“Regular” workers enjoy benefits such as housing, bonuses, training and (usually) lifetime employment, but non-regular workers earn as little as 40% of the pay for the same work, and do not receive training, pensions or unemployment insurance. In the past 20 years their numbers have grown to one-third of all workers.
The immediate problem is one of concentration. Japan’s heavy reliance on autos, electronics and capital goods is proving devastating as exports plunge. Boosting growth requires a major increase in public spending, and that gets at two key long-term hurdles.
The first is debt. The Organization for Economic Cooperation and Development says Japan’s public debt is likely to surge to 197.3 percent of gross domestic product next year (the burden was 172 percent in 2008). That means Japan may not be able to spend the money it must to prepare for the second hurdle: demographics.
Dangerous Direction
Twenty-three percent of Japanese are over the age of 65, while less than 13 percent are younger than 15. In the U.S., 13 percent of the population is over 65, while more than 19 percent is under 15. The ratio is 8 percent to 19 percent in China. Japan’s population dynamics are tilted in a dangerous direction.
Japan needs a baby boom. Instead, the boom is in centenarians. Loads of money will be required to pay for that imbalance and for increasing productivity among young workers. With the debt-to-GDP ratio approaching 200 percent, it’s an open question how such trends will be financed.
Cost of Japan's Competitiveness: Increasing Poverty
Now America also has a working poor, but it does not include the college educated in large numbers. In Japan, graduates during the "lost decade," save those who attended elite universities, are at risk of not landing a permanent job and thus suffering from marginal attachment to the workforce. Could America be heading down Japan's path?
But in an era of global competition, turning back the clock on labour reforms would be a simplistic response to a complex problem. A labour contract based on lifetime employment and seniority, coupled with companies hiring straight out of college, rewards those already in the system with stable employment, pay and benefits, no matter how unproductive they may be, says Naohiro Yashiro, professor of labour economics at the International Christian University. It also penalises those who have slipped through the cracks, regardless of their potential.
Many of the working poor are those who, having failed to secure a place within the system to begin with, become destitute as they grow older and their chances of finding even part-time work decrease. Many freeters, for example, cannot find full-time work because Japanese companies are reluctant to hire anyone who has not been in stable employment. The system also discourages much-needed venture businesses, since the opportunity costs for anyone who dares opt out of it are prohibitively high, Prof Yashiro says.
Japan, no doubt, needs to rebuild its social safety net, with greater security for its ageing population and measures to improve conditions for those outside the regular workforce. But unless Japan can also find a way to promote labour mobility and allow those who have fallen out of the employment system to come back in, it may not be too far-fetched to conceive of the social unrest witnessed in Nishinari spreading to other parts of the country. http://www.nakedcapitalism.com/2008/07/cost-of-japans-competitiveness.html
Yves Smith Blogger, "Naked Capitalism" Yves Smith has written the blog "Naked Capitalism" since 2006. She has spent more than 25 years in the financial services industry and currently heads Aurora Advisors, a New York-based management consulting firm specializing in corporate finance advisory and financial services. Prior to that, she worked for Goldman Sachs (in corporate finance), McKinsey & Co., and Sumitomo Bank (as head of mergers and acquisitions). Smith has written for publications in the United States and Australia, including The New York Times, The Conference Board Review, Institutional Investor, The Daily Deal and the Australian Financial Review. She is a graduate of Harvard College and Harvard Business School.
China intends to become a world leader in electric and hybrid cars
Chinese leaders have adopted a plan aimed at turning the country into one of the leading producers of hybrid and all-electric vehicles within three years, and making it the world leader in electric cars and buses after that.
To some extent, China is making a virtue of a liability. It is behind the United States, Japan and other countries when it comes to making gas-powered vehicles, but by skipping the current technology, China hopes to get a jump on the next.