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US Follows Japan: The Rise of Freeters, aka Temps

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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.

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51 comments

  1. Gemfinder

    These generational wealth gaps may be the inevitable result of labor globalization. Why? Because the jobs of the youngest, least experienced workers are the easiest to ship abroad, and thus exposed to the greatest price competition. Japan has done a great deal of this, though the US has done more.

    Training is one solution, but only if there is sufficient labor market transparency to see where the opportunities are. College does not appear to be solving this problem at present, in either the US or Japan.

    Thus, at root, we have here another transparency problem. The young need to know where the opportunities are, in order to pursue them.

    1. psychohistorian

      You assume that there is enough sustainable world consumption demand to employ all who would wish work. I believe that this assumption is wrong and that the public is being misled into believing that there are jobs for all out there.

      It just gives those in control more objects of hate to get the faith breather followers to focus on instead of the ultra rich….look over there, that country is taking jobs away!!!!!

      Globalism without effective social government is a recipe for disaster which we are seeing unfold. The ultra rich must think that they will survive the coming “adjustment” without much suffering on their part and I hope they are wrong.

  2. Diego Méndez

    You may find interesting that over 1 out of 4 Spanish workers were freeters before the crisis. Since freeters are the first to get sacked, the ratio has gone down to 1 out of 5 workers in Spain.

    This doesn’t account for some million freelancers who, in fact, work only for one company. The company forces them to get self-employed, so it has to pay fewer Social Security charges and can sack them immediatly if it so wants.

    It makes you wonder how some may call the Spanish labour market one of the most inflexible in the world.

    1. Sungam

      It is amongst the most inflexible because the majority of employees, the 75 to 80% on permament contracts, are nearly impossible to dismiss or make redundant. Once you have hired a permanent worker he or she is indeed “permanent”. Since the number of employees a company needs does indeed change over time that leaves “temporary” employees to take up all the flexibility needs.

      One thing I found “amusing” is the tone taken by the Economist about young people protesting about the rise of the pension age in France:

      “At the same time, 379 lycées were disrupted or closed on October 19th by protesting school pupils, who in France have their own unions. Although not directly touched by pension reform, many pupils seem to think that, if 60-year-olds work for two years longer, they will have to wait two more years before they can inherit their jobs.”

      Not even bothering to explicitly pointing out that they believe that thought is ridiculous. However these Students have grown up in a stagnating enconomy with few new positions being created. Is it really that suprising that they believe dead men’s shoes is the only way to get one of these posts.

      As a side note, I work in the UK and do have a “permanent” position. Like most permanent posts here I can be made redundant with one month’s notice (by the same token I have to give my employer a month’s notice should I want to leave them). In the US “permanent” is even less permanent. That kind of thing is fairly standard when people talk about a flexible labour market.

      1. Diego Méndez

        Every Spanish worker can be fired at 15-day’s notice, one of the shortest notice periods in the world. It just happens not to be for free: workers receive 33 days’ wages per year of work, up to a maximum of 2 years’ wages (if you have been working over 20 years for the same company).

        You must take into account that lifelong “permanent jobs” disappeared some 20 years ago in Spain, so that only very senior people get large indemnities when fired.

        Moreover, other redundancy laws (with even better terms for companies) apply when a company is in financial difficulty and mass lay-offs are needed.

        Can the Spanish labour market be made more flexible? Yes, it can. But it is in no way inflexible, especially when compared with other countries. Even one-day contracts are becoming standard in many industries, including public services; hard to believe that happens in an inflexible market.

        1. Sungam

          That 33 days wages per year worked is much more significant than the shorter notice period when making the comparison with the UK.

          30 days notice (during which you are expected to work) is a much lower cost than 15 days notice plus several months worth of pay. If you do get dismissed the 33 days wage per year served is a benefit worth about 10% of your yearly salary.

          Is the cost of this covered entirely by the employer? Does Spain also have state unemployment and job seeker benefits like you have in the UK? Does this benefit end when you get a new job?

          The other thing which I cannot comment on and is very difficult to put a number on is the amount of red tape you have to go through to dismiss someone and what constitutes of unlawful dismissal in each country.

          Sorry about all the questions but I do find these sort of things interesting.

          1. Diego Méndez

            Sungam,

            33 days’ wages per year apply to *unlawful* lay-offs (despidos improcedentes). If you want to go through all red tape and you prove that lay-offs were necessary (e.g. a crisis in the industry, financial difficulty or misbehaviour from the worker), that is reduced to 20 days’ wages (sometimes less).

            As you may imagine, most employers just go for unlawful lay-offs, which are pretty legal. In response to your question, unemployment subsidies in Spain are similar to the rest of Europe (less in quantity).

            You are right that the Spanish labour market is less inflexible than those in the UK or the US. However, I wouldn’t say it is more inflexible than those in most of mainland Europe.

            There’s some Orwellian history re-writing in all this. In good times, the inflexible Spanish labour market was creating more new employment than the rest of the eurozone combined. (Most of those new jobs still remain, so it wasn’t only because of the bubble).

            Then, conservatives argued, Spain (and Ireland!) were living proof that free-market policies and labour-market reforms worked.

  3. sam

    “The Demographic Crisis” should not be resisted, because it’s nothing more than the consequence of 1) people living longer and 2) the country’s population not growing exponentially. To wish for the “crisis” not to happen is either to wish for people to die younger, or to just stick your head in the sand and say that exponential population growth need never end. The latter is literally a pyramid scheme.

  4. Steve T

    The trend toward temporary jobs is really just part of the much more important trend to FEWER jobs of nearly all kinds, and therefore, less bargaining power for nearly all workers.

    Economists fail to realize the extent to which advancing technology and globalization are contributing to unemployment. Japan has been on the leading edge of automation and robotics and is seeing the impact first. Of course, Japan has a dramatically better social saftey net. All those freeters have access to affordable healthcare, and the Japanese unemployment rate is still only around 5%. The situation in the US is going to be much worse.

    It’s also imporant to note that Japan is likewise on the leading edge of the baby boom, demographic crisis. So where’s that shortage of workers everyone has been predicting? Shouldn’t we see at least a hint of it already? The reality is that accelerating automation technology is destroying jobs at an ever-increasing rate — starting with the good, permanent jobs.

    For a great overview of this, see this book:

    “The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future”

    http://www.amazon.com/gp/product/1448659817

    A free PDF is also available here: http://www.thelightsinthetunnel.com

    Also see the author’s blog at http://econfuture.wordpress.com.

    I think the issues raised in this book are among the most important that we will have to confront as a society. I encourage everyone to read it…

    1. alex

      While that’s a medium to long term concern (and has been since at least the start of the industrial revolution) it hardly explains the unemployment of the last few years.

      1. bluto

        Where did you think all the manufacturing jobs in the US have gone? Or are you one of those who doesn’t think we make anything here anymore?

    2. emca

      the book’s quote:

      “Among people who work in the field of computer
      technology, it is fairly routine to speculate about the likelihood that computers will someday approach, or possibly
      even exceed, human beings in general capability and intelligence.”

      not sure computer technology will soon be able to flip burgers, though; or whether its even worth trying.

  5. Jack Rip

    It may be that the growth in temporary workers is directly connected to the need to increase in the income of those controlling the means of income. Viewing the economy as a fixed size blanket, the pulling of the blanket towards the head exposes the feet and eventually the rear end.

    Unless the income of the higher ups, e.g. CEOs, financial traders and higher management, is forced to pull back in realistic terms, temporary workers will be needed and abused but increasing part of the economy.

    In today’s moral model, this is not going to happen without yet another severe depression. In the current political structure where the vast majority of congress people are “employees” of the rich, even a depression may not bring the needed change.

    1. alex

      ‘In the current political structure where the vast majority of congress people are “employees” of the rich, even a depression may not bring the needed change.’

      That’s a shame. I prefer metaphorical torches and pitchforks. But if the need for the genuine article arises …

  6. YY

    The legislative nudge was more than enough to change the system that wasn’t all that great to begin with to take away worker protection. What appeared ti be token nods to free market philosophy has had socially detrimental effects, not made up for by any increase in efficiency as social bills come due anyway. There already was a tiered system that protected larger companies by sacrificing their suppliers and contractors. The nudge resulted in large companies becoming freer to not hire as many permanent employees. Now the government is talking about decrease in corporate tax (high now, yes but so what?) as if that would magically transform investment climate. I think they’re smoking the result of their own fog machine.

    In the meantime how is it that demographic changes are detrimental, if the society can not provide enough jobs for the young people, even with their now very limited numbers?

    1. alex

      “What appeared to be token nods to free market philosophy”

      Where “appeared” is the operative word. Socialism for the rich is not a free market.

  7. hermanas

    If employment is required to participate in society, but not for the economy, does society respond by redesigning the ability to participate or destroy the jetsam non-participants?

    1. sam

      When profitable sheep farming in Scotland made Highland tenants redundant to the landowners’ needs, they were simply pushed off the land, by soldiers if necessary, and forced to go wherever they could find to get work, even to the New World. What if it happens again, and there are no new worlds?

  8. frances snoot

    http://www.angelfire.com/az/sthurston/HistoryofCorporateRule.html

    “If corporations are “persons”, they are persons with qualities and powers that no flesh-and-blood human could ever possess–immortality, the ability to be in many places at once, and (increasingly) the ability to avoid liability. They are also “persons” with no sense of moral responsibility, since their only legal mandate is to produce profits for their investors.”

    Yes, but look to see that charismatic world leader appear on the scene of the global criminal cartel in future. The progressives wax lyrical concerning the banks (not the multilateral banks of course) but deny people personhood by ignoring the moves made by the fascist capital in securing a ‘global empire’. It’s a deathly alliance.

    1. Externality

      Thank for your stereotypical, enthnocentric comment. Are there any other ethnic groups that you want to make fun of?

      1. frances snoot

        I wasn’t making fun of an ‘ethnic’ group but of the propensity of language users to categorize. The mother of English has suddenly decided she gave birth to a bastard son.

        1. frances snoot

          “Over the next twenty years, on the European continent, Anglo-American will survive in the “niche” of international languages as a popular common language based on a very limited vocabulary.”

          Correct me if I’m wrong, but this seems to be a thoroughly ‘eurocentric’ sentence based on an exclusionary matrix: there is no ‘standard’ English.

  9. Jim the Skeptic

    Japan’s economy went downhill as the rest of south east Asia began to compete for the USA import market. There is no easy solution to their problems. Our economist’s have assumed that Japan’s problem was their financial industry and that the Japanese acted too slowly, too timidly, or just failed to do what was necessary.

    The USA’s economy went downhill as more and more manufacturing jobs were moved overseas. We could force some of those jobs back to USA with high tariffs, but the corporations would resist and they own the Congress. So we are taking this path by choice, but the results are the same for us as it was for the Japanese. There is no surprise there. And we are making this situation worse by allowing wealth to become concentrated.

    Employers have to deal with the world as it is and in this environment hiring temps makes perfect sense. This is an effect of our major problem and we should be dealing with the cause! Instead we are acting as if clearing the financial industry crisis will solve all our problems. And the assumption is that we are smarter, quicker to act, and less timid than the Japanese. Balderdash!

  10. jake chase

    In the post WWII euphoria, monopoly capitalism sold itself as an engine of job creation. But, the corporate model has always been, first, dumb down the work (Taylorism), second, automate the work, third, eliminate redundant staff.

  11. frances snoot

    “All our countries have to deal with a new diversity. The time of the homogenous nation-state is over…Alongside diversity–and diversity is certainly a strength of our society–we still need, in each of our societies, a sense of unity, of belonging together. This sense of unity can lie in shared values…” Von Rompuy: “A Curtain Went Up”/Berlin/November 9 2010

    “We are fighting for the basic values that Europe has created in its thousands of years of history. Even more, we are fighting for the very source of these values, both in the past and for the future. The very roots of Europe are threatened.”Joseph Goebbels,1943

    http://www.calvin.edu/academic/cas/gpa/goeb43.htm

    Ring any bells?

      1. frances snoot

        I was merely pointing to the mirror; you decide whose face is reflected by the self-same words. Uncanny really. Von Rumpled’s entire speech could have been written decades ago: perhaps he found it in some linen closet somewhere? Budgetary constrictions and all.

  12. Paul Tioxon

    There will continue to be tension between two competing wings of the ruling class. Both sides understand that a distinct option for the citizenry is to revolt. Under reported rioting in Europe, except in the case of Bonnie Prince Charlie getting jostled about, due to austerity reprisals, shows the tip of the spear. We are much more affluent and it does not require the elimination of food and shelter to get a violent reaction. Cutting off college education or the internet for that matter is enough.

    On the one side are the pragmatists, they are trying to inject a measure of social democracy in the form of universal health care, education, employment and housing crowned with a reasonably dignified retirement. Obama is an example of that trend, now that the capitalism model is played out. On the other side are the National Security managers, flinty eyed, rough men with the stomach for war, rumors of war and all that Gitmo stands for. Dick Cheney and Halliburton, with private military corporations leads up that parade. As money gets tight the pragmatists and NatSec factions will cause friction, and if the heat grows too hot, the unexpected may happen in the form of the populace not swallowing what they are being force fed. And the final variable, is that the global crucible has been formed with the fall of the Soviet system. There is no where to go where the market system of the US variety has been set up world wide.

    Here is a recent lecture by Immanuel Wallerstein, his analysis of the World System. He spoke in March of this year in Riga. It is a fair description of the world today and how it got to be. I urge you to view it. How the middle class is being hollowed out here, in Europe now, Japan, and every where else will continue to be the driving force of politics, just as trying to create a middle class in China, India and Brazil and Venezuela is the driving force of former 3rd world countries.

    http://www.iwallerstein.com/the-origins-and-outcomes-of-the-global-economic-crisis/

  13. RichFam

    So either capitalism is a poor system or capitalists are evil, or both? Maybe a capitalist system ultimately breaks down as a small group benefits at the expense of the majority? Give me a break.

    1. Yves Smith Post author

      Re read the post. It may be endemic in your world (I’d assume IT), but it has not shown up in the aggregate data in a big way until now.

  14. armand g eddon

    @sam says: December 20, 2010 at 3:41 am “To wish for the “[demographic] crisis” not to happen is either to wish for people to die younger, or to just stick your head in the sand …”

    Well I’m 58 and my solution is for people to die younger. It’s preposterous to spend what we do in denying our mortal nature; and it’s immoral. These current and growing $$$ to the medical establishment, and $$$ to warehouse people 75+ should be spent on the young, on public assets, or not at all.

    And think about this: all these people 75+ were born in 1935 or earlier, before everyone gained an additional 25-100 too many pounds by age 30. I can’t imagine what the costs will be as the older-generation-aged are replaced by newer-generation-aged. Extend the retirement age? The newer-generation-middle-aged will be on government disability pensions way before retirement!

    My vote is to:
    • Provide nothing more than limited-tech medical technology, perhaps on the level provided in 1950 – treat trauma [broken bones, etc], inoculations, and antibiotics, etc
    • Exericse and eat right
    • Work less and get more rest
    • Live and die according to our natures

    The savings could then solve nearly all social problems that can be solved with money.

    1. craazyman

      you’d bankrupt half the medical profession. and then what?

      -Lootenant DT Tremens, GED
      Thought Police Patrol

    2. alex

      “my solution is for people to die younger”

      Aside from the obvious moral and ethical points, how does that increase the number of jobs available? If anything, elder care creates jobs.

    3. ArmchairRevolutionary

      Actually, I think people might live longer and happier lives if they planned to live without medical help, ate better food and exercised more.

      I like your plan.

  15. Septeus7

    Quote from psychohistorian: “You assume that there is enough sustainable world consumption demand to employ all who would wish work. I believe that this assumption is wrong and that the public is being misled into believing that there are jobs for all out there.”

    Psychohistorian is assuming that jobs and works are the same thing. Nation Builders and Protectionist unlike the economist prefer strict definitions.

    Economic Work is the physical work (force times distance) that humans do that will extend their survival on the planet and later off of it. Faced with continually depleting resources the task of shifting between resource bases can never run out, in short there is always stuff to move around.

    A job is any activity that one is paid i.e. increases purchasing power for consumption.

    The challenge of planning a economy is making sure that the jobs are paying for the right amount of work.

    Imagine all of the jobs that could be created if rather than Banks directing the flow of credit, the Nation directed the flow credit toward projects long lasting value. We used to call those “internal improvements.”

    For example, we could rebuild all of the broken down infrastructure. How many jobs can you create from all that work that needs to be done.

    We need to repave all the nations roads. Install high speed rail, then maglev rail, the low pressure maglev systems (5000 mph baby).

    We then need to connect rail lines over the Bering Strait into Asia. We need to bring down water from Alaska to solve the Western US water shortage and depletion of our fossil water.

    I can think of hundred of projects that could provide literally billions of jobs given our very limited level of technology.

    The problem is that all of those projects need on non-interest bearing credit directed toward those public sector projects. Unfortunately, the current system depends on extracting economic rent from the public wealth and from any activity that would actually provide a physical platform for jobs and economic development.

    The problem isn’t a lack of demand it’s a lack of moral perspective.

    Perhaps in the distant future when robots can do manual labor and construction we could talk about a gift economy and legitimate lack of jobs.

    But I believe that actually moving to higher infrastructure platform will cause us to see entirely new of projects that will depend on even further human involvement. Unless you believe in the fraud of logic based strong artificial intelligence humans will always be needed for what only conscious creative minds can do and the real task of economy is to create and empower such genius.

    As long human society has enough imagination there is always plenty of work for everyone to do.

  16. Paul Repstock

    All of us “surplus humanity”, may not be the problem you seem to think we are.
    If we copied the other half of the world and subsisted on $1-$2/day, This would lower the cost to our masters and perhaps therefore raise our marginal utilty.
    There will always be that segment who prefer to have their underwear washed buy hand and lightly starched.

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