I’ve been thinking a lot about this topic the past week. My thoughts are based primarily on observation, not an in-depth research and analysis.
In the U.S., it is my observation that among the vast majority of married couples, with or without children, both partners are employed. This is not necessarily voluntary, but often a financial requirement in order to generate sufficient income to cover housing, food, and general living expenses. It’s a practical requirement for those who raise children, save for the few that have a very high-paying job. Stagnant wages and rising costs have reduced the earning power of workers in the U.S. This is one factor in the decline of stay-at-home parents in two-parent households in the U.S. from 45% to 29% since 1975.
In Japan, it appeared to me that at least half of the children I saw had a stay-at-home parent. One large family had two sisters, both married and both with a couple of children under age 10. One worked full time, the other stayed home and took care of both sets of kids.
Although prices in Japan generally seem expensive (even with a favorable exchange rate), it appears the middle class in Japan has not felt the constantly increasing squeeze that the middle class in the U.S. has faced over the last 40 years … despite what appears to be a very low minimum wage (on par with the U.S.).
How is this possible? I am guessing there are several reasons the middle class might be faring much better in Japan than in the U.S.
Less Accumulation of Stuff
Given such limited space, there’s no room to buy a lot of stuff. Rather, Japanese appear to prefer spending their money on fewer possessions of higher quality as opposed to something that will be soon ignored, stored, or discarded. I already touched on this preference of quality over quantity in an earlier posting about food.
A Strong Social Safety Net
People do not risk bankruptcy as a result of serious illness or injury in Japan. Of course this does not make Japan unique: The majority of first-world nations offer significantly more free or reduced medical coverage, paid maternity (and paternity) leave, and support for the needy than we do. Japan offers public and private day care, and some local governments provide partial reimbursement for private day care. The U.S. stands alone among its peers in terms of services provided by its social safety net.
Lower, Possibly Declining Income Inequality
Like many first-world countries, income inequality rose during the past quarter century, though not as dramatically in Japan as in other countries. The top 1% of Japan take in around 9% of the income (excluding capital gains), compared to 17% in the U.S., and it appears the percentage absorbed by the top 1% in Japan is actually falling. CEOs in Japan earn, on average, about 67 times the average worker, compared to 354 times in the U.S. An extraordinary CEO in Japan is the head of Japan Airlines, who in navigating the company out of bankruptcy has cut his own benefits and salary to less than what some of his airline pilots earn.
Care for the Elderly
Japan has one of the fastest-growing elder populations in the world. It is predicted that citizens who are 65 years or older will exceed 25% of the population by 2020. Whereas many countries struggle to meet the challenge of caring for their senior citizens, Japan has developed a unique non-monetary exchange method of accomplishing this mission. It is called “fureai kippu” (ふれあい切符). I learned about this from a fascinating CBC Radio broadcast, called “Why Money Isn’t Everything.”
This is by no means a rigorous analysis of the economics of the middle class in Japan. But I was impressed with the number of couples and families in which I saw the economic possibility of staying at home to care for and raise the children, and I am trying to understand how it is possible. The above are some of the potential reasons I came up with, but I welcome any comments, articles, or analysis others can offer to explain this situation.