Annual Report on

The Japanese Economy and Public Finance

2006

- Japanese Economy Heading for New Growth Era

with Conditions for Growth Restored -

Cabinet Office

Government of Japan


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Section 3 Economic Disparity in terms of the Household Sector

    The trend of a widening economic disparity is also a phenomenon in common seen in foreign countries since the 1980s and many possibilities have been pointed out as its background, such as keen competition arising from ongoing globalization, and the uneven adaptability to technological innovations like information technology. In Japan as well, while the economic recovery has been continuing with its results spreading to the household sector, there are also increasing arguments on the issue of the disparity within households. The condition of the disparity is a complicated issue which is also closely linked with the historic and social background in Japan, thus there is a certain limit if all the aspects are analyzed by focusing attention only on the economic aspect. Nevertheless, this is an important issue for formulating policy with an aim to enhance the economic living standard of all citizens. An analysis here is made concerning the current state of the household sector in Japan by focusing attention on the disparity.
    Recently, there have been many arguments that the diversification in employment style can be raised as one of the reasons why there is increasing interest in the economic disparity in Japan. That is, there are viewpoints as follows: the increase in non-regular employees due to corporate restructuring might have widened the disparity in the household sector through a widening disparity in wages; and an increasing number of freeters and NEETs might have led to a widening disparity as a result of the stringent employment environment faced by young generations.
    This section tries to find out the background of this issue by analyzing the economic disparity from all possible perspectives.

1. Trends in the economic disparity based on economic statistical data

(1) Economic disparity seen from income

(The income disparity seen from the Gini coefficient is on a moderately increasing trend in the long term)
    Japan's income disparity has shown a moderately increasing trend in the long term. The income disparity in terms of the Gini coefficient(32), a representative economic indicator showing the income disparity, is confirmed to have risen moderately from the 1980s till the recent time (Figure 3-3-1). Regarding the Gini coefficient for the whole household sector, there exists a rising trend, as well, in terms of any of the following surveys: National Survey of Family Income and Expenditure (households of two or more members), Comprehensive Survey of Living Condition of the People on Health and Welfare and Income Redistribution Survey(33) (initial income and redistributed income(34)).
Figure 3-3-1 Gini Coefficients Measured by Various Statistical Surveys' Data

(It is necessary to note the difference in the levels of the Gini coefficients measured by various statistical surveys' data)
    In this way, regarding the behavior of the Gini coefficient, all the statistical surveys showed nearly the same moderately rising trend since the 1980s. Nevertheless, it is necessary to note that the levels of the Gini coefficients vary with the statistical surveys used for calculation. Comparison reveals that the level of the Gini coefficient in Income Redistribution Survey is higher than that in National Survey of Family Income and Expenditure. And one of the reasons for this is considered to have been the difference in the sample size or the sampling method between the two surveys(35). In terms of the households surveyed, Comprehensive Survey of Living Condition of the People on Health and Welfare includes money remittance-receiving people such as students living alone, and in terms of income distribution, a relatively larger number of households earning income less than 2 million yen in the survey samples are included in the Comprehensive Survey of Living Condition of the People on Health and Welfare(36).

(The Gini coefficient based on "total households" that includes single-member households has dropped since 1999)
    In comparing the trends of the Gini coefficients measured by various surveys' data, it is also necessary to note how single-member households were treated. In the Gini coefficients already released, single-member households were included for calculation in Income Redistribution Survey and Comprehensive Survey of Living Condition of the People on Health and Welfare; in contrast to this, regarding the Gini coefficient in National Survey of Family Income and Expenditure, households of two or more members were used for calculation. In order to grasp the trend in the income disparity of the whole society, it is considered recommendable to set a wider range of households so as to look at the Gini coefficient based on the "total households" in which single-member households are included as well as households of two or more members.
    It can be seen that the Gini coefficient of single-member households in National Survey of Family Income and Expenditure had generally remained flat from 1994 to 1999 and then dropped from 1999 to 2004. Furthermore, if individual micro data is used to calculate the Gini coefficient in National Survey of Family Income and Expenditure based on "total households" in which single-member households are added to households of two or more members (Figure 3-3-2), it can be found that the coefficient had dropped, albeit slightly, from 1999 to 2004.
Figure 3-3-2 Changes in Income Gini Coefficients in National Survey of Family Income and Expenditure

(Contributing factors that are pushing down the total households-based Gini coefficient)
    In order to examine the factors of this trend, a comparison of the income distribution estimated from National Survey of Family Income and Expenditure is made between the data of 1999 and 2004 (Figure 3-3-3). This shows the feature that the "peak" of the income distribution was higher for both households of two or more members and single-member households, and the average and the median of income were lower in both cases in 2004. Regarding single-member households, the concentration in the "peak" is seen as a contributing factor leading to the narrowing income disparity. In addition to the concentration in the "peak," the distribution of income lower than the "peak" inflated and the base of the distribution of high income became gentler in 2004: as a result of the magnitude correlation between these changes and the factor of concentration in the "peak," the Gini coefficient of "households with two or more members" increased and that of "total households" dropped, though slightly.
Figure 3-3-3 Income Distribution of National Survey of Family Income and Expenditure
    Overall, the fact that the number of people earning an average income rose amid a decline in household income is considered to possibly be one of the contributing factors that are pushing down, though slightly, the income disparity viewed from the Gini coefficient from 1999 to 2004.

(In the long term, the statistical disparity viewed from other inequality indexes than the Gini coefficient is on an increasing trend)
    It should be noted that in the long term, the income disparity has showed a moderately increasing trend statistically even if viewed from other inequality indexes than the Gini coefficient. If National Survey of Family Income and Expenditure (total households) and Income Redistribution Survey are used to calculate the Atkinson index (AI), the mean logarithm deviation (MLD) and the Tile index (TI) (for the characteristics of these indexes, refer to Appended Note 3-6), it can be seen that all the inequality indexes have moderately increased since the 1980s (Figure 3-3-4).
Figure 3-3-4 Various Income Inequality Indexes

(The pace of increase in the income disparity slows down after being adjusted by the number of household members)
    In order to capture in a more detailed way the trend in this statistical income disparity, adjustment should be made to the number of household members. This is because a decline in the number of household members as a trend leads to an increase in low-income households thus pushing up the disparity-indicating indexes. The trends of the disparity indexes after being adjusted by the number of household members shows that the pace of the disparity widening has slowed down in comparison with the values before being adjusted by the number of household members.
    Household income in various statistics has been measured in the unit of household and no adjustment has been made to the average number of household members. In fact, the results show that as a long-term trend, with the ongoing spread of the nuclear family, the number of household members has decreased (Figure 3-3-5).
Figure 3-3-5 Change in the Number of Household Members
    As a technique to adjust the impact arising from the change in the number of household members, there is a method to calculate the equivalence. This is to measure the inequality index by making revisions on a personal basis while taking account of the scale economy in the household sector(37). Regarding National Survey of Family Income and Expenditure (total households) and Income Redistribution Survey, a comparison is made between the income Gini coefficient before the equivalence adjustment and the Gini coefficient of equivalence (Figure 3-3-6). According to the result, the levels of the Gini coefficients with equivalence adjusted are lower than those of the Gini coefficients without making equivalence adjustment in both surveys(38). Regarding the change since the 1980s, the pace of the disparity widening has relatively slowed on the equivalence income basis if compared to the case without making the equivalence adjustment.
Figure 3-3-6 Change in Income Disparity based on Equivalence - being adjusted by the number of people in each household

(The change in the demographic movement, i.e., a rapidly aging population, is contributing to a increasing income disparity)
    If the Gini coefficient based on National Survey of Family Income and Expenditure (total households) is decomposed, then it is known that there is a stable structure that the income disparity is larger among elderly people (Figure 3-3-7). Regarding the Gini coefficient of elderly people, the level itself has dropped since 1999 but still remains relatively high if compared to other age brackets. Under such a structure, a high ratio of households consisting of elderly people means that the Gini coefficient of the society as a whole will be pushed up. According to the ratio of households by age in National Survey of Family Income and Expenditure (total households) (Appended Figure 3-6), households consisting of people aged 65 year or older among total households has risen as a trend since the 1980s.
Figure 3-3-7 Income Gini Coefficient by Age Bracket
    In examining the trend of the index showing the income-disparity, it is necessary to grasp the impact of the change in the demographic movement, i.e., a rapidly aging population. Regarding the long-term rising trend of the income disparity showed by the Gini coefficient, there is also a possibility that the income disparity appears to have widened due to the rapidly aging population structure.
    Thus, in order to confirm to what degree the factor of change in the demographic movement, i.e., the rapidly aging population, has developed, a factor analysis of mean logarithm deviation (MLD) is made. To be specific, it is possible to decompose the changed portion of the disparity into two parts, one as the changed portion of the income disparity arising from the effect of demographic movement resulting from the change in the age component ratio, and the other as that arising from other factors (the latter can be further decomposed into "change in the disparity within the same age bracket" and "change in the disparity among different age brackets) (39) (Figure 3-3-8).
Figure 3-3-8 Factor Analysis of MLD of National Survey of Family Income and Expenditure (total households)
    From the analysis it is known that the increase in the income disparity viewed from the mean logarithm deviation since 1989 can be explained largely through the effect of demographic movement. In terms of contribution in every five years, it can be seen that from 1989 to 1994 and from 1994 to 1999, while the Gini coefficient dropped based on the sum of the other two effects, the effect of demographic movement outpaced that sum and caused the overall Gini coefficient to increase. On the other hand, from 1999 to 2004, the effect of demographic movement fell below the sum of the other two effects and caused the overall Gini coefficient to drop. It is necessary to look at the values showing the effects here with a special caution, as they can vary with the method of age classification. Nevertheless, these results show that the increase in the income disparity as a trend has been attributed mainly to a rapidly aging population, i.e., an increase in the ratio of households consisting of elderly people.

(Reason why the disparity is of a high level among households consisting of elderly people)
    As has already been seen, there is a strong tendency for the income disparity to widen due to the fact that the older an age bracket is, the more income is reflected on achievements accumulated from people's youth. Furthermore, as there is also a wide range of selections when people reach the retirement age, such as those who continue to work and those who retire to live on pensions, the degree of disparity tends to be larger than among younger age brackets. However, seen from the trend of the Gini coefficient of elderly people, the level of the disparity is on a declining trend if compared to the past (Figure 3-3-7 cited before).

(Trend of family receiving public assistance)
    On the other hand, the widening disparity is associated with the recent significant increase in family receiving public assistance as well (Figure 3-3-9). The recent trend in family receiving public assistance shows an increase in households consisting of elderly people. Generally, the increase in the number of family receiving public assistance is considered to be attributed to factors such as the economic conditions and the employment situation, and recently the degree to which increase in the number of family receiving public assistance has slowed down, still the trend of the number of family receiving public assistance should continue to be closely watched.
Figure 3-3-9 Trend of the Number of Family Receiving Public Assistance by Type of Household, the Number of Protected Persons and the Rate of Family Receiving Public Assistance
    For low-income households including family receiving public assistance, the government has implemented measures to provide support for self-reliance efforts and all possible means have been expended to secure the safety net.

(Attention should be paid to the widening disparity since 1999 among young generations)
    Regarding the trend of the income disparity by age bracket, attention should also be paid to the fact that the Gini coefficient of young generations shows an increase form 1999 to 2004. Seen from the trend of the Gini coefficient by age bracket from 1999 to 2004, the Gini coefficients have been increasing among the young generation under 25 years (Figure 3-3-7 cited before). There is a possibility that this trend may have been a reflection of the increasingly severe employment situation for young generations, and regarding this, an analysis will be made by using labor income later.

(The Gini coefficient in Japan is slightly higher than the average for the OECD members)
    Here, attention is shifted to another aspect, i.e., by making an international comparison of the income disparity, now consider where the income disparity in Japan is placed among foreign countries. According to OECD data, if a comparison is made among OECD members by using the equivalence-based Gini coefficient, then the Gini coefficient in Japan is ranked in a middle group. It is among the lowest of the middle-upper-ranking group including United Kingdom and the U.S. and is just slightly higher than the average for OECD members (Figure 3-3-10).
Figure 3-3-10 International Comparison of Gini Coefficients

(An international comparison of the disparity viewed from the poverty rate)
    There is also a concept of the poverty index which is one of the indicators used internationally to make comparisons of the income disparity. The poverty index is further divided into two concepts, relative poverty and absolute poverty. Relative poverty is defined as being below the threshold income which is a certain percentage of the average living standard. On the other hand, absolute poverty is a concept which uses the basket of daily necessities as a standard and defines households that cannot meet this standard as poverty.
    According to the analysis by OECD, if an international comparison is made among OECD members regarding the indicator of relative poverty, Japan ranks the third worst (Appended Figure 3-7). In this analysis, as an indicator of relative poverty, a comprehensive hybrid indicator between the relative poverty rate and the poverty gap is used. The relative poverty rate is defined as the proportion of people who earn less than 50% of the median income in the income distribution. The poverty gap is defined as the proportion which is calculated by treating the income amount equivalent to 50% of the median in the income distribution as denominator, deducting from that amount the average income amount of the poverty group that can earn only less than 50% of the median in the income distribution and then treating the obtained result as numerator. Based on this, Japan's relative poverty rate ranked fifth to stand at 15.3% and its poverty gap ranked fourth to stand at 36.1% in 2000.
    However, regarding the indicators of relative poverty based on this OECD analysis, it is necessary to note that Japan's statistics are based on Comprehensive Survey of Living Condition of the People on Health and Welfare. It has been mentioned that in measuring the disparity during discussions on the Gini coefficient, it is necessary to interpret the result with a special caution for it, because the level of the Gini coefficient varies as a result with the statistical data which constitutes the basis of calculation. Regarding the international comparison, too, caution is needed because there is the same problem. If the relative poverty rate released through National Survey of Family Income and Expenditure (total households) is compared to OECD's tentatively calculated result, it is confirmed that there exists a deviation (Figure 3-3-11).
Figure 3-3-11 Relative Poverty Rate in Japan
    Furthermore, if an international comparison is made in terms of absolute poverty, it is difficult to derive a conclusion that Japan is in severe poverty. In Pew Global Attitudes Project(40), a public opinion survey project conducted worldwide in 2002(41), Japan was in no case rated high in term of absolute poverty. In this survey, questions were asked about whether or not citizens were unable to procure daily necessities (such as food, health care and clothing) due to low income. The results show that Japan had the lowest percentage of citizens among advanced countries who replied that they could not afford to procure it (Figure 3-3-12).
Figure 3-3-12 International Comparison of Absolute Poverty

(Per capita income varies with regions)
    The income disparity among regions was on a declining trend through the 1990s. However, from fiscal 2001 to 2003 the disparity is seen having widened. Seen from the average income per prefectural resident and its standard deviation in each region block since the 1990s, the standard deviation was on a declining trend in the 1990s. Since fiscal 2001, the decline in average income has been stemmed while the standard deviation indicating the variation has become large (Figure 3-3-13).
Figure 3-3-13 Income per Prefectural Resident by Region Block
    The deviation from the national average of income per prefectural resident in each region block increased from fiscal 2001 to 2003.
    Regarding the contributing factors for this, if a comparison is made between fiscal 2001 and 2003 by decomposing the deviation into contributions by labor productivity, the revised labor force participation rate and the revised employment rate(42), then the variation of labor productivity becomes a major contributing factor (Appended Figure 3-8). As for labor productivity in regions, there is a possibility that as a result of depending on the industries specialized by a region(43), the difference in the degree of specialization in each region may have been widening.

(2) Economic disparity viewed from consumption expenditure

(The level of the disparity in consumption expenditure is lower than that of the income disparity in Japan)
    Generally, the disparity in the consumption level is said to be lower than the disparity in the income level. The income disparity shows the disparity in income at a certain point of time. In contrast to this, the consumption level is determined through the reflection of the income trend over a long period, and therefore it is considered that the deviation of income at each point of time tends to be leveled over the whole period.
    This trend can be confirmed from consumption in Japan, as well, by using statistical data for calculation. Seen from the income Gini coefficient and the consumption expenditure Gini coefficient in National Survey of Family Income and Expenditure (total households), the consumption Gini coefficient is lower than the income Gini coefficient, whether based on the data before equivalence adjustment or based on equivalence (Figure 3-3-14).
Figure 3-3-14 Trends in Income and Consumption Gini Coefficients

(The disparity in consumption expenditure increased during the phase of economic recession in the second half of the 1990s, while after that, it has been moving moderately)
    The time series of the consumption Gini coefficient has shown almost the same trend as the income Gini coefficient(44). However, during the second half of the 1990s (from 1994 to 1999), the increase in the consumption Gini coefficient was somewhat larger than the increase in the income Gini coefficient. Regarding this, there is a possibility that the increasing consumption disparity may have been attributed to the circumstance that during the phase of economic recession in the second half of the 1990s, mainly the consumer behavior of working generations was affected as a reflection of stagnant consumer sentiment due to an uncertain outlook for the future.
    The consumption Gini coefficient by age bracket shows that the Gini coefficient increased among people in the 30s and the 40s who were in their most productive years from 1994 to 1999 (Figure 3-3-15). After that, the consumption disparity remained flat or increased moderately as a whole from 1999 to 2004. But the disparity increased among people in the early 20s and in the 30s. In addition, regarding the Gini coefficient of the consumption level, it is known that as a whole, the Gini coefficient among the generation in the 30s hits the lowest trough and the disparity among elderly people is larger.
Figure 3-3-15 Consumption Gini Coefficient by Age Bracket

(3) Economic disparity viewed from assets

(The level of the asset disparity is larger than that of the income disparity)
    Seen from the asset disparity in Japan, the level of asset disparity is larger than that of the income disparity. Assets referred here mean real estate such as land, houses and housing sites, and financial assets like deposits, bonds and stocks.
    As for the condition of the disparity in the total asset amount in Japan assessed in terms of the Gini coefficient in National Survey of Family Income and Expenditure (total households), annual income Gini coefficient has stayed at the middle of the 0.3 range, while in contrast, total asset Gini coefficient has stayed at around 0.6 (Figure 3-3-16 (1)).
Figure 3-3-16 Trend of Household Assets
    The facts that there is a difference in the savings rate by income group bracket and that there is a large asset disparity by age bracket explain why the level of the asset disparity is relatively large. Regarding the savings rate, the higher an income group is, the higher the savings rate (Figure 3-3-16 (2)). Regarding the condition by age bracket, seen from the asset amount of the householder by age bracket in National Survey of Family Income and Expenditure the household asset held by householders in the 50s is nearly six times larger than that held by those in the 20s, and householders in the 60s and 70s hold net assets which are nearly nine times larger than that held by those in the 20s. On the other hand, in terms of income, even households in the 50s that earn the largest amount of income among other age brackets earn only a little more than two times what those in the 20s earn(45) (Figure 3-3-16).

(The disparity viewed from assets has remained flat since the beginning of 2000)
    Seen from the change in the time series of the household asset Gini coefficient (Figure 3-3-16 carried above), it significantly dropped in the 1990s while have remained flat in 2000s. In comparison to this, the trend of assets shows the same behavior.
    As for real assets, the disparity among owners narrowed as real assets prices dropped contrarily in the 1990s after their price increase in the second half of the 1980s(46) and as it has become easier for people to buy houses due to declines in housing prices since the 1990s. The ratio of housing prices to annual income in the capital region (Figure 3-3-17) show that after reaching the peak in 1990, this ratio dropped in the first half of the 1990s and has then remained flat. Regarding financial assets, in the current phase of the economic recovery, stock prices have ceased to drop and there was an upward phase in 2004 when the survey was conducted. These factors are considered to be the factors that explain why the decline in the asset Gini coefficient has been stemmed.
Figure 3-3-17 Ratio of Housing Prices to Annual Income in Capital Region

(4) Economic disparity viewed from labor income

(The Gini coefficient viewed from labor income is rising recently)
    Viewed from the trend of the disparity in per capita labor income (annual income earned by a worker through one year's work) based on Employment Status Survey, the Gini coefficient continued to increase during the period from 1987 to 2002. In particular, the rise width was large from 1997 to 2002 (Figure 3-3-18).
Figure 3-3-18 Change in Gini Coefficient Viewed from Labor Income
    Seen from the trend of the Gini coefficient by age, from the second half of the 1980s to the second half of the 1990s, the disparity narrowed except that the disparity in labor income slightly widened among workers in the 20s. However, from 1997 to 2002, the disparity increased within each age bracket; and among young generations in the 20s and 30s in particular, the disparity widened to a large degree (Figure 3-3-19). The increase in the overall Gini coefficients is considered to have been attributed to the factor of higher share of the elderly people. However, the increase in the Gini coefficient among young generations since 1997 is considered to have made contribution to some extent as well.
Figure 3-3-19 Change in Gini Coefficient Viewed from Labor Income by Age

(The diversification in employment style is also one of the contributing factors of change in the disparity in labor income)
    The fact that disparity in labor income widened from 1997 to 2002, as was just described, is considered to have been attributed to the effect of the diversification in employment style. As was explained in Section 1, the percentage share of non-regular employees has continued to rise as a whole since the 1990s and has risen significantly since 1997 in particular. The overall Gini coefficient is considered to be raised through an increasing percentage of non-regular employees with a low level of labor income.
    Regarding the trend by age bracket, a high percentage share of non-regular employment among young generations is considered to have led to a larger Gini coefficient viewed from labor income among young generations (Figure 3-3-20) (47).
Figure 3-3-20 Change in Ratio of Non-Regular Employment by Age

(Contributing factor of the difference between the disparity in per-household income and the disparity in labor income)
    As for a contributing factor of the fact that there has been little change in the disparity in per-household income despite a widening disparity in per-capita labor income, labor income earned by household members other than the head of household is considered to have compensated for overall household income.
    As the economic background, there is a possibility that in order that the middle and elderly working generations can maintain per-household income, their spouses may have entered the labor market under severe employment situation. Seen from a high employment rate of wives by age and by income bracket in Employment Status Survey, among the working generations in the 30s or older, the lower the husband's income is, the higher the employment rate is of wives (Figure 3-3-21). This condition is consistent with the empirical rule about the labor force participation rate for women having a spouse, a rule known as Douglas-Arisawa law, and in this case, the income disparity is said to be more equal from the level of households than if viewed from the level of individuals(48).
Figure 3-3-21 Employment Rate of Wives by Husband's Age and Income Bracket
    Nevertheless, this trend does not apply to households in which the householder is under 30 years. The Gini coefficient by age among households consisting of people under 30 years viewed from National Survey of Family Income and Expenditure (households of two or more members) is seen rising as well (Appended Figure 3-9).

(The wage disparity among regular employment tends to widen among college graduated middle-aged and elderly male workers)
    As for wages in Japan, it is argued that in addition to regular and non-regular employment, the disparity may have perhaps widened even among regular employment due to factors such as the introduction of merit-based wage system and the difference in capability among workers. The analysis in Basic Survey on Wage Structure shows that the wage disparity has widened particularly among college graduate, male workers in their 40s. Since the second half of the 1990s, the disparity has widened even among those in the 50s.
    This is confirmed through Basic Survey on Wage Structure which contains information such as workers' status and their academic qualifications by examining the wage disparity between the highest 10% and lowest 10% of full-time workers in terms of age, academic qualification (college or high school graduates) and gender (Figure 3-3-22).
Figure 3-3-22 Disparity between the Highest 10% and the Lowest 10% of Wages by Age Bracket
    It can be inferred that this trend is attributed to the introduction of the merit-based wage system. However, it should be noted that the wage disparity within the age bracket is not seen having clearly widened among other groups or among male/female high school graduates and female college graduates.


2. Trend of social stratification

(No clear fixation of social stratification has been seen)
    In Japan, National survey of Social Stratification and social Mobility (SSM) has been conducted of sociologists every ten years since 1980, and as for the more recent conditions, Japanese Version of General Social Surveys (JGSS) is published. In this survey, the logarithmical odds ratio which indicates to what degree it is easy for children to succeed to their fathers' stratum is measured by using the stratum prepared from information such as occupation. According to the results of this survey, no clear fixation was seen from the post-war period till 2000 (Figure 3-3-23 (1)).
Figure 3-3-23 Trend in Degree of Stratum Succession and Its International Comparison
    Furthermore, compared with the U.S. and former West Germany, from which similar data are available, the stratum structure in Japan does not show any significant deviation from both countries. For instance, seen from the disparity in the degree of relative mobility found among the strata of origin, i.e. an indicator showing the exclusivity of the stratum structure, a similar pattern can be seen in Japan, the U.S. and former West Germany, with Japan not showing a particularly large or small disparity (Figure 3-3-23 (2)).
    Based on such findings, it is considered that no clear fixation of social stratification has been seen as an overall social trend in Japan at the current stage. If there were increasingly strong fixation, i.e., the social stratum handed down from one generation to another such as the phenomenon that parents and their children adopt the same occupation, then some argue that regardless of the class of origin, as social inequality aggravates, there have been fewer jobs that people intend to do or fewer opportunities that enable people to acquire desired social status. However, such argument is not necessarily true to Japan as an overall social trend.


3. Citizens' awareness of disparity

(Citizens' awareness of belonging to the middle class is stable in Japan)
    As for citizens' awareness of disparity, their awareness of belonging to the middle class indicated by the typical questionnaire surveys is stable in Japan, without showing any drastic change. Up until now, Public Opinion Survey on National Life (conducted by the Cabinet Office) has been asking households about the degree of life(49). And in that survey, respondents replying that their living standard was "middle" accounted for 60% in the 1970s and the percentage has consistently remained at 50-60% since the 1980s (Figure 3-3-24).
Figure 3-3-24 Awareness of Life and Its International Comparison
    An international comparison of the awareness regarding social stratification reveals that compared to conditions in the U.S. and Germany where the similar surveys were conducted, there is a larger upper stratum in the U.S. and a larger, albeit slightly, lower stratum in Germany, but as a whole, there is not a very large difference in the middle-class identification among the three countries.

(Attention should be paid to the gap of awareness between ideal and reality in terms of status and remuneration)
    As for the way of thinking about the acquisition of status and remuneration, a gap has been seen between ideal and reality, and there is a possibility that this may have an impact on people's awareness to the disparity.
    For instance, according to the public opinion survey conducted by the Cabinet Office, people hoping to acquire status and remuneration in accordance with their efforts accounted for approximately 50%, while in contrast, those who think that individuals who actually made efforts have acquired appropriate status and remuneration accounted for approximately 20%. On the other hand, those who think that individuals who have actually made certain results have acquired status and remuneration accounted for approximately 50% (Figure 3-3-25).
Figure 3-3-25 Awareness of Status and Remuneration

(Factors of awareness for people to think that the disparity has widened)
    Regardless of the fact that as a whole, awareness of belonging to the middle class in terms of the living standard is stable, there have been more people recently feeling that the economic disparity has widened. The results of various public opinion surveys show that people recognized in common that the disparity such as income disparity had widened accounted for more than 60% of the people surveyed (Appended table 3-10).
    Regarding the reasons why people have recognized a widening economic disparity even though the awareness of the living standard is stable, mainly the following things have been raised (Otake 2005 and 2006) and Sato (2006)).
    One of the reasons is possibly that people may have become sensitive to the disparity due to the impact of prolonged deflation and overall income stagnation. The disparity which occurs under high economic growth is no more than the disparity in the magnitude of increase in nominal income. But under the circumstances where overall income is leveling off, there exists a sharp contrast; those whose income rises and others whose income decreases.
    The second reason is that as the seniority-based wage system changes, new wage mechanisms such as merit-based system are introduced, and follow-the-crowd mentality has been collapsing. As pointed out above, for male workers in the 40s or 50s who were college graduates, there is an obvious impact arising from the introduction of the annual salary system such as the merit-based wage system and the wage systems which attach more importance to performance results. There is a possibility that as a result of the change from traditional follow-the-crowd mentality, people may have become sensitive to the difference and more conscious of the disparity.
    In addition, it is possible that the impression the disparity has widened may be reinforced, if people share the recognition that polarization has occurred based on individual cases such as the existence of those who have lost their social status due to ongoing corporate restructuring and plunged into economic difficulties in contrast to the occurrence of others who earn an notably high income through IPO in the corporate sector with a considerably high growth potential such as IT-related companies.
    However, regarding the analysis of the relationship between such an increasingly strong awareness of the disparity and the survey result of stable middle class identification, there is still little accumulation of empirical research stock at the present stage(50), thus this is a task for the future.


4. Standpoint in considering the disparity

    The income disparity based on the official statistical data has been moderately widening as a whole. However, to a great extent, the increase in the disparity indicator in terms of these statistics is confirmed to have been attributed to the factors such as an increasing number of households consisting of elderly people, which is a factor of population movement, or the factors of change in the family pattern such as a declining number of household members. It was confirmed that the consumption disparity or the asset disparity was less widened than the income disparity.
    However, there are also some changes, including the future trends that should be closely watched, though they are a partial phenomenon for the time being.
    One of the notable changes is that the income disparity and the wage disparity are widening among young generations. There is a possibility as well that these changes may have reflected the severe employment situation among young generations, i.e., an increase in non-regular employees such as freeters and NEET among young generations. On the per-household basis, these young generations often live with their parents and statistically, it does not seem that they are an apparent problem of disparity. But people such as "parasite single" who escape from "self-reliance" and depend on livelihood support from their parents will plunge into a serious condition if such support is exhausted (Figure 3-3-26). From such a point of view, it is considered necessary to take measures accordingly for these young generations, including also the possibility that they may become a problem in the future.
Figure 3-3-26 Young People's Lifestyle
    Secondly, it has also been pointed out as possible that the widening disparity viewed from labor income may have something to do with an increase in non-regular employees. At present, the widening wage disparity has not directly led to a widening disparity in household income. But it is necessary to note that the trends in regular and non-regular employment discussed in Section 1 should be taken into consideration from the viewpoint of disparity.
    Regarding employment support for young generations and the policy response to regular and non-regular employment that constitutes the above two points, discussions will be made in Section 4.
    Thirdly, it is necessary to pay attention to the way of policy response regarding the disparity. According to the results of the analyses, the Gini coefficient viewed from total households including those single households showed a tendency to narrow, though slightly, from 1999 to 2004. However, this is seen as attributed to the fact that the income distribution concentrated in low incomes amid a declining average income and does not necessarily show the desirable result that the disparity alone had narrowed. What is important as a policy response is the expansion of job opportunities that lead to an increase in income as a whole. In addition to that, as it is also important to design and operate a safety net that well meets the needs of the weak, there is the necessity to consider from such a point of view what the model of policy response should be for households receiving public assistance which are increasing among elderly people.
    Fourthly, attention should be paid to the insufficiency of statistics. From the analyses in this section it has been confirmed as well that according to the statistical data used to analyze the disparity, it is necessary to interpret its level and direction with some statistical caution. The analysis based on adequately objective data is important amid increasing discussions on the disparity. Nevertheless, it is often the case where economic statistics currently available are not for the purpose of measuring the economic disparity per se. It is recommended that economic statistics should be further improved and enhanced so that it will be possible to analyze the latest conditions of various trends in the disparity in a more detailed way.


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