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Home > Debates Last Updated: 14:34 03/09/2007
Comment (April 21, 2005)

Comment on Yoshio Higuchi's Article "Baby-boom Generation Approaches Retirement Age: Coping with a Depopulating Society"

Kae NOMURA (Waseda University, GLOCOM Platform)


Out with the old and in with the new; this well-known adage is only partially fitting for Japan's current economic state: the old are leaving, but the new are not coming in. As Japan's population of baby-boomers is approaching their retirement age, it is expected that the workforce will experience a drastic drop in numbers. As Professor Yoshio Higuchi expresses in his article, "Baby-boom generation approaches retirement age: coping with a depopulating society," dealing with the retirement of baby-boomers is of paramount importance in maintaining the Japanese economy. However, this economic dilemma is a double-edged sword; one must look at both the retiring generation as well as the younger generation in order to regard this problem holistically.

In order to slow down the rush of retirees leaving the workforce, Professor Higuchi supports the lengthening of their employment, but in order to "promote extended employment for aged people, the gap between wages and productivity needs to be diminished." This is certainly a viable and intelligent solution because it addresses the economic problems that arise from giving too high wages to the older, higher ranking workers. As stated by the professor, "the relationship between wages and productivity is such that when workers are young, wages are suppressed below their productivity whereas when they become older, wages supersede their productivity in relative terms." Such a system ensures that despite their lower pay, the younger workers will work hard in order to avoid dismissal from their job and the lost opportunity of a much higher wage in the future. As Professor Higuchi expresses, decreasing the wage gap would "extend employment for aged people" because it will be financially more efficient for firms if they pay according to productivity rather than seniority. However, while extending the employment of aged people may be one part of the solution, opening the doors for the younger generation to enter the workforce is equally as important.

By making ample opportunities for the young graduates to enter the workforce, the economy is ensured a growing, skilled workforce. It is often the case that while the senior workers are able to run the firms efficiently, the younger generation provides a great deal of innovation and fresh ideas. Therefore, not only do the younger workers fulfill the role of replacement of retired workers, but they also contribute to the progression and evolution of the business. However, Japan is facing a critical problem with its younger generation in the form of "freeters" and NEET (Not in Education, Employment, or Training). Rather than follow the traditional path of their parents by holding a full-time job, "freeters" drift from one part-time job to the next. While they are earning money and supporting themselves, such a life-style neither adds to the country's skilled workforce nor does it help the economy to grow. At about 2 million in number and growing, "freeters" are a mounting problem, but the NEET population presents a more serious case.

The term NEET was coined in Britain in the 1990's, where it was used to describe 16 to 18 year olds who did not participate in society and thus were of no contribution to the nation's economy. In Japan, the term describes 15 to 34 year olds who are not employed, married, or engaged in housework or schooling. According to the Ministry of Health and Labor, from 2002 to 2003, the size of the NEET population in Japan increased from 480,000 to 520,000, and it is expected that it will nearly double by 2010. With the government estimating that by 2025, there will only be 2 working-age citizens for every pensioner over 65 years of age, it becomes not only important but necessary for working age citizens to contribute to the economy. Coupled with Japan's low birth-rate, the futures of pensioners seems to be a in a dire situation if nothing is done.

The Japanese government has already expressed great concern about this matter. "The people who are not acquiring work skills or knowledge [] will seriously affect Japan's economy and society," Prime Minister Koizumi said in early 2004. In an effort combat this national problem, the government has set aside 37 billion yen (US$350 million) to implement programs to help the young secure jobs. Said programs will take the form of job-training sessions and will help young people to complete their resumes and find suitable jobs. Although this is an important step to take, there is an important underlining issue that is largely being ignored. This issue concerns the negative mentality that seems to be prevalent in the NEET population. Surely, it must be more than indolence that fuels the NEET population to forgo work and live as parasites off of their parents. Rather, it is often much deeper than that. As one psychiatrist of Yokohama states, "they [young people] carry a heavy complex - that they cannot act as others do. They are also unable to share their pressures with anyone else." Another psychiatrist, himself formerly withdrawn from society in his youth, expresses that "NEET people are commonly less able to appreciate their positive aspects." Based upon these observations, it appears that the NEET population is not only in need of job-training, but first and foremost, emotional assistance.

In regards to this, it is best to look towards Britain and see how they faced their NEET dilemma. It is important to note, however, that although they go by the same name, the NEET problems faced in Britain and Japan are largely different. Nevertheless, they share a commonality in that in both countries, the young people were in need of guidance and support, not just in terms of job placement, but emotionally, as well. An organization called Connexions was established in Britain, which provided a holistic service through personal advisors, helping the young person to cope with his whole situation, not just his economic situation. In Japan, such a service was never available because there simply was not a need for one. "The economic situation was so good that there was no real need for career advice or a training service," commented Dr Michiko Miyamoto, a professor of family sociology at Chiba University. However, because much of the Japanese NEET population is not composed of the poor like in Britain, their needs are different in nature. Although many seem to exhibit a general resigned attitude when it comes to jobs, they also have their parents' money to fall back upon, adding a different dimension to the problem. In Japan, the NEET and "freeter" population have the privilege of being able to choose between fulltime employment and their current care-free lifestyles. They do not choose full-time employment largely because their options (that of a care-free lifestyle) is more appealing to them.

Therefore, a large part of the solution lies in making full-time employment more attractive. By "attractive," it is meant here not in terms of salaries or even working hours (although these are not irrelevant), but in terms of the working environment. As Professor Higuchi stated, it is important to create "a working environment in which abilities of every worker, irrespective of age or sex, can be realized." If the young people see that their strengths will be highlighted and that they will have opportunities to learn and get promoted, they will regard full-time employment with more interest. Although it is not the sole reason, the NEET and "freeter" population in Japan often choose not to hold full-time jobs because it is not an attractive option for them. Rather than work for hours carrying out tasks they neither care about nor are appreciated for, they chose to either forgo work altogether or take on part-time jobs which gives them more freedom. The ideal working environment is an adaptation of what Professor Higuchi paints in his paper; one that presents a plausible way to slow down the sudden rush of retirees while at the same time welcoming in the younger generation.

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