A theme often repeated in the media is that Japan is suffering terribly because of its low birth rates and shrinking population. This has meant slow growth, labor shortages, and an enormous government debt.
Like many items that are now popular wisdom, the story is pretty much nonsense. Let’s start at the most basic measure, per capita GDP growth. Yeah, I said per capita GDP growth because insofar as we care about growth it is on a per person basis, not total growth. After all, Bangladesh has a GDP that is more than twice as large as Denmark’s, but would anyone in their right mind say that the people of Bangladesh enjoy a higher standard of living? (Denmark’s GDP is more than twelve times as high on a per capita basis.)
On a per capita basis, Japan’s economy has grown at an average annual rate of 1.4 percent since the collapse of its stock and real estate in 1990. That’s somewhat less than the 2.3 percent rate of the U.S. economy, but hardly seems like a disaster. By comparison, per capita growth has averaged just 0.8 percent annually since the collapse of the housing bubble in 2007 in the United States.
But per capita income is just the beginning of any story of comparative well-being. There are many other factors that are as important in determining people’s living standards. To take an obvious one that gets far too little attention, the length of the average work year has declined far more over this period in Japan than in the United States.
According to the OECD, the length of the average work year has declined by almost 16 percent between 1990 and 2017 (the last year for which data are available). By comparison, the length of the average work year in the United States has declined by less than 3 percent over this period. This is a really big deal in terms of peoples’ lives.
If we use a start point of a 40-hour workweek, for 50 weeks a year, a 16 percent reduction in hours would be equivalent to 8 weeks a year of additional vacation. Alternatively, it would mean a 6.4 hour reduction in the length of the average workweek, meaning that people would be working 33.6 hours a week rather than 40 hours. My guess is that most people in the United States would be very happy to see the same sort of reduction in work hours as in disaster Japan.
Turning to health statistics, the OECD reports that life expectancy at birth in Japan increased from 75.9 years in 1990 to 81.0 years in 2016 (the last year for which data are available). In the United States it increased from 71.8 years in 1990 to 76.1 years in 2016. This means that the gap in life expectancy between Japan and the United States has increased from 4.1 years in 1990 to 4.9 years in 2016.
There is an even more dramatic difference in life expectancy at age 65. In Japan, this went from 20.0 years to 24.4 years in 2016. In the U.S., life expectancy at age 65 increased by just 1.7 years over this period, from 18.9 years in 1990 to 20.6 years in 2016.
If we look at unemployment rates, most of us are happy to see that the unemployment rate in the United States has fallen to 3.6 percent, a fifty-year low. By comparison, the unemployment rate in Japan is just 2.4 percent.
If we flip the picture over and look at employment to population ratios (EPOP), the percentage of the working age people (ages 15 to 64) who have jobs, the difference is even more dramatic. The most recent figure for the US is 71.9 percent. For Japan, it is 77.5 percent. While most of this gap is due to higher EPOPs among men, 84.3 percent in Japan, compared to 76.3 percent in the US, Japan now has higher EPOPs among women as well.
Excerpted from: ‘The Old Japan Disaster Horror Story’.