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38% of labor force in limbo, flirting with poverty

Japan’s working poor left behind by ‘Abenomics’

by Chang-ran Kim

Reuters

Last Christmas Eve, Ririko Saito and her 11-year-old daughter gathered some plastic bottles, pots and a kettle and made several trips to a nearby park to get water. Their utility had just turned off the tap after months of unpaid bills.

“I was going to take care of it as soon as I got my paycheck in a few days,” the 49-year-old single mother said. “I figured they wouldn’t be so callous as to cut us off at that time of year. I figured wrong.”

Saito, who works part-time caring for the elderly in a Tokyo hospital and gets welfare to supplement her salary, represents a growing army of poor in a nation that continues to pride itself on being an egalitarian society despite a decades-long rise in poverty.

At 16 percent, Japan’s relative poverty rate — the share of the population living on less than half of the national median income — is already the sixth-worst among the 34 OECD countries, just ahead of the United States. Child poverty in working, single-parent households like Saito’s is by far the worst at over 50 percent, making Japan the only country where having a job does not reduce the poverty rate for that group.

As Prime Minister Shinzo Abe charges ahead with his “Abenomics” policies to revive economic growth, things look set to get harder, not better, for Japan’s down-and-outs.

Having ramped up spending on public works projects and business incentives, the government has also moved to shore up its finances, cutting welfare benefits last summer and last month raising the national sales tax to 8 percent from 5 percent.

The regressive tax puts the biggest burden on the poor, and another hike to 10 percent is planned for October 2015.

Team Abe’s success in reversing 15 years of price declines that have hurt business confidence and investment also squeezes the poor, who cannot count on bonuses or financial profits to offset rising living costs as he artificially stokes inflation.

Japan says it plans more aid for welfare recipients, largely through job training. That, however, is little consolation because even those with jobs often live under the poverty line. The government does not officially define the “working poor,” but the number of part-time, temporary and other non-regular workers who typically make less than half the average pay has jumped 70 percent from 1997 to 19.7 million today — 38 percent of the labor force.

“The Abe administration’s stance is more about fixing things, including poverty, with a trickle-down effect from overall economic growth,” said Takashi Oshio, a professor at Hitotsubashi University specializing in social security. “There’s little political capital spent on issues like alleviating child poverty. It doesn’t garner votes.”

Cases like Saito’s suggest benefits of the growth pickup over the past year do not spread to all, and experts warn that a deepening divide between the haves and have-nots could threaten Abe’s vision of Japan’s economic revival.

A broad recovery in consumption, a key ingredient of Abenomics, may not last if more and more households struggle to hold above the poverty line, some economists say.

In the longer run, problems associated with poverty such as worse access to quality education, poor health and crime could increase fiscal burdens and dent Japan’s growth potential by shrinking the pool of skilled workers.

“Rising poverty leads to a wider gap in education,” said Makoto Saito, an economist at NLI Research Institute. “Japanese companies are supposed to be creating value-added jobs, but at this pace there won’t be enough people to fill those positions.”To be sure, higher sales taxes are widely seen as inevitable given Japan’s public debt is more than twice the size of its economy, and growing.

But economists say the government could limit the pain with policies that redistribute wealth better.

With social spending skewed toward pension and health care schemes that mostly benefit the elderly, Japan is the only OECD country where the poverty rate among working households and households with children rose after benefits and taxes, according to a recent study by the Organization for Economic Cooperation and Development.

Many economists say adopting a system like the U.S. earned income tax credit, which reduces the amount of tax owed, would go a long way in helping the poor. But politicians favor introducing preferential tax rates for basic goods and services to ease the pain of the next hike.

“Politically, it’s easier to get the understanding of the electorate since multiple tax rates would benefit everyone, not just the poor,” said NLI’s Saito.”But if effective countermeasures aren’t adopted to help low-income earners, the poverty rate is just going to keep rising.”

For those like Ririko Saito, who lives hand-to-mouth with her daughter on an hourly wage of ¥1,080 ($10.6), last month’s tax hike has made life considerably harder. An extra ¥1,300 a month she will be receiving from the government to offset the higher costs of essentials is just not enough to avoid the repeated utility cuts.

“As it is, we can only afford discounted groceries.” Saito said. “I’m not sure how we’ll manage, but I’ll just have to find a way.”

  • zer0_0zor0

    A depressing article–if you’re open to empathy.

    The class divisions in Japan are being exacerbated by Abe and his attempt to inject a form of neo-nationalism into the public sphere and transfer wealth to the burgeoning (stealthily) military industrial complex.

    All he needs is a war!

    • queirozf

      When you say you want empathy what you really mean is money. =)

  • keratomileusis

    If I were a Japanese citizen I would want the government to explain how the debt ratio got to 200% in the first place, and what guarantees the increased revenues from the tax hikes won’t be squandered in the same way. You would think that groceries and medication would be exempt from taxes as they directly impact the poor.

    The other problem is the social insurance system, which unlike the US and Europe, is not tied to wages, but to contracted salaried employees, so part time hourly wage employees are falling through the net. Since they are not paying into the system, there is no record of them, and will be left out at their retirement, if the whole system doesn’t collapse before then. Of course, big businesses love this since they escape having to contribute their share.

    • zer0_0zor0

      The following figures mentioned in the article

      The government does not officially define the “working poor,” but the number of part-time, temporary and other non-regular workers who typically make less than half the average pay has jumped 70 percent from 1997 to 19.7 million today — 38 percent of the labor force.

      coincide with the Japanese adoption of an American style “temp” worker system, which had been against the law before the “neoliberal” free-marketeers succeeded in pushing through “labor market reform” policies. That was close to the time late when the postal savings privatization and other attacks on public services and social safety net type of programs were being promoted.

      There are some parallels with developments in the USA, but poorly planned public works projects connected to corruption between politicos and the construction industry is one black hole that they keep pouring concrete (publicly funded) into. It’s now shifting toward the defense industry.

      • keratomileusis

        Zero, we are on the same page on this one. Upward drift of wealth. Japan is not perfect by any means, but I’m sick of the US pretending to be this model of integrity and all that is good in the world. At least there’s no wacko element here. Not yet…

  • Ken5745

    And statistics show that with a low birth-rate Japan’s population is slated to shrink by one-third to around 84 million by 2050. That may lift the per capita GDP but will not help the marginals one iota.

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  • Boey Kwan

    This is occurring in basically every country – taxes are raised because the country is in debt, the government is the one who put the country in debt, and the poor get the most hurt by these changes. The higher class find ways to sneak out of income taxes, and all sorts of other things that just keep them in the top %. The ones who try the hardest (such as the lady in the article) aren’t getting what they deserve and what they have worked for. They’re working for their families and for their lives, and as every person (male or female, regardless of race or any other characteristic) is and forever will be entitled to their natural rights, it’s not a matter of justice but it’s social and it’s ethical. You’d think the government would give them some retribution by now. Do people actually follow the constitutions made for every person in today’s society?

    Also, I wish Japan (its government, as a whole) would focus less on taking land for themselves, like in past years. Honestly, we all know that Japan is becoming less easy to maintain because of Fukushima (God bless their souls). However, that’s not an excuse to send all the money towards the military and take land. It’s not going to help in the long run, for goodness’ sakes.