has positive externalities for long-tern human capital development and productivity, as it enhances health and educational outcomes in children. On a macro level, improvements in housing facilitate the development of a country through the multiplier effects of housing investment on national income.

The micro data that I use in my study also comprises the expenditures on tertiary needs, such as travel, sports and entertainment. Migrants in the early periods will sacrifice their tertiary needs for increases in food, education, medical and housing expenses. However, in the later periods, an increase in the total expenditure increases their spending on tertiary needs fifteen times higher than the counterpart. Fulfillment of these needs means that the families have reached high level of comfort to lead their life. This will then make them more productive in gaining various skillsets and thus motivated to live a better life.

Additionally, the effect of remittances sent by migrants for their family is beyond financial. The experience of living and working in other countries is eye-opening to the more productive part of the world. Migration makes them more productive, because more economically advanced countries have stronger institutions and lower levels of corruption. Factory workers in advanced countries spend fewer hours at work because they have access to more efficient tools. Care laborer are often able to learn from the family that hires them such skills as the use of computers and other electronic devices. This is comparable to the experience of scientists in rich countries who make more breakthroughs because they have better laboratories. Consequently, know-how is another component of the value added of migration for the sending country.

There are many tools developing countries choose to use to increase the welfare of its citizenry. Despite the policy hurdles to creating an open economy for labor market, many developing countries still rely on positive development externalities of migration for their welfare strength. The experience they bring from another country will make an impact for not only the migrants but also their families. The vast evidence that migration contributes to human capital development and poverty alleviation in the home country brings us to the question of how we can improve the status quo so that we can make the most out of it. Migration is a powerful tool for development; therefore, accompanying them along the process is essential.

For the host countries such as Taiwan, migrant workers bring the benefit of providing labor supply in areas which the locals are reluctant to enter. Additionally, local women are more willing to participate in the job market because of the help of caregivers. Migrants also benefit the host country indirectly by obligatory participation in the social security system, which they rarely use themselves. And with the dependency ratio increasing in many developed countries, labor migration can fend off the effects of decreasing productivity and labor supply.

The last argument is one of particular relevance to Taiwan. Taiwan has been receiving an ever-increasing number of Indonesian migrants since 2005. In 2005, there is only 41,906 Indonesian working as domestic workers in Taiwan, and this figure rose to 203,566 by the end of March 2020. Taiwan, as one of the top destinations for Indonesian migrant workers, is expected to grow its immigrant proportion in the near future. Further to the issue of high dependency ratio in 2020, Taiwan became a country with the world’s lowest fertility rate in the world at 1.218 children per woman. This is an alarming number for policy makers to make a serious policy that embrace immigration and increase friendliness to migrant workers since their role is increasingly important for the country.

One of Taiwan’s initiative to increase its friendliness to immigration can be seen in Taiwan’s New Southbound Policy, launched under Tsai-Ing Wen’s administration in 2016. The New Southbound Policy is intended to shift the focus of Taiwan’s foreign policy to areas beyond Beijing and Washington, such as Southeast Asia, South Asia, Australia and New Zealand. Since, Indonesia is the biggest country by area and total population in Southeast Asia, and the market became a famous destination for Taiwan’s businesses to expand. Taiwan is not the only country that sees Indonesia as an economic hub, giving Taiwan a fierce competition entering the market. Since, Indonesians comprises the biggest number of foreign populations in Taiwan as per 2020, Taiwan should see this as a window of opportunity. Nevertheless, New Southbound Policy fails to clearly determine a role for migrant workers in this cooperation. Despite its references to fostering development in partner countries, Taiwan ignores the potential of migrant workers in buttressing strategies for human capital development.

Industry-Academia collaboration acted as a means to cultivate talents from the New Southbound countries, including Indonesia, to study in Taiwan and to do internship in Taiwan’s industry. This program can also be seen as one of Taiwan’s openness to invite foreign talent to immigrate and work in the country. The students are required to take and learn Mandarin language and Taiwanese culture. Although this strategy looks promising, it can still be interpreted as exploitative, as it only allows them to “work for” Taiwan and not the other way around. This demonstrates that lack of long-term programs for migrant workers in Taiwan is a missed opportunity to strengthen the existing developmental assistance schemes as well as the country’s soft power projection capabilities.

The case of Indonesia demonstrates that Taiwan’s developmental assistance relies heavily on agriculture. For example, the Taiwan International Cooperation and Development Fund (Taiwan ICDF) is committed to boosting socio-economic development, enhancing human resources and promoting economic relations in a range of developing partner countries, including Indonesia. The projects include technical cooperation and humanitarian assistance in agricultural development. In August 2019, Taipei Economic and Trade Office (TETO) in Indonesia, and Indonesian Economic and Trade Office (IETO) to Taipei, signed the arrangement for implementing Indonesian Young Farmer Internship Program in Taiwan to select young farmers between 18 to 36 years old, who holds a diploma from Indonesia’s school of agriculture and possesses practical field experiences in farming. These young farmers will be trained by the said program to help Indonesia boost its agricultural development and can also become valuable assets for Taiwanese agricultural companies in Indonesia. Although agriculture is one of the important keys for development, to focus only on agricultural assistance seems too hierarchical. Indonesia is not anymore traditional society rather than it is an emerging country that enjoys the demographic bonus at least in the next few decades. Its population is skillful, young and healthy making its own people as its biggest asset. Today’s development of Indonesia is in the take-off stage ready for development in its manufacturing sector, not anymore aimed to turn Indonesian people into skillful farmers.

Taiwan should expand their assistance into wider field which goes beyond just providing traditional development aid. People-to-people exchanges, industrial upgrading, capacity building among migrant workers, professionals, students and their families; and training in financial management assistance for them are some of the manifold multiplier of development. This article encourages Taiwan’s policy makers to recognize the significance of socio-economic contribution of Indonesian people including migrant workers in development and its undervaluation and invisibility. The talent pool is huge and by providing Indonesia with impactful assistance in human capital development, it will enrich Taiwan’s New Southbound Policy.

Hafizha Dea Iftina is a research fellow at Taiwan NextGen Foundation, where her research focuses on the New Southbound Policy and broader South-South relations. Dea is an economist and received her training at Gadjah Mada University (Yogyakarta, Indonesia) and the National Taiwan University (Taipei, Taiwan).


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