Once again with "There are no shortages, there is merely a disagreement with reality about how much labor costs."
It does not astound me that companies are having difficulty hiring white collar workers for $2k a month with the expectation of traditional Japanese working conditions but with traditional American expectations about job security.
With an unemployment rate at 2.8%, I would say that there actually is a shortage. That figure is already lower than the expected unemployment rate at "full employment" scenario. [0, 1]
At the same time I am not going to dispute your opening line: because there sure as hell is a disagreement on labour cost too.
Which brings up another fascinating point: the situation is Japan is going to be a data feast for economists. A modern, technologically advanced country going through such a shortage of labour that it's affecting the equilibrium and general conditions of the labour market.
Why do we even bother discussing the unemployment rate any more? It is now common knowledge that it does not include people who have given up on finding a job, people who are underemployed, people who went on disability as a replacement for unemployment subsidies, etc.
I think at this point we can just move on. I will state it explicitly: the notion of "expected unemployment rate at full employment" is meaningless. Whatever the supposed number is, it tells us nothing and deserves no discussion.
I would agree with this, governments (western at least) have distorted the measurement of so many statistics (inflation in Canada is <2% because they essentially exclude housing costs, as if that's a minor part of a typical family's budget) that historical comparisons are a joke.
I've had a question about Japan for a long time I hope someone reading may have some insight:
The nature of the Japanese workplace and society is so unique on the planet, does anyone know if there has ever been an in-depth economic study trying to translate some of it into numbers?
For example, on one hand you have the negative economic effect of "overstaffing" (my word), or having employees doing really quite unnecessary (ignoring a variable increase in pleasantness) things. Or, staying until 10PM pretending to work. Both of these must hurt productivity numbers big time.
But on the other hand, Japan enjoys a relative lack of expenses for many societal ills like various crimes, welfare, drug abuse, etc which would to a degree cancel out the above expenses.
It's obviously very complex, but I wonder if anyone has ever made a competent attempt at putting some of this into numbers?
> inflation in Canada is <2% because they essentially exclude housing costs
The practical month to month housing costs are included. Rent is an item in the basket of goods, as are mortgage payments, insurance payments, etc.[1]
> as if that's a minor part of a typical family's budget
What is missing is the "once in a lifetime" down payment made on the purchase of a home. But that happens so infrequently that it is difficult to see how spending changes over time. In terms of family budgeting it doesn't seem completely unreasonable to exclude it - you don't really need to budget for it.
Reading that I can see how one might come to the wrong conclusion (that actual housing costs are what is used to calculate inflation), that is likely in fact the intent.
Think about it: how can you have ~1% GDP growth, flat or diminishing wages, but housing prices (the largest purchase any family will ever make, 10+ years of salary) rising at 5% to 30% (in extreme cases) per year, year after year after year, with no drop in other spending categories, but somehow inflation is <2%? Where is the money coming from to drive this housing bubble?
So what we have here is our government deliberately misleading us on incredibly important economic matters, that are massively distorting our economy and the economic behavior of individuals.
> Where is the money coming from to drive this housing bubble?
A bubble constrained to a handful of specific markets within the country. Which, a common theme I hear is that people choose to live in those markets because their income is higher than if they lived elsewhere. It seems that the market is simply correcting on the expense side so that incomes between those locations and other parts of the country even out. If it were more lucrative to live elsewhere, people would.
To put it another way, if, hypothetically, your expected revenue is $50,000/year in Toronto and $35,000/year in rural Manitoba, and your expenses are $20,000/year in each location, you have $15,000/year additional money that you can put into the Toronto housing market. On the other hand, if expenses rose to $45,000 in Toronto, then your income would actually be $10,000/year higher in rural Manitoba. You'd be hard-pressed to not consider moving for a $10,000/year raise.
But the population of Toronto, and similar markets, keep on growing by leaps and bounds, which indicates that there is still extra money to be made there. Money that can eventually be spent on housing.
If it was just Vancouver and Toronto that would be one thing, but housing across Canada (except perhaps the maritimes) has seen huge gains in the last decade, far beyond income growth.
These price increases have been excluded from inflation (price inflation) numbers, as has the massive growth in consumer credit (monetary inflation). I don't have an article for you, but Canada has surpassed the US at the peak of their housing bubble in most any metric you look at, some of them substantially. Unsurprisingly, convincing anyone to acknowledge this reality is near impossible, the numbers can stare people in the face and they simple refuse to believe them.
> If it was just Vancouver and Toronto that would be one thing, but housing across Canada (except perhaps the maritimes) has seen huge gains in the last decade
The biggest trouble with Canadian data is that, unlike most of the rest of the world, they calculate it using the mean. A figure that is easily skewed by the sale of multi-million dollar mansions, which means little to the typical family budgeting for a home. It is true that the average home nationwide has risen substantially, but mainly because of Toronto and Vancouver specifically. Median home prices would be much more useful here, but data is nonexistent (as far as I can tell).
As for the growth, inflation over the period is 16%, so you would expect that much for sure. Historically, houses have followed inflation. Conveniently, I purchased my Canadian (non-Maritime, non-Toronto/Vancouver) home 10 years ago, and that sounds just about right for what I could expect to get out of it a decade on. Maybe slightly more, but the local economy has also improved dramatically in that timeframe, so I expect the locals have seen real increases in their income as well. The best data I can find for the localized area seems to confirm that.
> far beyond income growth.
The government redesigned their website and I have never been able to find it again, but they used to have a really good chart showing incomes over time. For most, their incomes have been been stagnant in real (adjusted for inflation) dollars. That is true. However, the income of the top 20% has skyrocket in the last 10-15 years. The most liberal figure I have ever seen for sales volume in the GTA is 80,000 units per year. A region with 2.6 million households. That is just 3%. It may be a bit of a misnomer to think that average people are buying places at all. If only 3% per year in the GTA are buying homes, that can easily be satisfied by the top 20% who are making huge income gains, especially when you consider that they can buy more than one home.
> Inflation over the period is 16%, so you would expect that much for sure. Historically, houses have followed inflation. Conveniently, I purchased my Canadian (non-Maritime, non-Toronto/Vancouver) home 10 years ago, and that sounds just about right for what I could expect to get out of it a decade on.
Are you saying that your house in non-maritimes Canada has only appreciated 16% in the last decade? Are you able to disclose where this is, because I might move there.
It's so strange to me to see articles like the above, charts like this: http://www.macleans.ca/economy/economicanalysis/canadas-hous..., read newspaper articles from around the world discussing our bubble, but then encounter people like yourself who witness literally nothing historically unusual, at all. It is truly bizarre.
Funny how these spherical cow models of perfectly efficient and fungible markets end up justifying a huge and growing transfer of wealth from the productive part of the economy to pure (and literal) rent-seekers, which is perhaps the worst possible outcome for actual economic efficiency.
Because none of these factors are news to economists, who do not give up measuring economies after reading a few editorials in the newspaper, and because in some very large, important economies, unemployment --- however it's measured --- is a major, justifiable public policy concern.
Perhaps I'm misunderstanding your question, though.
I think you're being actively uncharitable, but I'll offer the other cheek and agree to call that "misunderstanding" instead.
My objection is to the use of the unemployment rate (as defined by most governments), not to the study of the actual economic phenomenon of unemployment. We should insist on using better or less massaged indicators (perhaps the labor participation rate, though I do not want to get into a discussion of which specific indicator to use as a replacement), instead of going along with the use of deceptive statistics.
If you think that is throwing the baby out with the bathwater, I retort that throwing out a field's metaphorical babies can be an appropriate punishment for deceiving the public. Surely economists, of all people, can appreciate the importance of putting the correct incentives in place.
I'm not too worried. The economy will adjust to the aging/declining population via automation, downsizing, etc. The quality of life for the average Japanese person is very high, and I don't see that changing any time soon.
Economists in general are very doom-and-gloom and say that Japan needs mass immigration to balance the population decline, but that would clearly be a mistake. Here's an interesting video on the subject that mostly echoes my views: https://www.youtube.com/watch?v=Z3BYCK-3jPc
Economists consider around 5% unemployment healthy, allows for people to retrain and move jobs and it's better to have some slack in the system while people move around.
I just want to chime in here: seishein(full time permanent) workers over here get a lot of protection mandated by law. For example if my company closes, they have to pay me 3 months of my salary while I find a new job, and I'm quite difficult to fire.
Infact one of the old chef's just stopped turning up and said I needed a break, they had to pay him 3 months salary still.
Edit for more info:
That is why there has been a huge reduction in the past 10 years (this is anecdotal evidence I have heard by word of mouth), of hiring staff as seishein.
One school I worked at refused to put staff on as seishein, then myself and a few others left due to this, and they changed their practices.
I don't know how it is in Japan. But in Spain, there is a fund, paid by all companies, that is used in this situation. It works like a mandatory insurance. If your company goes under, your employees get the money from the fund. The fund name is FOGASA (FOndo de GArantia SAlarial), it means salary guarantee fund.
Japan Inc has been giving the shaft to young people with regards to permanent worker status for about 25 years now. The conditions are such that the social contract that some/many older Japanese believe exist is distinctly a part of history for a lot of young Japanese. This has, imho, created a lot of challenges related to social stability and the economic aspects related to social stability (e.g., housing trends, marriage, having children, education, etc.).
As such, I hope that this is the beginning of a long upward trend in increasing the proportion of permanent workers. It will likely be very good for Japan in the long run if it can be sustained.
I will be interested to see what happens during the big worldwide economic downturn.
I hope going forward humans are realizing that we don't need things, we need social systems which function. That's much more important that the latest doodad or car. It's more important to have good functioning social systems which support the masses and allow them to have some sense of a life... rather than being treated like one night stand employment agreements that we have today... and being in a constant state of being used and under-appreciated.
It is funny because I just looked at an email from HR and saw that there was 9 people "at elevated risk of Karoshi" in my department of <100 IT people.
Media BS aside, the labor shortage has certainly not brought any improved worker treatment.
(Incidentally, there is a union here, but they are not very effective at anything, as is the norm for Japanese unions)
I know it's cynical but it feels like the term "labour shortage" is just a way of complaining about not being able to find desperate laborers at bottom dollar. Here in Canada, I've seen plenty of job ads that were more or less "we have job, come work here". It's like they don't even try and then proceed to step 2: complain about the labor supply. I can only image that the situation is a lot worse in a country that overworks it's people as much as Japan.
> ...I've seen plenty of job ads that were more or less "we have job, come work here". It's like they don't even try and then proceed to step 2: complain about the labor supply.
This kabuki theater by business political advocacy groups is a perverse form of the old Soviet joke "they pretend to pay us; we pretend to work", except the pretend on the part of labor hasn't taken hold yet at large scales. Perhaps a perverse form of a Potemkin village is a more fitting picture.
I think it's a bit judgemental to say that Japan overworks people, the place functions to some of the highest standards, and excels in many ways like nowhere else in the world.
After a lifetime of "overwork", retired japanese people opt to do part time work to stave off boredom. I think they just think of it differently.
Japan is a big country and there are people with diverse views in it. Overwork is widely recognized to be a societal problem here, in the same fashion that e.g. racism is widely recognized to be a problem in the US. You could certainly find people who disagree with either conclusion, but you could also find people who disagree that the earth is round.
There exist government employees whose literal only job is preventing deaths from exhaustion. Japan has at least a few hundred of these a year; the true number of excess overwork-caused death is probably low tens of thousands when you factor in suicides.
It's often because the ad is "fake" in the sense that is is a mandatory first step before applying for a temporary foreign worker because they "couldn't find" a Canadian to fill the job. I know someone who worked at a foreign recruitment company so I know all about the outright fraud that goes on.
I also know someone that works at a company that sells relatively large $ commodities into China, so I get to see all the fraud of how Chinese do business (big deals being chopped up into smaller pieces and deposited into "nieces and nephews" accounts, etc).
I refuse to believe the Canadian government isn't well aware this is all going on (for example, it accidentally leaked that they don't audit suspicious real estate deals if a non-Canadian is involved as it might be perceived as racist), which is pretty damn depressing considering more and more people including high paid professionals are struggling financially.
Another major change not mentioned in the article is the revisions to Japan's labor law that now makes it a requirement to hire any "fixed-term" (=yearly contract) worker who has been at the same company for five consecutive years on a permanent basis from year 6, or else terminate employment by the end of year 5. This will go into effect for people who have been working at the same place for years at the end of this fiscal year (March 2018). There are still some differences, such as lack of a retirement bonus and there may be some lingering status issues ("tenured" staff traditionally rank higher).
I live in Tokyo, and I've seen this trend in action. Jobs that would almost certainly be part-time in America, such as chain yoga or exercise class instructors, are often full-time employees.
This is good news. For those who have not seen it, Japan: A Story of Love and Hate (https://www.youtube.com/watch?v=QH-kNnq7mFM) is an excellent - and often poignant - window into the life of a Japanese temp* worker.
That's not going to increase consumption demand on the market. New workers in Japan and especially wary about the future and are not like the spenders of the Bubble 時代.
Seems like some irony/self-fulfilling prophecy going on here, though. The optimist, "borrower spender" American is another side of the same coin that values risk taking and has tolerance for failure. If you are too "realist", your reality might actually end up being worse than if you were an optimist.
There's a big difference between borrowing for a business venture and borrowing to subsidize a lavish lifestyle. We have both kind of people in the US, but I have to believe the second type outnumbers the first by quite a bit.
You're both right, and that's the beauty of culture. The double sided sword yields both benefits and disadvantages. The irony is that America's historical appreciation of immigration (one of the best ways to mitigate cultural blind spots) has yielded a backlash against the lack of a cultural bedrock, and become a double edge sword itself.
> The irony is that America's historical appreciation of immigration (one of the best ways to mitigate cultural blind spots) has yielded a backlash against the lack of a cultural bedrock, and become a double edge sword itself.
Only for people who refuse to appreciate that immigration as a whole is America's cultural bedrock, and not merely the effect of immigration from a particular group or region.
Are there upper limits to the level of immigration before this bedrock starts to deteriorate? I was out at a park on the weekend and I'd estimate less than 25% of the people there could speak the same language as me. Does an inability to verbally communicate with my fellow citizens really not affect anything?
I should also clarify, I don't know what percentage of those people were capable of speaking English, based on past experience of attempts I would guess < 25%, but that's pure speculation.
Quebec, founded in 1608 (well, Quebec City), a semi-sovereign nation in Canada whom we literally fought a war with in the past, is not really comparable to the situation in Vancouver. I don't think it's my argument that isn't valid.
> Sharp contrast to the eternal optimist, borrower spender American stereotype.
Agree, while there is a growing number of Japanese who resort to カードローン (quick credit) these days, for instant gratification despite having few savings.
I see the Japanese population as having a more defined vision of the future than Americans, and it's fairly negative vision. This leads to making concrete but pessimistic plans like saving as much money as possible and investing it only into things like real estate.
My impression of the US mindset about the future is that it's hazy but also positive. This leads to low or negative savings and few convictions about where to invest. Most just take a broad portfolio approach and buy index funds. Many people have both debt and holdings in index funds. They're not sure how, but feel optimistic that things will work out well somehow.
I disagree, however I've modded you up because your opinion is valid even if I think it's wrong and you've said nothing offensive.
My viewpoint is far more pessimistic: I think there's a major cultural difference between the US and Japan, and that Japanese tend to be better managers of their personal finances than Americans. Americans have much higher debt, but it's because too many of them have spending addictions, and think they deserve to live like royalty, and with the availability of easy credit get sucked into that trap. I've seen it myself far too many times. Also, perhaps education has something to do with it: Americans generally aren't taught to budget or manage their personal finances in school much from what I've seen. Maybe they are in Japan.
People in America complain a lot about things like the cost of rent, etc., which is definitely true IMO, but they do also tend to splurge on a lot of stuff they don't need, such as Starbucks drinks. If Americans were really short of funds, then how do all these Starbucks on every street corner stay in business selling $5-10 fancy drinks?
Or maybe Americans save less and borrow more because necessary things like education, housing (in certain cities), and healthcare are so damn expensive.
Japan has done an excellent job on health care, but Japanese housing costs are significantly higher on average than those in the US.
Along with a huge and growing underclass of freeters and other workers who cannot land the shrinking number of corporate positions, housing costs are why Japan is famous for "parasite singles". Nonetheless, even those living below the poverty level are less likely to carry personal debt than Americans.
Another problem with attributing American saving habits to health care or schooling costs is that Americans had a high propensity for debt even 30 years ago when those costs were much lower. Cultural differences are a driving factor.
Japan's debt-to-GDP figure far exceeds the US's and yet it's industries are getting punched left and right (by China-Korea and the US). Becoming more realist/risk-averse after the Bubble era is not a great feat IMO.
That's the Japanese government, which is different from the Japanese people, who have among the largest savings per heard on the planet. Do not equal the people to the state, please.
It does not astound me that companies are having difficulty hiring white collar workers for $2k a month with the expectation of traditional Japanese working conditions but with traditional American expectations about job security.