15.7% of Japanese Living in Poverty?

A Kyodo news report yesterday proclaimed that 1 in 7 Japanese people were living in poverty, according to a Ministry of Health, Labor and Welfare release. This was the first time that the ministry has released such figures, which were calculated in accordance with the calculation methods used by the OECD. In October 2008, the OECD had ranked Japan’s poverty level as 4th highest in its “Growing Unequal?” report. This same report however did note that income inequality and general poverty had improved in Japan over the last 5 years.

The figure of 15.7% (or 1 in 7) has been all over the media over the last day or so, but what does it really mean? The ‘poverty’ rate is considered to be that percentage of the population that are living below half of the median anuual income. In Japan, this amounts to living below about US$12,500 per year. This number, along with the 15.7% figure sound very ominous, but there are a number of factors that cannot be determined from these figures alone, and which require more information.

Firstly, the OECD report from last year recognizes that over the last 20 years, the share of the population aged over 65 has doubled, and the number of children has fallen by one third. This in itself is a major reason for a shift in income equality. Since the elderly are less likely to be earning high incomes, and since this group currently make up 20% of the population (see Respecting the 28.98 million Aged), this can account for at least some of the 15.%. And given the high savings rate in Japan through the 70s and 80s (20% of household income in the 70s, and as much as 14% in the early 90s), the elderly of today are still largely in a position to take care of themselves.

It should be noted also that while some portion of the population may be currently earning less than half the median annual income, this is not a static group. For all kinds of reasons, people find themselves without work temporarily (the unemployment rate in Japan was 5.5% in August, and many consider this to be a lowball aproximation of the real figure), and others take part time jobs or jobs below their skill level on a temporary basis for a variety of reasons. Many of these unemployed or temporary workers will later shift to better paying jobs, so it is important to remember that while 15.7% may be considered to be ‘living in poverty’ at one point in time, circumstances will change for a large number of them.

Having said all of that, the seriousness of Japan’s worker problems should not be understated. The problems with temporary workers has already been highlighted here (see Japan’s Temporary Worker Problem). According to a Japan Times survey, some 31% of temporary workers were earning between 1 and 2 million yen per year, which would put them in the ‘poverty’ range.

The Hatoyama administration have said that they want to address the issues surrounding those with lower incomes in Japan. The last two decades have really taken their toll on what was the powerhouse economy of the 80s, and this has resulted in the need of companies to reorganize, and to lay off a lot of surplus workers. They were able to support extra workers for a long time, but that time is long gone. And over the last decade or two, Japan has struggled to grow at a rate that would allow them to pick up the slack. The government can hand out a few hundred dollars to those at the lower end of the financial ladder until they are blue in the face, but until they implement policies to encourage and facilitate real economic growth and business investment, there will not be any real jobs which are needed if poverty levels are to be diminished dignificantly. So far, there are few signs that the Hatoyama administration have significant plans to do this….

Tags: Aged, Economic Growth, Hatoyama Administration, OECD, Poverty, Temporary Workers