Is being unable to afford it an illusion or a "Taiwanese disease"? The Economist reveals the truth about perceived poverty

The Economist recently published “America’s affordability crisis is (mostly) a mirage,” stating that despite Americans generally complaining about “not being able to get by,” macroeconomic data shows that American households are actually in better financial shape than before the pandemic. The panic about Americans “not being able to afford” things is actually an illusion. Comparing 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 price-to-income ratio make it difficult for most people to feel the benefits of economic growth. Is Taiwan’s “not being able to afford” an illusion or the “Taiwan disease”?

Americans’ “not being able to afford” is actually an illusion

The main point of The Economist is: despite Americans’ widespread complaints of “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,” meaning an illusion.

Income actually outpaces inflation

The article notes that since 2019, prices in the US have increased by about 20%. But during the same period, the median hourly wage for American workers has risen by approximately 25-30%. Adjusted for inflation, “real wages” are rising. This means that the average American can now buy more with each hour worked than before the pandemic.

Americans are still spending

If Americans truly couldn’t afford things, they would cut back on spending. But data shows that consumer spending remains strong.

US retail sales and personal consumption expenditures (PCE) 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.

Why is there an illusion of not being able to afford?

If the data is so good, why do Americans still feel poor? The Economist offers psychological and political explanations:

Price level vs. inflation rate

Economists focus on “inflation rate” (slower price increases), but the public perceives “price level” (e.g., eggs still double the price of 2019). People expect prices to “fall back,” but such deflation is rare (and usually worse). This “price memory” causes pain.

Frequency bias

People are highly sensitive to price increases of frequently purchased items (like food and gasoline), even if these items don’t constitute a large portion of total spending. Conversely, items like TVs and electronics, which have become cheaper, are purchased less frequently, so people don’t notice the savings.

Political narratives

Politicians (especially Trump and Republicans) emphasize narratives of “economic collapse” and “worst in history” for electoral gains, deepening negative perceptions among the public.

Taiwan’s current situation: illusion or real pain?

This phenomenon is also common in Taiwan. Official data often reports “record-high wage growth” and “impressive GDP growth,” but people feel that “lunchboxes are more expensive” and “housing prices are hopeless.” Compared to The Economist’s description of the US situation, Taiwan’s situation is as follows:

Overall data is more like an illusion than reality

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

Despair over the housing price-to-income ratio

But in Taiwan, aside from the semiconductor and tech industries, many traditional industries and service sectors’ wages have not kept pace with inflation.

Taiwan’s housing pain stems from a very high price-to-income ratio. Long-term, housing prices have diverged from basic wages, creating a sense of helplessness among young people who feel they can never catch up no matter how much they save.

The “lunchbox index” and perceived inflation

Although official consumer price index (CPI) figures are low, the most felt increases—such as dining out and rent—often far exceed official numbers.

For example, a lunchbox that used to cost 80 yuan now costs 100 yuan, and then 120 yuan. A 50% increase in such everyday items causes a psychological impact far greater than the “mild inflation” claimed by official data.

Note: Taiwan’s latest data shows that the CPI year-over-year increase for December 2025 is 1.31%, with an average annual CPI of 1.66%. This is the first time in four years that inflation has fallen below the 2% warning line and the lowest in five years.

When “illusion” meets “Taiwan disease”

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 truly be declining—this is not an illusion but a result of being “averaged out.”

Last November, The Economist proposed the “Taiwan Disease,” pointing to long-standing structural issues in Taiwan’s export-oriented economy. The core problem is that the central bank maintains a low New Taiwan Dollar (NTD) exchange rate to keep exports competitive, leading to severe currency undervaluation, which results in weak domestic demand, stagnant wages, soaring housing prices, and difficulty sharing economic gains—creating a paradox of “data prosperity, perceived stagnation.”

To support exports (especially in tech), the central bank has maintained a relatively weak NTD for a long time. This also makes imported goods (energy, raw materials, iPhones) much more expensive for Taiwanese consumers.

For Taiwanese, is “not being able to afford” an illusion? When Taiwan’s per capita GDP surpasses Japan and South Korea, and average wealth exceeds France, do you feel it?

(UBS 2025 Global Wealth Report: Taiwan’s median per capita wealth ranks second in Asia, surpassing Singapore and Japan)

Is this article “Not being able to afford” an illusion or the “Taiwan disease”? The Economist reveals the truth about perceived poverty. Originally published on Chain News ABMedia.