Editorial: Japan must expand middle class and reduce wealth disparities to boost economy

The protracted coronavirus crisis has exposed growing inequalities in Japan, revealing how severely distorted the country’s economy is.

For a longer time, the negative effects of the pandemic have reverberated on those in a weak position. Low-paid non-permanent employees make up a large portion of the workforce in restaurants and other industries severely affected by working hour limits. In June of this year, the restaurant industry had over 700,000 fewer people than two years ago. The drop is due to the termination of employment amid the coronavirus crisis.

At the same time, large companies, including automakers, saw their profits increase dramatically over the period. The economies of the United States and China, which were among the first to recover, are behind these good numbers.

Japan’s gross domestic product figures released this week for the April-June quarter clearly show the distortions in the economy. While exports are on the rise, domestic spending remains low and the overall economic situation continues to be dire.

The spread of inequalities in society increases the number of isolated people and deepens the division. How to resolve this situation is not obvious.

A woman in her 30s working as a contract cook at a Japanese cuisine restaurant in Tokyo lost her job in the fall of 2020. Of the ten or so cooks working in the restaurant, all of the permanent staff kept their jobs. She was the only person to be let go.

She worked 12 hours a day and her annual income never exceeded the 2.5 million yen mark (approximately $ 22,800). She also struggled in a male dominated workplace. Despite this, she clung to her dream of someday becoming independent and was in the process of learning her trade.

The drinking establishment where she found work subsequently refused to comply with requests to shorten its hours of operation. Her work continued until the early hours of the morning and she could not finish in time for the last trains built earlier under the pandemic. She spent the night in internet cafes. Eventually the calendar took a toll on her mental state and she quit in the spring of this year.

Now she works part time in the kitchen of a supermarket. She lives in an apartment with her mother, who lives off her pension, and by sharing the rent halfway, they lead an unstable life where they can more or less cover their expenses. “All I want is to work normally at a job that pays a salary that allows me to live normally,” she said.

Aya Abe, professor at Tokyo Metropolitan University and expert on poverty issues, said: “Even if people who have lost their jobs find new jobs, if their treatment is poor, they lose sight of their own worth. and think they have been cut. of the society.”

Until the government tries to correct the tensions in the economy, there will be no clear path out of poverty and social isolation.

Almost 40% of the workforce is now made up of people in non-permanent jobs. This figure was achieved under the administrations of former Prime Minister Shinzo Abe, who pushed forward the efficiency-oriented “Abenomics” economic policy mix. Outgoing Prime Minister Yoshihide Suga aims for a society where “self-help” is a priority, and makes no attempt to revise the current situation.

The Prime Minister announced that by accelerating the deployment of the vaccine in the country, Japan’s GDP will return to its pre-pandemic level within the year. But by simply restoring the economy to its former state, the structures that create inequalities could persist.

Disparities with the rich must be reduced and the middle class expanded.

The middle class was born with the economic development of Japan in the post-war period. Because people could receive secure income, they could play a role in expanding the economy through consumer activity.

But from the 1980s, neoliberalism, which advocates self-sufficiency and efficiency, has spread around the world. The tax cuts have made big business and the very wealthy even richer.

Advances in the digitization of society have also perpetuated inequalities. Information technology companies make huge profits, but require far fewer hands than industries, including manufacturing or retail. The few senior employees and others receive generous compensation.

Japan’s relative poverty rate indicating what proportion of the country has low incomes has risen sharply since the 1980s, and even before the COVID-19 crisis it had high rates among developed countries. The pandemic has just highlighted the degradation of the middle class to be seen in a serious way.

The administration of US President Joe Biden sees the middle class as the backbone of the country and is working to restore deeper and deeper equality under Donald Trump’s previous administration. They have proposed raising taxes for the very rich and big business, and are considering correcting disparities through income redistribution. The debate on the tightening of the taxation of large companies is also opening in Europe.

The United States and Europe have ruled that a post-coronavirus society cannot be the continuation of one that has existed until now, and have started changing their policies to those that create vibrant economies with the middle class In the center.

Keio University professor Kohei Komamura, who has researched inequality issues, said: “It is the job of government to correct the distortions of capitalism. Especially in a digital economy, Japan must very deliberately strengthen income redistribution.

This can, for example, also be an opportunity to move towards a low-carbon society. If active investments are made in environmentally related industries, it will lead to huge employment opportunities and lead to revival for the middle class. But the Suga administration lacks a perspective that could join in correcting the disparities. Using societal transformation as a lever, a radical response including plans for a complete structural change must be made.

If the middle class is growing and many people can be part of a society where they lead a secure life, one can also expect more consumer activity. It would certainly help the Japanese economy.