Wednesday, May 21, 2008

No Car, no Beer, no Money

The morning news today featured a report on the problem of young people not buying things. Specifically, 20-30-somethings are not buying cars any more; both car ownership and (more ominous for the industry) drivers licence ownership is trending steadily downwards and has done so for a number of years. Of course, owning a car is expensive and becoming more so, and a car is not a symbol of adulthood anymore, unlike for earlier generations.

But it's not just cars; beer sales is steadily diminishing in this age group too, as is the sales of many other consumer items, appearances notwithstanding. To some extent it's of course the vagaries of fashion; consumption patterns change according to prevailing attitudes, and with the current interest in environmental issues, health, and the downsides of materialism, a downtrend is nothing to be surprised about.

Shopping less.

But that is not the whole explanation. Nor is it the (in)famous population decline; the consumption pattern change does not track population change in this age group. What was brought up as the main culprits was the current state of the economy, and the example of this generations forebears, the so-called "lost generation".

The "lost generation" are those who came of age during the interminable post-bubble recession; people around my age. They graduated into a lousy economy and a dismal job market, and because of the vagaries of Japanese employment (many companies hire only fresh graduates for permanent positions) a disconcerting proportion of these people have never gained a steady foothold in the job market. They are the vanguard of the part-timer and temp-staff trend here in Japan, with no job security, low pay and a very uncertain, poor retirement to look forward to. The current 20-30 year-olds see what happened to them, see their own job prospects trending the same way (fixed employment is down, temp jobs are up), and plan accordingly.

The second issue brought up is the deteriorating state of the pension system especially; this was specifically mentioned by many of the young people in the report. The pension system is clearly failing - it's in a similar situation the old Swedish system was in, with projected payments not able to cover its commitments - and in addition you have the never-ending farcically incompetent mishandling of millions of pension records. Young people suspect they will never get a single yen from the pension system, and save their money instead of consuming it.*

The report highlights one aspect of social security that is often missed: lack of security materially impacts the economy. If a poor country does not have a reliable pension system and social security net it doesn't affect the economy in this manner; poor people are going to spend most or all their resources on necessities anyhow. But a wealthy country, like Japan, has a farirly substantial part of its economy driven not by necessities but by discretionary spending. And when your job is unstable, child-raising is extremely expensive and your future pension is highly uncertain, you're going to cut down on discretionary purchases - as well as delay marriage, postpone child-rearing and limit the number of children; this is certainly a factor in the declining population, as per my earlier post on the subject. Having people work as temporary staff will save some money for the individual company, but will contract the overall market for everybody. And this is true wven if the salary is the same; is is the uncertainty associated with a lack of job security rather than salary level that makes people anxious and unwilling to spend.


* As an aside, as a foreigner I have to pay 9 percent of my salary into the Japanese pension system. But because of the way the rules are set up for foreigners I am unlikely ever to get any pension benefits from that money. There are no reciprocal agreements between Japan and Sweden so I won't be getting any pension from Sweden either, and Japan is famously dragging its feet all it can to avoid such agreements (only two countries have them so far). Japanese part-timers get into trouble too, as you need to pay for a minimum of 25 years to receive anything at all, and many part-time jobs generate no pension benefits. This is a cheap, tawdry way of treating people in the abstract; it's milking contributions from people with no intention of ever paying them back in turn. I'm not all that upset about it in practice, though, since I agree with the current 20-somethings that by the time I retire there won't be money for me or anybody in the Japanese pension system anyhow.


  1. As a foreigner, I gathered that you know you can take out your pension when you decided to leave Japan.

    Additionally, some of the younger generation have also elected not to make contribution to their pension.

  2. We can take the last three years of pension payments with us. Which is a help if you have been here only a short while, but consider people that have been here for fifteen or twenty years. They'll lose the vast majority of their payments.

    And yes, some people skip paying their pension payments. But that is technically illegal, and only possible for some people; for many jobs your employer will deduct the pension from your salary directly, giving you no choice.


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