Reversing a long-running brain drain will be an important step on the path to economic revival.

James Grigbsy has spent the majority of his professional career in Taiwan. He worked as a consultant here for two decades, including 15 years as an executive with Getchee (originally known as Pacific GeoPro), a location intelligence firm that advises companies on where to open retail outlets. Even as China became Getchee’s biggest market, Grigsby remained based in Taipei with his wife and two children.

For more than five years, he commuted between Taipei and Shanghai, spending at least a quarter of his time every month in China. “Taiwan offers a nice quality of life, which even today is hard to match in China,” he says. “I wanted my kids to grow up in Taiwan.”

But finally, in July 2015, Grigsby relocated to Shanghai to take a position with Adidas as senior director of retail expansion strategy for Greater China. What prompted the change of heart? He felt the time was right to take his career in a new direction and his children are nearly grown up. His daughter will begin college in the United States this fall, while his wife and son (aged 13) will move to Shanghai to join him this summer.

Grigbsy is quick to emphasize that he still prefers living in Taiwan, but it offers little in the way of career opportunities. “I couldn’t do what I do now in Taiwan,” he says. “The market is too small. Companies aren’t investing there as they are in China.”

Among the many professionals who have left Taiwan for work reasons since the turn of the century, Grigsby is an outlier. Most expatriates didn’t wait until their kids were nearly adults to relocate. And many local nationals left their young families behind here to seek opportunity overseas, usually in China.

The scale of Taiwan’s brain drain is dizzying. Of a population of more than 23 million, roughly 700,000 Taiwanese worked overseas in 2015, about 60% of them in China, according to the Directorate General of Budget, Accounting and Statistics (DGBAS). Unofficial estimates of the number of Taiwanese working China are much higher, ranging anywhere from 1 million to 2 million.

Longterm residents among foreign professionals, meanwhile, are scarce in Taiwan today. Aside from teachers, missionaries, and a smattering of businesspeople with a local niche, nearly everyone else has decamped for greener pastures.

The talent exodus has transpired in tandem with Taiwan’s flagging competitiveness. To be sure, China’s rapid ascendancy would have lured away talent in the best of times, but Taiwan’s inability to offer competitive salaries or dynamic career opportunities has been the primary factor.

Salaries for new graduates in Taiwan come to less than NT$30,000 monthly. In China, whose GDP per capita remains well below Taiwan’s, new graduates earn RMB8,350 (NT$37,000) a month, almost 20% more. New graduates in Hong Kong earn about HKD14,700 (NT$57,000), and in Singapore they receive SGD3,325 (NT$73,000).

Low compensation levels in Taiwan are crimping the talent market, human-resources professionals say. “The salaries companies offer here aren’t competitive at all,” says Alan McIvor, a senior associate in Taipei at the Hong Kong-based executive search firm Bo Le Associates. “It’s a common problem for me that someone I am trying to place in Taipei ends up taking an offer in Shanghai because the salary is much higher.”

Anna Chang, a Taipei-based communications manager, says that a friend who formerly worked for one of the world’s largest advertising agencies in China earned NT$250,000 a month, a salary beyond the reach of most Taiwanese professionals. “There were 100 people in the company’s China offices who earned the same salary as she did,” Chang says.

In China, fierce competition necessitates high salaries for top talent, observes Rita Wu, human-resources manager for the French Chamber of Commerce in Taipei and a veteran recruiter who has placed candidates in both Taiwan and Shanghai. “They value talent and they’re willing to pay for it,” she says. “If you are doing well in China, headhunters will find out soon enough and call you up with an attractive offer.”

A survey conducted last year by the Chinese-language Business Weekly found that more than 62% of Taiwanese aged 20 to 35 plan to seek employment abroad. A total of 89% of them said that low salaries are the primary reason they want to work outside of Taiwan.

In June, National Development Council (NDC) Deputy Minister Kung Ming-hsin said that stalled industrial transformation has hurt Taiwan’s business environment, as local firms are struggling to earn gross annual profits of 2-3%. Given market conditions, it is difficult for companies to offer high salaries, he said.

Economists cite another key reason why salaries are low. “The government offers subsidies and other tax benefits to companies for investing in capital equipment, but not human capital,” says Hank Huang, vice president of the Taiwan Academy of Banking and Finance (TABF). For that reason, “businesses are not used to investing in people.”

The weak New Taiwan dollar, which is a boon for exporters, also depresses wages, Huang observes. “When inflation is low, everything becomes cheap, including people.”

Career ambitions

There’s more to Taiwan’s brain drain than a search for higher pay. Joseph Lee, a Shanghai-based marketing professional, says he was drawn to China by the opportunity to build a career. “China is the biggest market there is, and Shanghai is its gateway to the world,” he says. Lee currently works as a senior planning director for the communications agency Posterscope. His clients include Tencent, the world’s largest gaming company; Mondelez International, one of the top snack-food companies globally; and Adidas.

“I couldn’t do this kind of job in Taiwan,” he says. “The market is too small, and brands in Taiwan depend heavily on distribution channels for promotion rather than media investment.”

Even if he did decide to relocate home, as an experienced marketing professional, he might not land a job. “There are fewer and fewer vacant senior positions in Taiwan,” says the French Chamber of Commerce’s Wu. “The economy isn’t good, so people are less willing to take a risk on a new position or they stay put because they haven’t been able to earn enough to retire comfortably.”

As a result, “I’ve been unable to place some highly qualified people with strong work experience and Ivy League educational backgrounds,” she says. “It’s frustrating both for me and the candidates.”

Communications manager Anna Chang says that her husband went to work in China because he was disappointed by an inability to move beyond middle management in the Taiwan insurance business. In China, he earns a higher salary and has better long-term career prospects. “He found that there are senior managers in their late thirties and early forties in China,” she says. “In Taiwan, it’s almost impossible to reach a senior corporate position before your fifties.”

Management in Taiwan remains conservative in its rigid, top-down decision-making and aversion to change, says Bo Le Associates’ McIvor. “It’s not conducive to hiring the best talent, because whether they are local or foreign, the best people will not work under those conditions,” he says.

In contrast, management in mainland China is increasingly flexible because it has to be, observes Wu. The China market moves fast, so just as a business owner can replace an employee easily, that employee can find a new job elsewhere without much trouble.

Increasingly, Chinese firms recruit overseas as well. Television director Roger Christiansen, who splits his time between Hollywood and Shanghai, first worked in Asia as a Fulbright recipient at National Taipei University of the Arts in the mid-2000s. But it was entertainment industry people in Shanghai, not Taiwan, who sought him out afterwards (they knew him from his directing work on the U.S. TV sitcom Friends).

After serving in consulting roles for several years, Christiansen began teaching at Shanghai’s Songjiang University in 2013. “I would love to work in Taiwan instead of China, but all the jobs are in China,” he says. “I’m not getting any invitations to work in Taiwan.”

Strengthening the talent pool

Industry observers say the Taiwan government must take the lead to stymie the brain drain. Encouraging businesses to invest in labor productivity, they note, would both boost workers’ skill levels and help raise compensation rates. They also suggest revising monetary policies designed decades ago, at a time of high economic growth, to boost exports. Inflation would rise, but so would salary levels.

The government has yet to show an appetite for dramatic reform. In May, during a visit to a green-energy business park in Tainan, Premier Lin Chuan urged young people to accept low salaries for the time being and focus on “pursuing their dreams.” The backlash on social media was immediate, prompting the Executive Yuan to issue a statement in the wee hours of the following morning to clarify Lin’s remarks.

In the statement, Executive Yuan spokesman Hsu Kuo-yung said that Lin’s comments were “taken out of context” and that he intended to emphasize the employment opportunities that the green-energy park would provide. Hsu highlighted the link between low salaries and consumer prices, cautioning that “it is a tremendous challenge to raise salaries without also increasing prices.”

Despite low salaries, Taiwan’s work environment “leaves room for achievement, prosperity, and entrepreneurship,” Hsu was quoted as saying in the English-language Taipei Times. He urged students to “pursue their interests rather than wealth.”

Hsu is correct that blind pursuit of wealth rarely makes for a happy career. But his comments about Taiwan’s work environment evoke the nation’s late 20th-century boom more than today’s sluggish market. “Taiwan was once a haven for entrepreneurship, and it has many established small and medium-sized enterprises,” says TABF’s Huang. “But prolonged economic weakness has taken a toll on people’s willingness to launch new ventures.”

There are exceptions. With nearly 4,000 employees in its ecosystem, Taipei-based AppWorks is one of the largest start-up accelerators in Asia. Its valuation recently hit US$1 billion – making it a “unicorn company” in the tech world. AppWorks’ 14th Demo Day, held in Taipei in late May, featured presentations from 28 start-up teams from Hong Kong, Singapore, Malaysia, and Taiwan. Two-thirds of the participating teams this year were international, a record high.

AppWorks is one of the major success stories of Taiwan’s tech sector over the past five years. Hopefully, its success augurs healthy prospects for other new ventures.

In the meantime, businesspeople urge the government to relax restrictions on the hiring of foreign professionals. In a January news report, the English-language China Post quoted technology industry executives as saying that opening the local IC industry to foreign talent would raise its competitiveness. “It’s been so hard to recruit foreign talent here, but it’s so easy for Taiwanese to work abroad, especially in China,” Pegatron chairman Tung Tzu-hsien said.

According to the report, Taiwan Semiconductor Manufacturing Co. (TSMC) chairman Morris Chang urged the government to “to think hard on how to keep them [IC sector talent] and draw more of them to Taiwan.”

In April, the Cabinet approved a draft bill intended to boost the participation of foreign professionals in the local workforce. The proposed law would offer foreign professionals incentives to work in Taiwan, such as tax breaks on annual salaries of NT$2 million or more for up to three years, as well as providing their spouses and children with immediate coverage under Taiwan’s National Health Insurance system; currently, they have to wait six months to become eligible.

Under the bill, foreign professionals would also be eligible for retirement benefits. After retiring, those who are permanent residents could choose between receiving a lump-sum payment or a monthly disbursement. (See the accompanying story for more details).

Meanwhile, local talent continues to leave Taiwan – and at an increasingly younger age. In an April report, the Chinese-language CommonWealth magazine noted that a plurality of Taiwanese working overseas are aged 25-29, down from ages 30-34 seven years ago.

With regard to Taiwanese millennials, “they are very selective about jobs,” says Bo Le Associates’ McIvor. “They’re quick to think the grass is greener on the other side, so they’re willing to work in China.”

For some Taiwanese, however, China is a long-term commitment. Based in Shanghai since late 2009, Posterscope’s Joseph Lee has no plans to return to Taiwan. His job and family are both in Shanghai.

“For me, it’s not a question of liking one place better than the other,” he says. “The point is that the future is not in Taiwan, it’s here.”