Category: Japan

Japan’s economic gap not growing as fast as the Gini coefficient would have us believe? According to the Nihon Keizai Shimbun, a recently released economic white paper details some key developments that could be skewing the data. From the Nikkei:

To prove the point [that the data are flawed], the white paper cited a nationwide consumption survey by the Ministry of Internal Affairs showing that most of the growth in the income gap since 1989 stemmed from the fact that households composed of the elderly increased as a percentage of all households. The white paper cited a decline in the average number of members in Japanese households as another reason for the apparent widening of the income gap.

The big problem that could have “adverse effects” on the Japanese economy, the report says, is the now 3.6 million youngsters shooting themselves in the foot by insisting on living a free-wheeling lifestyle in a system that punishes them both socially and financially for it. In other words, if your average Japanese person doesn’t lock in a permanent position in that critical age window of 22 until around 30 (when the typical age discrimination kicks in), he or she has little chance of making as much lifetime income as someone who followed the rules. Of course, there’s nothing controversial about people making less money because they don’t have full-time jobs. The problem is that “full time” jobs (seiki koyo) in Japan are permanent (no firing/quitting as a general rule), so when times get rough, companies have filled up vacant posts with “part time” or contract positions that pay fewer benefits, lower wages, and don’t have the same amount of security in exchange for working the same hours and often performing the same job as full time employees. In terms of effects, the report estimates that once this “Freeter” generation (named after a Janglish word for part-timer) hits middle age in 2015, this phenomenon will result in a 4.9 trillion yen (or 0.9%) loss in GDP.

While part-time work might work for women (who face social pressure against pursuing a career and who may want to work fewer hours while raising children) and old people, young workers who enter companies as part time employees find themselves trapped because while regulations were changed in the 1990s to allow for non-seiki employees, there was no concurrent reform of the seiki system – age discrimination included. If the youngsters continue working part time until they hit the age ceiling, then they are screwed.

Adamu’s Politically Untenable Solution? remove restrictions on firing full time workers (or simply introduce an “at will” employment system), eliminate age discrimination, and otherwise create a truly flexible labor market. GOJ/Shinzo Abe‘s politically sexy solution? Treat part time workers the same as full time workers, raise the maximum hiring age, and encourage more mid-career hiring.