One of the post-bubble era trends in Japan that has caused consternation within the island nation is the rise of an employed underclass. The old economic model was lifetime employment, even though that was a reality observed more at large companies than in the economy overall. Nevertheless, college graduates could expect to find a job without much difficulty and look forward to a stable career if they performed reasonably well.
In the new economic paradigm, wages are compressed among full-time salaried workers (meaning seniority/managerial based pay differentials, which were not all that great in Japan to begin with, have narrowed). And even worse from a societal standpoint is the rise of “freeters” or workers hired into temporary jobs. Some of them can work for the same company for a very long time, but they are not only paid less, but are also not in the hierarchy of permanent worker. Many become freeters right out of college, and are never able to get back on track with their peers, since companies in Japan, as in the US, prefer to hire new college or professional school graduates into their entry level positions.
The bigger implications for Japan are negative. Many freeters can’t afford to live by themselves, and therefore become “parasite singles” staying with their parents. The delay in or inability to support oneself further suppresses Japan’s birthrate, worsening its demographic crisis. And it exerts a psychological toll, particularly in Japan, which places particular importance on group ties.
A recent article by Charles Hugh Smith depicts the rise of freeters as directly related to growing income disparity:
The gap between extremes of income at the top and bottom of society — measured by the Gini coefficient — has been growing in Japan for years. To the surprise of many outsiders, once-egalitarian Japan is becoming a nation of haves and have-nots…
More than one-third of the workforce is part-time as companies have shed the famed Japanese lifetime employment system, nudged along by government legislation that abolished restrictions on flexible hiring a few years ago. Temp agencies have expanded to fill the need for contract jobs as permanent job opportunities have dwindled.
Many fear that as the generation of salaried baby boomers dies out, the country’s economic slide might accelerate. Japan’s share of the global economy has fallen below 10% from a peak of 18% in 1994. Were this decline to continue, income disparities would widen and threaten to pull this once-stable society apart…
Freeters ”who have no children, no dreams, hope or job skills could become a major burden on society, as they contribute to the decline in the birthrate and in social insurance contributions,” Masahiro Yamada, a sociology professor wrote in a magazine essay titled, ”Parasite Singles Feed on Family System.”
In Japan, the rise of permatemps started from the bottom up, with new graduated who were relegated to short-term work. As the New York Times indicates tonight, the rise of temps in the US instead appears to be happening across a broad swathe of jobs, meaning everyone who loses a job is at risk of never finding a job again. Of course, with job tenures shrinking, the distinction between having a full time job versus a temporary one may seem to be overblown. But traditional jobs also include real perks, such as benefits, and also usually terminated less casually than temporary positions (and this distinction has long been abused: for instance, a relative of mine was a “temporary” employee for eight years at GM in the 1990s, running an administrative unit).
From the New York Times:
This year, companies have hired temporary workers in significant numbers. In November, they accounted for 80 percent of the 50,000 jobs added by private sector employers, according to the Labor Department. Since the beginning of the year, employers have added a net 307,000 temporary workers, more than a quarter of the 1.17 million private sector jobs added in total…
To the more than 15 million people who are still out of work, those with temporary jobs are lucky. With concerns mounting that the long-term unemployed are becoming increasingly unemployable, those in temporary jobs are at least maintaining ties to the working world.
The competition for them can often be as fierce as for permanent openings, and there are still far too few of them to go around. Indeed, the relative strength in temporary hiring has done little to dent the stubbornly high unemployment rate, which rose to 9.8 percent in November.
“With business confidence, particularly in the small business sector, extremely low,” said Ian Shepherdson, chief United States economist at the High Frequency Economics research firm, “it’s not surprising that permanent hiring is lagging behind.”
The failure of small businesses to add permanent jobs is particularly troubling, since small businesses have been far and away the biggest source of job growth in recent expansions. In the last upturn, large corporations shed employees. Back to the Times:
This year, 26.2 percent of all jobs added by private sector employers were temporary positions. In the comparable period after the recession of the early 1990s, only 10.9 percent of the private sector jobs added were temporary, and after the downturn earlier this decade, just 7.1 percent were temporary.
Temporary employees still make up a small fraction of total employees, but that segment has been rising steeply over the past year. “It hints at a structural change,” said Allen L. Sinai, chief global economist at the consulting firm Decision Economics. Temp workers “are becoming an ever more important part of what is going on,” he said.
As with Japan, the long term implications of this trend are not good: employers providing lower-quality employment;, workers attaining less in the way of skills, which puts them on a permanently weaker career path; the resulting lower income workers less able to build up economic reserves in an era of weakening safety nets. And this trend has gone very far in Japan, a country which reveres enterpreneurs not for making money, but for creating jobs. With far fewer social inhibitions against turning employees into temps, we can expect to see an even further hollowing out of the US economy.