- Macroeconomics, Economic Policy
Japan’s Anti-Poverty Policies in Need of Change after 50 Years of Stagnation
September 4, 2009
Ever since the high economic growth of the 1960s, Japan has inhabited the myth that all Japanese people belong to the middle class. However, Japanese-style employment, which is at the heart of this myth, has been transformed by the increase in nonregular employment and other factors, and a growing number of Japanese live in poverty. For the Democratic Party of Japan to have a genuine impact as a ruling party, it must achieve both symbolic and substantive shifts. Changing Japan’s approach to poverty for the first time in 50 years offers one such opportunity.
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The extraordinary economic growth achieved by Japan in the 1960s effectively buried the issue of poverty in this country, rendering it a problem solved. Japan was able to ride out the subsequent oil crisis of the early 1970s while sustaining relatively little damage compared to other countries. This prolonged period of economic good news gave rise to the illusion that all Japanese people belong to the middle class—a myth that we still inhabit.
At the heart of this myth lies Japanese-style employment, which is characterized by mass hiring of new graduates, lifetime employment, seniority-based promotion, and copious fringe benefits. Unique in the world, this system came to be regarded as the standard during the high-growth era. Workers not subject to these employment practices assumed that they would eventually become part of the Japanese-style system or, if that proved impossible, that their children would.
Generous employee benefits covered the living expenses of full-time (primarily male) employees and their entire families; spouses, children, and elderly parents lived on “family welfare” funded by these benefits. Gender roles became entrenched, with women responsible for childrearing and household matters.
Some problems did arise—intense competition among students to pass exams and eventually be hired by a good firm; long working hours that would be unthinkable in other countries, resulting in deaths from overwork; low wages and job insecurity for part-time workers—but these were dismissed as sacrifices that had to be made for the sake of Japan’s economic progress. The message was that the main engines were running smoothly, so we should close our eyes to the few peripheral problems. Day laborers, fixed-term employees, and others who did not enjoy the benefits granted to regular employees, along with single-mother households not covered by “family welfare,” invariably lived in poverty as the original “working poor,” but this was not regarded as a major social problem.
During the so-called lost decade that followed the collapse of Japan’s bubble economy at the beginning of the 1990s, businesses actively sought to replace regular with nonregular employees in an effort to affect a recovery in their performance by reducing personnel costs to generate higher profits (a “jobless recovery”). The neoliberal economic model embraced by the United States was adopted as the norm, and the Japanese-style employment system, symbolized by seniority-based compensation, was criticized as a “convoy system”: by generously protecting even the slowest ships, it endangered the entire fleet.
The result has been a sharp increase in the number of people living outside the protection of company and family welfare and the formation of a socially marginalized underclass. As the scope of company and family welfare has shrunk, the population of the working poor has expanded to include not only day laborers and single-mother households but young people, single-father households, low-income households in general, the elderly, children, those with health issues . . . in other words, virtually everyone who is burdened with any type of disadvantage.
This situation, we are told, has come about because central government bureaucrats, local government employees, middle-aged and older male regular employees, and other members of the traditional mainstream have clung to their vested interests. For some time now it has been argued that any measures taken to resolve this situation must be based on deregulation for the purpose of enhancing competition.
An endless wave of privatization has transformed entities including Japanese National Railways, the postal services, and the Japan Highway Public Corporation, while there has been a surge in the hiring of nonregular employees by local governments and a rapid decline in regular employees’ wages and benefits. At present 30% of those employed by local governments are nonregular employees, 90% of whom earn less than 2 million yen per year. In some municipalities more than 50% of public servants are nonregular employees, and this does not even include workers of subcontractors.
Even among regular employees in general, there has been an increase in so-called peripheral full-timers—regular employees in name only who receive low wages and few benefits. Already, 30% of regular employees earn less than 3 million yen per year. Meanwhile, pay rises for the core employees who constitute the core ranks of private industry shrink with each passing year.
Two opposing arguments have been mounted in response to this state of affairs, one claiming that it was caused by excessive reforms and the other maintaining that it was caused by inadequate reforms. Considerable reforms have been implemented, and those who believe these reforms have improved efficiency, on the one hand, or impoverished people’s lives, on the other, simply produce figures to substantiate their respective views of the outcome. There has been no coherent discussion of the issues at stake.
Those of us involved in providing support to the poor have not seen any decrease compared with the 1990s in the number of people seeking help because they cannot make ends meet from day to day; on the contrary, since the 2005 general election alone, their numbers have increased several times over. What we cannot judge is whether this has happened because reforms went too far or did not go far enough.
This question was not a major issue in the campaign for the general election held on August 30. While the election was said to constitute a genuine choice of administration, just what we were choosing when we chose an administration was not clear.
In its campaign the Democratic Party of Japan advocated of a change of administration, espoused deregulation, claiming it would transfer power from the public sector to the private sector, and also promised to help rebuild people’s livelihoods. The link between these two aims is the elimination of waste; the idea is that livelihoods have been squeezed because of the bureaucracy’s monopolistic control over interests. The DPJ claimed that once such control was wrested away from the bureaucracy, trillions of yen would become available and would be returned to society to help rebuild people’s livelihoods. It criticized the Liberal Democratic Party and its coalition partner, the New Komeito, as dependent on the bureaucracy.
The administration of former LDP Prime Minister Junichiro Koizumi swept into power by criticizing the compartmentalized bureaucracy and the special-interest legislators allied with it, and by pledging to “destroy the [old-style] LDP” if these “forces of resistance” blocked reform. Unlike the Koizumi administration’s notion of “the private sector,” which meant corporations, the DPJ’s version seems to be more focused on civic activities and nonprofit organizations. This difference was symbolized in a debate among party leaders in the recently dissolved Diet, in which DPJ President Yukio Hatoyama confronted Prime Minister (and LDP President) Taro Aso with statistics such as the extraordinarily high number of suicides in Japan—over 30,000 per year for 11 consecutive years—and called for efforts to make Japan a country where “every individual can find his or her own place.” On that occasion, at least, Hatoyama certainly seemed to be speaking in a way that reflected concern for people’s livelihoods.
In the election campaign, however, rather than bringing the issue of poverty to the fore, the DPJ relegated it to the background. Nor did the party provide any details about just how it would establish a policymaking process incorporating civic activities and nonprofit organizations. There seemed to be a stalemate at the level of concrete, practical action, and there was even a sense that the DPJ was trying to gloss over this stalemate by stressing its image as the agent of a change of administration. If one reflects on the history and accumulated actions of bureaucratic government over the more than 60 years since the end of World War II and the more than 130 years since the Meiji Restoration, this lack of specific and practical policies can induce the worrying sensation that there is actually very little to distinguish the DPJ from the LDP.
Viewed in this context, the frequently repeated slogan of “change of administration” increasingly embodied the negative aspect of the DPJ—the party’s limitations, as demonstrated by its inability to address concrete, practical concerns—rather than the positive aspect: the sense of anticipation it generated for a much-desired change. It was as if the outcome of the election hinged on a race against time: which would come first, election day or the expiration date on the “change of administration” slogan?
Those of us working to tackle poverty in Japan have tried to persuade the government to monitor the nation’s poverty rate, to assess the soundness of people’s livelihoods.
Past structural reforms implemented by the LDP succeeded in eliminating some vested interests, but the people did not reap any benefits. The lives of ordinary people continued to become more and more difficult, as the number of people struggling to stay afloat, weighed down by the demands of life and work, steadily increased. Considering what happened then, if the DPJ goes back to calling for a shift of power from the public to the private sector, the party will have to clearly demonstrate that this means redistributing resources to help people rebuild their lives.
To criticize policies based on the notion that all is well as long as the economy is expanding—trickle-down economics, in other words—from the perspective of those who have been sacrificed to this polite fiction, we need statistical information on the rebuilding of people’s lives. Since 1965, however, the Japanese government has steadfastly refused to disclose the nation’s poverty rate, notwithstanding the fact that the rate can be estimated from the results of various public surveys.
The Organisation for Economic Cooperation and Development has stated that Japan’s relative poverty rate is 14.9%, second only to that of the United States among the organization’s member nations, but the Japanese government continues to ignore this. The government refuses even to provide the OECD with statistical data, leaving it to private organizations to perform this task.
This approach—turning a blind eye to displeasing statistics and concealing the suffering of individual citizens by relying strictly on the economic growth rate, which no longer has any relation to the way people actually live—deceives the citizens in whom the nation’s sovereignty resides.
For the DPJ to be a genuine alternative as a ruling party, the party must try to achieve both symbolic and substantive shifts in the major areas where its own rationale differs from that of the LDP. A change in the approach to the poverty issue, the first in 50 years, could offer one such opportunity. If the DPJ is incapable of such an action, its tenure will be no more than a transitional phase before the next realignment of the political world, and it will be very difficult for the party to leave any record of achievement in government.
In the August 30 general election, the Democratic Party of Japan won an unprecedented 308 of the 480 seats in the lower house to become the next ruling party. In postelection press conferences, DPJ President Yukio Hatoyama repeatedly stressed the need to “improve national vitality through direct support to households” and showed that his viewpoint on poverty issues has not been blurred.
Yet the economic situation remains severe, and it is all the more important for the DPJ to illustrate the state of the nation in relative terms and find an alternative barometer of successful administration to replace GDP and the unemployment rate. Otherwise, the DPJ will soon be blamed as the ruling party for the continuing economic recession and worsening unemployment rate.
Direct support for low-income households, a policy advocated by the DPJ, would boost consumption, improve people’s livelihoods, and lead to the vitalization of Japanese society. However, the DPJ needs to implement the promised policy in a way that enables ordinary people to actually feel the improvement. Without such efforts, it will be extremely difficult for the party to govern, even with a decisive majority of 308 seats, because it will find that the more dynamic a policy change is, the greater the resistance it encounters. This prospect is evident from the devastating defeat of the Liberal Democratic Party, which occupied 296 seats before the recent election.
We hope that the incoming DPJ administration will take resolute political decisions to tackle the poverty issue.