Taiwanese can't afford houses? The Economist reveals the difference between the American illusion and Taiwan's problem

“The Economist” points out that Americans cannot afford things due to psychological illusions; real wages are outpacing inflation. Taiwan is different: 70% of employees earn below the average, housing affordability ratio ranks among the top three globally, and lunch prices have increased by 50%. The core problem in Taiwan: the central bank suppresses the exchange rate to protect exports, leading to stagnant wages and soaring housing prices. Per capita GDP surpasses Japan and South Korea, and average wealth is higher than France, yet most people remain unaware.

The American Illusion: Real Wages Outpace Inflation but Feelings of Poverty Persist

A recent article in “The Economist” states that although Americans generally complain about “not being able to get by,” macroeconomic data shows that American households are actually in better financial shape than before the pandemic. This phenomenon is called a “mirage,” or illusion. The article notes that since 2019, prices have increased by about 20%, but during the same period, the median hourly wage of American workers has risen by approximately 25-30%. Adjusted for inflation, “real wages” are rising, meaning that the average American can now buy more with each hour worked than before the pandemic.

If Americans truly couldn’t afford things, they would cut back on spending. But data shows consumer spending remains strong. Retail sales and personal consumption expenditures continue to grow, with no signs of recession. Data indicates that people are not only buying essentials but also entertainment, travel, and non-essential items.

If the data is so good, why do Americans still feel poor? “The Economist” offers psychological and political explanations. First is the perception gap between price levels and inflation rates—economists focus on “declining inflation” (slower price increases), while the public perceives “price levels” (e.g., eggs still twice as expensive as in 2019). People expect prices to “return to previous levels,” but such a correction (deflation) is rare and usually worse. This “price memory” causes pain.

Second is the frequency bias: people are highly sensitive to price increases in frequently purchased items like food and gasoline, even if these items constitute a small part of total spending. Conversely, items like TVs and electronics have become cheaper, but since people buy them less often, they don’t notice. Third is political narrative amplification: politicians (especially Trump and Republicans) emphasize stories of “economic collapse” and “worst in history” for electoral gains, deepening negative perceptions.

Three Psychological Mechanisms Behind the American Illusion

Displacement of Price Memory: Expect prices to fall back to 2019 levels, but deflation is more dangerous than inflation

Frequency Bias: Feel the rise in food and gasoline prices, but not the fall in electronics

Political Narrative Amplification: Trump repeatedly emphasizes “economic collapse,” influencing perceptions

Taiwan’s Illness: The Harsh Reality for 70% of Employees

Compared to Taiwan’s current situation, although benefiting from the booming AI and semiconductor industries that boost GDP and asset values, the uneven wage structure and high housing affordability ratio prevent most people from feeling the benefits of economic growth. Taiwan’s wage growth is highly concentrated in the tech and semiconductor sectors. According to statistics, about 70% of employed workers earn below the average. For these 70%, their real wages may indeed be declining—not an illusion, but because they are “averaged out.”

Benefiting from the AI server and semiconductor boom in 2024-2025 (TSMC, Quanta, Foxconn, etc.), Taiwan’s GDP growth has been impressive, and export data has repeatedly hit new highs. The Taiwan stock market has reached new highs over the past two years, and for those investing in stocks and ETFs, assets have significantly appreciated. The consumption power of this group is also remarkable—just look at department store anniversary sales and overseas travel crowds.

However, outside of the semiconductor and tech industries, many traditional industries and service sectors have seen wage increases lag behind inflation. Taiwan’s housing pain stems from a very high housing affordability ratio; long-term housing price increases have diverged from basic wages, creating a sense of helplessness among young people—“no matter how much they save, they can’t catch up.” Although official consumer price index figures are low (December 2025 CPI annual increase of 1.31%, average for the year 1.66%, the first time in four years falling below the 2% inflation warning line), the most felt increases in “eating out” and “rent” are often much higher.

A lunch that used to cost 80 NT dollars now costs 100, then 120—this 50% increase causes a psychological shock far greater than the official claim of “mild inflation.” This “lunch index” perception of inflation is the real pain point for Taiwanese people.

Structural Causes of Taiwan’s Illness: Central Bank Exchange Rate Policy

Last November, “The Economist” proposed the “Taiwan Disease,” directly pointing out the long-standing structural issues of Taiwan’s export-oriented economy. The core is that the central bank suppresses the New Taiwan Dollar to maintain export competitiveness, leading to severe currency undervaluation, which results in weak domestic demand, stagnant wages, soaring housing prices, and difficulty sharing economic gains—creating a contradiction of “data prosperity, felt stagnation.”

To protect exports (especially in the tech industry), the central bank has maintained a relatively weak New Taiwan Dollar for a long time. This also makes imported goods (energy, raw materials, iPhones) more expensive for Taiwanese consumers. When Taiwan’s per capita GDP surpasses Japan and South Korea, and average wealth exceeds France, do you feel it? For Taiwanese people, “not being able to afford” is not an illusion but a structural “Taiwan Disease.”