Are Foreign Workers Responsible for the Increasing Unemployment Rate in Taiwan?

This paper investigates the current important issue in Taiwan that the impact of foreign workers on the rising unemployment rate by constructing a dynamic intertemporal general equilibrium model. The results show that foreign workers rob jobs from the local unskilled labor and raise the unemployment rates during the past decade. However, extending the time frame to a longer term, an increasing importation of foreign workers may lower unemployment rates under some circumstances. In contrast to existing literature, this paper conditionally supports the view that immigration increases unemployment rates. An appropriate policy regarding foreign workers for a small open economy like Taiwan needs to consider the state of the global economy. By considering the current ambiguity of world economic recovery and the high unemployment rate, a cautious policy for the Council of Labor Affairs to adopt is to maintain the current level of imported foreign workers. JEL classification: C61; C68; D91; J21; J61; J68