Tuesday, January 8, 2008

The Wall Street Journal Becomes Underconsumptionist

Hayashi, Yuka. 2008. "Growing Reliance on Temps Holds Back Japan's Rebound." Wall Street Journal (7 January): p. A 1.

"One reason Japan's rebound hasn't gotten traction: companies' growing reliance on temporary workers, who earn less -- and spend less -- than full-time employees. The shift in hiring can be seen at companies like Hino Motors Ltd. The truck-making unit of Toyota Motor Corp. is paying record dividends this year. But it also has been filling thousands of factory jobs with temporary workers, who start at $10 an hour and get few benefits."

"More than a third of the people in Japan's labor force are categorized as "nonpermanent" workers: part-timers, temps on fixed-term contracts and people sent to companies by temporary-staffing agencies. That compares with 23% in 1997 and 18% in 1987."

"Use of temps gives companies flexibility and cost control, helping them succeed in highly competitive global industries like manufacturing. Big Japanese companies have reported earnings growth for five straight years."

"In the past decade, average wages in Japan have fallen every year except two because of an increase in temps and stagnant wages for full-timers. Consumption by working families declined on a year-on-year basis in six of the past eight quarters. This even though the Japanese are also saving less: A Bank of Japan survey showed that some 23% of households had no savings last year, compared with just 10% in 1996."

"The result is sluggish domestic demand and growth that is supported by exports to a lopsided extent. In the July-September quarter, when Japan's economy grew at an annualized rate of 1.5%, exports were rising at an annualized 11% rate and domestic demand was shrinking slightly. Personal consumption is so weak in Japan that it accounts for only a little over half of the economy, compared with 70% in the U.S."

"Until the late '90s, worker-friendly laws forbade temporary-labor contracts except for a few specialized areas, such as computer programming. A change in 1999 allowed temp agencies to dispatch workers to many more types of jobs. And in 2004, manufacturers were allowed to use workers sent by temporary-help agencies."


Anonymous said...

Personal consumption is so weak in Japan that it accounts for only a little over half of the economy, compared with 70% in the U.S."
I always thought that 50% must be about right and that any comparison to the US consumptive economy would be a tad excessive.
But generally, I am reeling from that fact: 1/3 of Japan's labor force is "non-permanent".
The mighty hand of transnational corporations fueling export-led economies, keeping labor costs and domestic consumption low.
So what happens when the US consumer demand declines?

Michael Perelman said...

If the buyer of the last resort fails in its obligations, then .......

Eleanor said...

This is a very interesting articles. So what we have is corporations around the world keeping wages down, while looking for markets for their goods in places where workers have money to buy goods.

Michael Perelman said...

Eleanor, yes, you are right. They find their markets through the miracle of debt, not wages. The Japanese, so the story indicates, are not so stupid, so they choose frugality instead.

Anonymous said...

Eleanor, interesting isn't it - in the struggle to maximize profits by reducing labor relative to capital, by perpetuating under and unemployment, by creating a mass of unproductive but necessary laborers, by becoming finance and debt dependent... a contrary outcome is guaranteed. What's logical for each is apparently not so for all.