[OPE] The crack in Japan's facade

From: Gerald Levy (jerry_levy@verizon.net)
Date: Fri Jul 11 2008 - 09:08:04 EDT

o  Workers riot.
o  Growth of 'working poor'.
o  "freeters".
o  Increase in suicide, crime, divorce rate. Falling birth rate.
o  Prof of Labor Economics complains about "unproductive" workers.

"In a relatively short time, the world's second largest economy has
been transformed from a cohesive egalitarian society to one saddled
with the ills of the neo-liberalist model: a growing underclass, social
alienation,  widening income disparities and simmering discontent".

In solidarity, Jerry

Poverty widens the crack in Japan's facade

By Michiyo Nakamoto

Published: July 10 2008 03:00 | Last updated: July 10 2008 03:00

Not long before representatives of the world's richest nations
convened in Toyako for the glitziest event in the history of this
remote Japanese fishing community, a very different scene unfolded
just a few hundred kilometres south. Angry day labourers in
Nishinari, Osaka, threw stones and firebombs at riot police,
overturned a car and set fire to garbage, venting their frustration
at their inability to find work.

The violence, which involved an estimated 200 people and went on for
two days last month, was a long way from the serene facade that
Japanese society normally presents to the world. But the riots were
just one extreme manifestation of the social cracks that are
appearing in a country that has often, if half-jokingly, been
referred to as the world's most successful socialist state.

Following more than a decade of economic stagnation, Japan is no
longer the gentle place it used to be for the weaker members of its

In a relatively short time, the world's second largest economy has
been transformed from a cohesive, egalitarian society to one saddled
with the ills of the neo-liberalist model: a growing underclass,
social alienation, widening income disparities and simmering
discontent. The country's once-vaunted social and labour contracts
have failed to keep up with the changes wrought by globalisation,
leaving a large number of people barely managing to survive.

Although unemployment in Japan, at about 4 per cent, is by no means
high, the number of so-called "working poor", who earn less than Y2m
($18,600, ‚,¨11,800, ¬£9,400) annually - a level considered to be
close to, if not at, the poverty line - has risen at an alarming
rate. In 1997, 5m workers fell in that category but by last year the
number had doubled to 10m, according to a government survey.

The rise in working poor stems largely from a sharp increase in non-
regular workers as Japanese companies restructure their workforces to
cut costs and remain globally competitive. Non-regular workers,
including part-time workers, temporary workers and others, comprise
more than a third of the total workforce, according to government
statistics. In addition, there are at least 1.8m "freeters", who take
on whatever temporary jobs they can find and generally have no
benefits. Thousands of freeters, in their 20s and 30s, sleep in
internet cafés and are unable to find stable employment because they
lack a permanent address.

Japan's minimum wage, at Y687 an hour, is in danger of falling to the
lowest level among Organisation for Economic Co-operation and
Development countries once the US implements legislation to raise its
minimum wage. Japan is still, relatively speaking, an egalitarian
society, where income disparities are nowhere near as large as they
are in many western societies. But the old social and labour
contract - which promised income stability, assured that hard work
would be rewarded, healthcare would be within everyone's reach and
people could retire knowing that their pensions would keep them off
the streets - no longer applies to a considerable proportion of the
Japanese public.

There is growing concern that spreading poverty is leading to an
increase in suicide, crime and the divorce rate and even aggravating
Japan's falling birth rate. "Poverty is not just a situation of low
wages but isolation from society, from family, friends and
workplace," says Tsuyoshi Takagi, president of the Japanese Trade
Union Confederation. "Japan's silent public is reaching the limit [of
its patience]," he says.

As public frustration has grown, the finger is being pointed at past
policies of deregulation, particularly of the labour market. There
are calls for tighter regulation, higher taxes on the rich and a
redistribution of wealth. In a bid to placate a worried public, the
government has responded with plans to ban - in principle - the
contracting of unskilled day labourers.

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.

Copyright The Financial Times Limited 2008

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