Fertility in Taiwan had declined to replacement level in 1983. In 1986–1997, the total fertility rate dropped to 1.7–1.8, with continuing decreases observed in 1997–2001. Fertility will probably be sustained at the 2001 level of 1.48 or even decline further in the future. If the current fertility and labour-force participation rates persist, the size of the labour force will increase only slightly in the next 15 years and begin to shrink soon after 2015. After 2034, the labour force will fall below the current level and Taiwan will face a labour shortage. Though efficient, the policy option of importing more foreign workers is fraught with political sensitivities, especially given the current economic downturn and rising unemployment. Another policy approach, to increase the participation rates for women and mature men, would lead to growth in the labour supply sometime after 2030 and, combined with a modest increase in fertility, would prevent the labour force from falling below its current size in the next 50 years. Notwithstanding that any increase in fertility will have a delayed effect on labour supply, strong incentives are still required to affect fertility behaviour.
