In today’s society, dual-income families are common in Taiwan due to both the higher education levels of women and the desire among citizens to pursue a higher quality of life.
However, traditional social norms, such as doing housework and taking care of family members, continue to constrain female labor force participation in Taiwan.
In the past twenty years, the government has started opening the door for households to hire foreign domestic workers to take care of children, elders and family members who need 24 hour care. The cost of hiring a foreign domestic worker is much lower than hiring a native domestic worker. As a result, women who are able to afford these services may be able to shift their focus from domestic chores to market work. Given this, it is interesting to explore the relationship between foreign domestic workers and women’s labor market outcomes in Taiwan, in order to see whether the foreign domestic worker policy has a substantial impact.
Women’s labor supply is a popular topic that has been analyzed extensively by economists in Taiwan. Factors that determine women’s labor decisions, like numbers of young children, husband’s income and education level, have been discussed in the light of empirical evidence. However, due to a deficiency of individual-level data related to foreign domestic workers, the relationship between foreign domestic workers and native women’s employment has received little attention in Taiwan.
It is surprising to note that empirical research on the impact of foreign domestic workers or immigrants who provide household services on the female labor supply in developed countries has only begun to be explored in recent years. After Cortes and Tessada (2011) who focused particularly on the impact that low-skilled immigrants have on the female labor supply in the United States in 2011, similar research has started to pop up focusing on different countries. To my knowledge, most of the studies show that the impact
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of foreign domestic workers or immigrants who provide household services on the female labor force decision is both positive and significant, including cases in the United States, Spain, Italy and Hong Kong. Given that the issue is a popular topic in the field of labor economics, it is worth exploring in Taiwan.
This study assumes that native women would substitute their time spent on household work with the purchase of services provided by foreign domestic workers. I follow Barone and Mocetti (2011) in exploiting a variable that uses the share of foreign domestic workers on native women in every county and city to represent the effect of foreign domestic workers, and apply probit and tobit models in order to conduct the empirical research.
Although estimating the impact of foreign domestic workers with an OLS method might lead to biased results, this study has not found a proper IV in order to avoid the endogenous problem and reverse causality. The study finds that the correlation between foreign domestic workers and female labor force participation is positive, and that the correlation between foreign domestic workers and the working hours of native women is also positive. Both results are statistically significant at a 1% level.
The contribution made by the study lies in showing the connection between foreign domestic workers and married women’s labor market outcomes in the Taiwanese context, providing insight into the effect of the foreign domestic worker policy on native women’s labor force decisions.
Moreover, the results of this study may provide lessons for related policies in Taiwan.
For example, it seems that native women are quite dependent on the service provided by foreign domestic workers; however, with the economic growth in Southeast Asia, the Taiwanese working environment may not be so attractive to foreign domestic workers in the future. Given this, the government might attempt to improve the working environment in Taiwan, by, for example, instituting clear overtime working regulations in an attempt to
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maintain the services provided by foreign domestic workers in the future.
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With the rise of education levels in Taiwan, native women have greater opportunities to gain a higher education (Figure 2.1). Figure 2.2 shows the significantly positive relationship between level of education and women’s labor force participation. Therefore, as we see in Figure 2.3, the percentage of women who are willing to join the labor force has been increasing over the past 30 years in Taiwan.
However, social norms in Taiwanese society continue to prevent native women from joining the labor force by placing the burden of taking care of family members, the elderly and children on females. In addition, Taiwan’s aging population is a serious problem (Figure 2.4).
In 1992 the government introduced the “foreign caretaker scheme” and, the “foreign domestic helper scheme” order to lessen the burden of attending to the old and young that is placed on women (蔡幸嶧,2006; 劉秋英, 2003). Taiwanese households can apply for foreign domestic workers through both of these channels. The “foreign caretaker scheme”
applies to households that have seriously ill patients who cannot take care of themselves.
These patients must prove, by supplying medical documents, that they need 24 hour care.
The “foreign domestic helper scheme” applies to households that contain elderly people and children. One qualifies to apply for this scheme based on “points” that are calculated by the number and age of elders and children in a household. This paper does not distinguish between foreign domestic caretakers and foreign domestic helpers, because people in Taiwan often do not precisely distinguish between the two types of workers.
People apply for foreign domestic caretakers and ask them to do the job of a foreign domestic helper, and vice versa (Cortes and Pan, 2013). Given this, in this paper, “foreign domestic caretakers” and “foreign domestic helpers” are collectively called “foreign domestic workers”. From the data issued by the Bureau of Employment and Vocational