The Japanese economy appears at long last to be emerging from the shadow of the "lost decade" of the 1990s, with companies reporting robust earnings and corporate executives regaining their confidence.
But when one looks into the minds of people actually working in the economy, it becomes clear that the sense of job security they used to enjoy prior to the bursting of the bubble economy around the beginning of the 1990s has not returned. If anything, people are growing more anxious about the ever-expanding disparities in society.
The relationship between employers and employees remains in a state of flux, and it is likely to undergo further changes. Statistics compiled by the Ministry of Internal Affairs and Communications show that the number of regular employees declined from 34.9 million to 33.7 million over the past 15 years, while the ranks of non-regular employees, such as part-time and temporary workers, nearly doubled from 8.8 million to 16.3 million.
As a result, average pay at private-sector companies has fallen for eight straight years. Companies themselves are reporting higher earnings, thanks partly to corporate tax breaks, but the benefits, workers complain, are not being shared with them.
The government's Council on Economic and Fiscal Policy last year advocated sweeping labour market reforms - touted as a labour "big bang" - and the biggest changes of labour law in six decades are in the offing. The current session of the National Diet will be deliberating new legislation to redefine employment contracts and part-time work, along with proposed revisions of several existing laws.
But in the face of strong public protest, the administration has abandoned its plan to submit a bill to introduce a "white-collar exemption" system, which would have eliminated working-hour restrictions for certain categories of employees.
GREATER EMPLOYMENT FLUIDITY: The trend toward greater fluidity of employment in Japan, represented by the decline in the number of regular employees and the corresponding rise in other types of employment, is likely to continue. There are several reasons for this. One short-term factor is the lingering aftermath of the "lost decade." The economy has finally emerged from its long downturn and is showing signs of steady growth. Many companies are now in a position to invest in new plants and equipment and to expand their workforces.
The ratio of job offers to job seekers is rising, and the unemployment rate is falling. Yet many companies remain cautious about hiring regular employees because of their memories of the lean years, and they are increasingly non-regular workers, whose wages tend to be lower and who can more easily be discharged.
A second, more fundamental reason, though, is the full-fledged arrival of post-industrial capitalism. No longer is building big factories enough to generate income. The real source of earnings is not scale of production but differentiation. One inherent paradox, though, is that distinctive products and services are quickly emulated. Shorter product life cycles are part of the problem; a decade ago the average life of a product was about seven years, but today the cycle is down to three years or so.
Price erosion is another important factor, as seen in the markets for digital cameras and flat-panel television sets. Even when a distinctive new product is developed, similar models appear on the market, driving prices down. In order to survive, manufacturers must constantly develop new technologies, new products, and new ways of organising and running their businesses. Post-industrial capitalism attaches value only to that which is new.
Maintaining a constant flow of innovation requires a certain degree of fluidity in human resources. This is because the introduction of a new production process for new products inevitably results in the displacement of workers, who do not meet the needs of the new set-up. Post-industrial capitalism forces companies to innovate and differentiate in response to changes in society, and this demands flexible work formats. This is the reason that employers are increasingly turning to temporary and part-time workers.
Accompanying this trend have been changes in the thinking of employees. They have seen companies laying workers off during the "lost decade" and now realise that a position as a regular employee no longer means a guarantee of lifetime employment. Graduating students looking for jobs are now less likely to expect they will spend their entire careers with a single employer; increasingly they are assuming they will make mid-career moves.
THE ISSUE OF DISPARITIES: One frequently cited concern related to the growing fluidity of employment is the widening of social disparities. This has become a constant topic of discussion both in the media and in the Diet.
The gap between rich and poor is slowly but surely widening, and this is a trend that is likely to continue. But it should be emphasised that compared to other countries in statistical terms, Japan is far from being a country of pronounced disparities. The talk of yawning gaps has been feeding on itself, divorced from reality.
Why has the word disparity been generating so much worry? I believe that this is because people are unconsciously assuming that in another 5 or 10 years Japan will end up becoming more like the United States. In May 2006 economists Thomas Piketty and Emmanuel Saez published an article in the American Economic Review examining income inequality in the United States and other leading capitalist countries. They made a historical analysis of how much of a country's total income went to the top-earning 0.1% of the population.
Prior to World War II, the top 0.1 percentile claimed roughly between 8% and 10% of all income; this was true not only in the United States but also in other capitalist states, such as Britain, France, and Japan. Social disparities were surprisingly widespread around the world.
Things began to change after the onset of the Great Depression in 1929, though, and income distribution flattened out rapidly during World War II. This was because the war effort required national solidarity and also because the spread of socialism necessitated the reinforcement of progressive income taxes. At the end of the war, the share of income going to the top 0.1% had declined to around 2% in most countries.
Income gaps began to widen again in the 1980s, though, primarily in the United States and Britain, as the liberalisation agenda advanced by President Ronald Reagan and Prime Minister Margaret Thatcher bolstered the incomes of the very rich. In the United States, in particular, the top 0.1% once again claimed nearly 8% of total income in 2000, approaching the inequality of the pre-war years. The figures for Japan and France, though, are still around 2% today, suggesting that equality still prevails in these countries.
(To be concluded)
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