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| 01-27-2011, 09:24 PM | #1 |
| Generational Inequality In Japan and the USA
I think every young person in America should look at what is happening to the youth of Japan and think long and hard about how we can prevent that from happening to us here in America. The NYT has a very good story about the growing generational inequality in that country and the emergence of a "Silver Democracy" where the old people dominate the government and focus government spending and policies more towards protecting the geriatric old people than nurturing the young people and educating the children.  Quote: like many young Japanese, he was a so-called irregular worker, kept on a temporary staff contract with little of the job security and half the salary of the “regular” employees, most of them workers in their late 40s or older. After more than a decade of trying to gain regular status, Mr. Horie finally quit — not just the temporary jobs, but Japan altogether. Quote: Last year, 45 percent of those ages 15 to 24 in the work force held irregular jobs, up from 17.2 percent in 1988 and as much as twice the rate among workers in older age groups, who cling tenaciously to the old ways. Japan’s news media are now filled with grim accounts of how university seniors face a second “ice age” in the job market, with just 56.7 percent receiving job offers before graduation as of October 2010 — an all-time low. Quote: “Japan has lost its vitality because the older generations don’t step aside, allowing the young generations a chance to take new challenges and grow.” Quote: As Mr. Horie discovered, there are corporations that hire all too many young people for low-paying, dead-end jobs — in effect, forcing them to shoulder the costs of preserving cushier jobs for older employees. Others point to an underfinanced pension system so skewed in favor of older Japanese that many younger workers simply refuse to pay; a “silver democracy” that spends far more on the elderly than on education and child care — an issue that is familiar to Americans; and outdated hiring practices that have created a new “lost generation” of disenfranchised youth. Quote: Social experts say the need to cut soaring budget deficits means that younger Japanese will never receive the level of benefits enjoyed by retirees today. Calculations show that a child born today can expect to receive up to $1.2 million less in pensions, health care and other government spending over the course of his life than someone retired today; in the national pension system alone, this gap reaches into the hundreds of thousands of dollars. Quote: The result is that young Japanese are fleeing the program in droves: half of workers below the age of 35 now fail to make their legally mandated payments, even though that means they must face the future with no pension at all. “In France, the young people take to the streets,” Mr. Takahashi said. “In Japan, they just don’t pay.” http://www.nytimes.com/2011/01/28/world/asia/28generation.html?partner=rss&emc=rss | |
| 01-28-2011, 05:54 AM | #2 |
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Actually I think in a sense you are confusing cause and effect.. if Japan did what I had suggested for us.... purge the workforce of older workers w/ retirement (yes we CAN afford it) that would increase their participation in the economy, and spending, and taxes....... Japan realizes that their system has a weak link... something we are unfortunately taking as the "status quo" and seeing it "good for business"....... There "gap" between rich and poor is only a fraction of us apparently anyways.. It sounds bad but in US terms is not so bad........ Comparing apples to oranges is also a bit risky... There "poor" already have it better then our "poor" and their "middle class" already has it bettr then our "middle class".... only their "upper class" can't hold a candle to the good old USA......  to quote the book I linked........ Inequality amid affluence: social ... - Google Books you are a "gloomy gus" aren't you.....    This was 1999......... Seems to me someones propagandizing Japan for some reason........ Maybe someone doesn't want us to consider Japan as "successful"....... Quote: Well Natalie, international statistics show that poverty rates are lowest where income inequality is lowest too. That can be because of culture -- the wage spectrum is compressed, as in Japan, where it is unseemly to get too far ahead of others in pay -- or through active redistribution programs, where taxes and the services they buy redistribute incomes and opportunities to try to level the playing field a bit more. Getting a bit back to MMT and "full employment" since it just so happens to come up in this conversation......... Quote: Comment From RonMacKinnon: Would a "guaranteed income suppliment" be a solution to this crisis? Ron it could indeed be a solution, and has been the subject of discussion in Canada, with various iterations, since the 1970s. The Mincome experiment in Manitoba in the mid 1970s, the MacDonald Commission i n the mid 1980s, and the House Report from Newfoundland and Labrador in the early 1990s all had proposals for providing a basic income. Only Manitoba tried it, as a pilot project, for a few years. The problem with the guaranteed income idea is at what rate you set it, and at what rate you tax it back. It could remove the stigma of income support programs, but it could just as easily be a costly experiment that, essentially, guarantees poverty. Also, as Dr. Wilkinson has suggested, at some point on the GDP per capita curve, income inequality is no longer about material deprivation, but rather one of psycho-social responses. We are, after all, pack animal Quote: Comment From Gerry Sanders: Seems to me we can keep going down the road of winner take all corporatism like the US or develop a middle class by going the route of social democracies. Why not have prospering Norway as our economic model rather than the declining US? Armine Yalnizyan: Gerry, you have put your finger on the nub of the problem, which is not economic in nature, but cultural in nature. For better or worse, our culture is more likely to mimic the Americans than the Norwegians. But Canadians have always trod a slightly different path too. We have perhaps the most diverse population on the planet, and Canada has for some time been regarded as the United Nations in action. We have had leadership from virtually all of our provinces in ways to do things more effectively and inclusively, and it is highly likely that we can continue that pattern of marching to the beat of a different drummer, even as the Americans pursue their own course of action. We should remember, too, that some of the most vocal opponents of inequality come from the U.S. See Senator Bernie Sanders' speech here http://www.youtube.com/watch?v=H5OtB298fHY Back to Japan.... Quote: But after interviewing at 10 companies, she said she suffered a minor nervous breakdown, and stopped. She said she realized that she did not want to become an overworked corporate warrior like her father. By failing to get such a job before graduating, Kyoko was forced to join the ranks of the "freeters" -- an underclass of young people who hold transient, lower-paying irregular jobs. Since graduating in 2004 she has held six jobs, none of them paying unemployment insurance, pension or a monthly salary of more than 150,000 yen, or about $1,800. "I realized that wasn't who I wanted to be," recalled Kyoko, now 29. "But why has being myself cost me so dearly?" sounds like the entire USA job market........... So Japan is becoming.... US????  Quote: He—as well as the politicians in attendance—knows that because most Americans have not directly experienced the much higher living standards that most Europeans enjoy, Washington could long ignore our laggard status as the wealthiest third world country on earth. We are much closer to a Brazil than we are to a France by most of the important measures. Do not get me wrong—we have very much to be proud of, unfortunately, most of our best moments are now in the very distant past. By almost any measure, US living standards for the vast majority of our population have slipped far behind those of other wealthy nations—and by many measures we fare no better than countries with per capita incomes far below ours. People... WAKE UP................. Seems to always come back to this........... Quote: While I do believe that the US has had a problem with deficits and debts, it was the US private sector not its government sector that created the problem. Perhaps our households and firms “ran out of money”, but the government as sovereign issuer of our currency can never “run out of money”. I have explained that before, both on this blogsite as well as at New Economic Perspectives, New Deal, and Huffington Post, and also in academic papers at www.cfeps.org and www.levy.org. Let me quickly recap: yes, it is true that our domestic private sector (households and firms) ran budget deficits for most of the decade 1996-2006. That helped to fuel economic growth as well as the housing boom, but it also meant a growing mountain of debt—including those subprime mortgages that got bundled and sold even to the Chinese. It was unsustainable and crashed in 2007—we are now living in the aftermath as the private sector downsized, defaulted on debt, and started saving again. The earlier private sector deficits helped to reduce the federal government deficits during the Clinton years, and even during the later part of the Bush years (holding the current account balance constant, that is an identity: private sector deficit equals dollar-for-dollar a government surplus). When the private sector retrenched after 2007, the government sector's deficit grew (dollar-for-dollar, excluding the improvement of the current account deficit). Unlike the private sector's deficit, a government sector deficit is sustainable in the sense that it cannot lead to insolvency; sovereign government cannot run out of finance. That does not mean growing budget deficits are a good idea—they can boost demand beyond the full employment level, fueling inflation. They might affect the exchange rate; and they might affect the interest rate (although the impact is the reverse of what is usually believed, a point I will not explain here). But none of that is related to affordability. (Caveat: state and local governments are not sovereign; they do have unsustainable financial positions and hence are cutting spending and raising taxes and fees. That in turn is creating huge head winds that will kill this supposed recovery. A topic for another day.) minskian history of japan Quote: Clearly, one would not want to put too much faith into this kind of analysis. Quite apart from the data issues, it abstracts from culture, institutions and history. Also, economic projections of any kind are almost always wrong simply because they assume that what was observed in the past will continue into the future. A reading of far more sophisticated budgetary projections from the early 1990s in both the U.S. and Canada should make that abundantly clear. That being said, projections are useful in that they can at least tell us what is likely to happen if all else is held constant and history rhymes. Indeed, these pictures do suggest that there are striking parallels in the broad patterns of the data and at least demand that we pay some attention to the possibility that Japan s recent experience may presage our future. We have suggested that Japan s crisis followed what might be best labeled a Minskian pattern, which can be found in Minsky s discussions of financial deregulation (see, for example, the chapter on banking in his 1986 tome) as well as the important and stabilizing role of government deficits and central bank lender-of-last resort policy. We can group the causal factors into two broadly defined groups. First, we have the contextual facts. They are as follows: " The real estate sector was highly leveraged relative to other sectors. Even though DE ratios moved lower in the period leading up to the crash, the subsequent worsening of DE ratios especially in light of the continued improvement in other sectors suggests these improvements were insufficient or illusory. When the speculation ended, so did the improvements. The importance of the real estate sector cannot be underestimated because of its impact on the banking sector, which we revisit next. In other words, the real estate sector constituted a critical mass of firms needed to trigger a crisis. " The banking sector grew ever more exposed to the real estate sector and stock market because of a broad decline in demand for financing from its traditional clients, the large Japanese corporations. The collapse of stock and then real estate prices, interacting with Basle accord provisions and other institutional changes, induced a liquidity preference on the part of banks. " The U.S., seeking to redress trade imbalances, put pressure on Japan to stimulate domestic and deregulate its financial markets......................The broad over-riding theme in Minsky s work and in most non-mainstream work for that matter is that of a capitalist economy that naturally moves in and out of crises. The only constant is constant change. There certainly is no static equilibrium, as the most simple textbook presentations (and even many of the more sophisticated mathematical models) seem to suggest. If anything, the absence of large scale non-market institutions (big governments, central banks) make crises worse, not better. The best institutions adapt quickly to these constant changes. And still the transition from one set of institutions to another imparts inherent fragility precisely because the adjustment process ventures into the unknown. The pallet of uncertain events grows with the adjustment process. And yet that does not imply hopelessness and defeatism, as many latter day laissez-faire preachers seem to suggest. Rather, it demands a more vigorous and creative attempt to design better economic institutions. This is where economists should direct the brunt of their intellectual energy, as Paul Davidson and a whole tradition of American and Canadian Institutionalists and Keynesians have repeatedly suggested. Quote: In any case, a vulgarized version of our Japan story would say that institutional and historical realities meant the country could not easily escape its relatively rigid past. This was a great weakness in a fast-changing world. This was Minsky 's main message and it is one of the few things we can say with certainty about economies and, for that matter, people. http://www.progressive-economics.ca/wp-content/uploads/2007/07/pigeon.pdf MIKEMIKE check out pg 5........ Kalecki equation.... Written in 2000, quite prophetic....... Current one... no time to look now though...... http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1304265 http://www.levyinstitute.org/pubs/wp_548.pdf Last edited by jeffkrol; 01-28-2011 at 07:41 AM. | |
| 01-28-2011, 12:20 PM | #3 |
Originally posted by jeffkrol  Read more: In Japan, Young Face Generational Roadblocks sounds like the entire USA job market........... So Japan is becoming.... US???? There is no point where people are forcibly retired by the government, only an age where they are forced to take their social security and start drawing down their retirement accounts. Given how ill prepared old people approaching retirement age are for retirement they just continue to work into their old age instead of getting out of the way for the next generation. | |
| 01-28-2011, 12:29 PM | #4 |
| 01-28-2011, 12:40 PM | #5 |
| Originally posted by jeffkrol And we help that by increasing the SS age and cutting benefits??? how about decreasing the retirement age for full bene's and maybe even a bonus... I know you say "we can't afford it"...... pfffft. Make people who continue to work ineligible to receive SS and Medicare benefits while they are still making a regular paycheck. Then maybe you can give some kind of incentive for early retirement by making the means test more generous at 62 than it is at 67. Enough of the carats, we need to break out the sticks and drive the old mules to the glue factory. | |
| 01-28-2011, 01:00 PM | #6 |
| Originally posted by mikemike Means test SS. Make people who continue to work ineligible to receive SS and Medicare benefits while they are still making a regular paycheck. Then maybe you can give some kind of incentive for early retirement by making the means test more generous at 62 than it is at 67. Enough of the carats, we need to break out the sticks and drive the old mules to the glue factory. Then I can make my way in the "shadow economy" of ebay and real estate..... Wouldn't have to prod me too hard. | |
| 01-30-2011, 06:39 AM | #8 |
| 01-30-2011, 10:31 AM | #9 |
| 01-30-2011, 11:41 AM | #10 |
| Originally posted by GeneV I hear all these carps about the deficit, but I fail to see anyone explain cogently why it has very much to do with the current problems. Likewise, SS hasn't contributed one penny to the deficit--just the opposite. Older people will be working longer because our savings, which we were encouraged to keep and invest by the most conservative voices in society, rather than depend on the government, tanked. Much of my investment in the stock market has come back to close to where it was, but in one's late 50s, every year with zero or negative growth is a killer. I will not be retiring at age 65 absent some windfall. It is not a choice, but an economic reality. Do we really want 'people" to truly understand that wall street and unbridled "capitalism (the true US religion) is what brought us to this point????? That the gov can "spend" as much as it wants and needs on it's own people??? Granted that spending in turn must "feed the beast"... That "feeding the beast" has had a very feeble ROI for the American people in the last 30 years (excluding that 1%)? Naaahh just blame your "neighbor"...... A little bit of SANITY............. Quote: Economic Giants Can Handle Big Debts Large national debts haven't prevented Japan, France or Germany from maintaining their status as economic powerhouses. The U.S. debt won't stop this nation either. But if a large national debt doesn't prevent economic greatness, what's driving Pawlenty and others to paint a picture of economic ruin? Perhaps it's just a personal value or a belief that a nation should pay for all of its purchases and expenditures with cash? Or a belief that the federal government should not be involved in providing certain services to its citizens? Or perhaps Pawlenty doesn't want the economy of the U.S. to become too much like the economy of France (with its capitalism tempered by a commitment to egalitarianism and defense of human dignity), or Germany (with its ingenious exporters, global competition-ready workforce and supportive social services), or Japan (with its innovation and world-class manufacturing). I'll leave it to others to speculate on the real goals of lower-national-debt advocates, but one thing is certain: They can say the U.S. national debt is large, but they can't say a large debt prevents a nation from being an economic powerhouse. Quote: More broadly, Darwinian natural selection may not work. Rather, like Gresham’s law — which holds that bad money drives out good — reckless firms forced more conservative firms to follow similarly reckless investment strategies. More prudent firms might have done better in the long run but could not survive to take advantage of that long run. Our financial system failed in its core missions — allocating capital and managing risk — with disastrous economic and social consequences, not just the misallocated capital of the past but the huge disparity between potential and actual GDP in the coming years, sums in the trillions of dollars. Regrettably, flawed economic theories aided and abetted both those in the public and in the private sector in pursuing policies that, almost inevitably, led to the current calamity. We need to do a better job of managing our economy, but this will require better research that is less framed by the flawed models of the past, less driven by simplistic ideas, and more attuned to the realities of today. There is a rich research agenda ahead. Last edited by jeffkrol; 01-30-2011 at 02:16 PM. | |
| 01-30-2011, 02:26 PM | #11 |
| 01-30-2011, 07:30 PM | #12 |
| 01-31-2011, 06:38 AM | #13 |
| Originally posted by seacapt He now runs a building crew (foreman) . His boss starts framers at $16.00 per hour which is pretty good pay for this region but can't find any younger folks willing to work. Most of those who he hires don't last because they don't show up or do show up toasted. Darn shame when a 50 year old out works most of the 25 year olds he hires. BTW: at $16/hr how are the benefits???? Health ins??? Pension??? Paid sick time?? I got a son who may be interested.. Just for fun. | |
| 01-31-2011, 08:31 AM | #14 |
| Originally posted by GeneV I hear all these carps about the deficit, but I fail to see anyone explain cogently why it has very much to do with the current problems. Likewise, SS hasn't contributed one penny to the deficit--just the opposite. The US government faces multiple financial problems which are interrelated and contribute to one another but have different causes. One problem is the current debt level which has been built up by decades of deficits. The next problem, which you brought up, is the current year deficit it relates back to the debt because it contributes to the debt over time and because the interest on that debt is an expense that contributes to the current deficit. The present deficits we face are exacerbated by cyclical deficits which occur when cyclical revenue like income taxes decline and cyclical expenses like unemployment payouts increase. The third problem is the structural deficit which is the government plan to continue running deficits in good times and in bad ad infinitum. In order to understand this problem better you should understand a little bit about accounting and the two main bases of accounting, cash and accrual. The government uses cash accounting which recognizes revenues and expenses when transactions are made and most businesses use accrual basis which recognize revenues and expenses when expenses are incurred. An easy to understand example on the difference of how these works is insurance where the premium is paid once per year, say your business has an insurance policy where you pay $1200 every January. On a cash basis there would be a $1200 expense every January and no record of this any other time of the year but on an accrual basis you would see a $100 expense every month even though the cash was still in your bank. Another example would be if a lawyer, such as yourself, took on a case that you expected to take at least 100 hours of your time at $200/hr and collected an up front retainer of $20,000 before you billed a single hour to the case; under a cash basis you would record a $20,000 profit in the month when you collected the retainer and then would record a loss as you actually performed the work whereas under an accrual basis you would record the retainer as a $20,000 asset and the case a $20,000 liability to unearned revenue and as you bill time to that case you will recognize that revenue and dispose of the liability to find the actual profit. As you look at your company's profitability over time accrual basis gives you a more realistic outlook of how your company is doing since you won't look insanely profitable when you are booking new business and collecting retainers then insanely lossy when you are actually working to take care of those cases. Now that you understand the difference between cash basis and accrual basis think about the situation with social security and medicare. For decades these programs have been able to run surpluses recording a "profit" for the government on a cash basis but over the coming decades they are projected to record massive "losses" on a cash basis and the government has not kept that unearned revenue on its book as a liability. This is what people talk about when they say the federal government has "unfunded liabilities" they have made promises to pay out a lot of money to seniors and they have no money in the bank to pay it out so they must come up with the cash at the time when those liabilities are due either through taxes, monetization, or borrowing. Because the amount of these liabilities can only be estimated by people with incomplete information since the government doesn't report on an accrual basis no one can be sure the exact amount of the unfunded liabilities but estimates range from a low of $40 Trillion up to $100 Trillion. The system of accounting that the government uses to calculate their long term liabilities is even more flimsy than the mark-to-market practices that got Enron into trouble. | |
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