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January 15, 2007

[SSJ: 4334] Re: Abe's success so far?

From: Ronald Dore
Date: 2007/01/12

Thanks to Richard Katz for the OECD analysis. But one has to be careful of "dualism" because the regular/non-regular worker dichotomy and the increase of non-regulars from 19% to 30% is not the only explanation of rising inequality. (And the OECD needs to be more careful in sorting out regular vs irregular from full-time vs. part-time. A lot of irregular workers are 150% full-time: they have to be to make ends meet.) The inequality is also in part the dualism that people used to denounce in the 1970s, the dualism of large and small firms, out-sourcing and sub-contracting firms. OECD I suppose is quoting the Chingin chosa for the spread of full-time wages when it says that there was no increase in inequality for full-time workers between 1994 and 2003. But if you take the hojin-tokei figures, the average wage plus benefits for the 16% of corporation employees in the smallest firms was 44% of that for the 10% working for the biggest firms in 1994, but that had fallen to 33% by 2003. (An absolute fall from 3.0m.yen to 2.4m., compared with a slight rise in the big firms from 6.9 to 7.4m) That surely can't all be due to a substitution of regular, by irregular workers.

One reason for this is the shameful way in which Rengo, reflecting the big enterprise unions' total loss of any sense of class solidarity, allowed Nikkeiren to strangle Shunto and Keidanren subsequently to kill it off, (greatly helped by the deflation of course). The average wage increase established by the big firms used to be trumpeted throughout the land and had a big effect on wage-setting in the small firms, forcing them all, more or less equally, to make the same percentage wage increase which they passed on to consumers.That helped to keep differentials stable rather than increasing -- as well as helping to maintain the level of modest inflation that all healthy economies need.

Anyway, I trust that Japanese policy-makers are tackling the irregular worker problem at least by improving their social insurance situation, and are not going to listen to the OECD economists when they say -- true to OECD form --

"One important key to reversing the rise in inequality and poverty is to reduce labour market dualism. This requires a comprehensive approach including reducing employment protection for regular workers and thereby weakening the incentives of firms to hire non-regular workers."


But one thing they say which the government should indeed take to heart is:

"Social spending as a share of GDP has been expanding in the context of population ageing, although it remains below the OECD average and the proportion received by low-income households is small."

Also when they point out that the proportion of children of single mothers in poverty is extraordinarily high in Japan, and that the change in the seikatsu hogo system designed to push single mothers into work took place in face of the fact that the child-poverty rate was higher for working mothers than for non-working mothers.

A propos the US "shareholder primacy" question at issue between Richard Katz and Sandy Jacoby, it is a nice illustration of the gap between formal institutions and actual behaviour. In the conflict of interest between agents and principals when the agents are managers and the principals are minority shareholders there is no way the shareholders will ever win if the agents are greedy and unscrupulous -- information assymetry and all that. As Galbraith pointed out in the 1960s there was then an ethic of honesty and trust among US managers which among other things kept their remuneration relatively modest and prevented too much cheating. No more. Now you can get your shareholders to give you several hundred million above board and still rip them off. The important thing about nihonteki-keiei was that "employee sovereignty" -- the collectivity of your fellow-employees being the "principal" -- helped to maintain an ethic of honesty and trust because if you cheated you were ripping off the people you worked with every day. That's why most of the fushouji were about people doing illegal things for the sake of the firm, not for their own benefit at the expense of the firm.

The novel about how the big firms screw the little ones, by the way, was it Shiroyama Saburo Yusha wa katarazu? Splendidly graphic.

Ronald Dore
loc. Cavanazza 14
Grizzana Morandi
40030 BO
Tel: 39051 913550
Fax: 39051 6730128

Approved by ssjmod at January 15, 2007 11:35 AM