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.
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.
0: https://en.wikipedia.org/wiki/Full_Employment_in_a_Free_Soci...
1: https://en.wikipedia.org/wiki/Full_employment