The plight of Japan’s “lost generation” mainly comprising people in their 40s or early 50s is persisting, as they struggle to keep pace with the pay growth and career advancement commonly seen in both older and younger age groups.
This generation graduated from high school or college during a hiring “ice age” that lasted from the late 1990s into the 2000s, with many finding it tough to find stable employment after the bursting of a bubble economy inflated during the 1980s by soaring real estate and stock prices.
While Japan’s overall wage level has started to pick up, data shows that there are still noticeable disparities among different age groups.
The country’s inflation has remained above 2% for over two years amid upward pressure on prices around the world. According to a survey by the Ministry of Health, Labor and Welfare, total monthly cash earnings, or nominal wages, have continued to rise year-over-year since January 2022.
But another survey by the ministry shows that the average monthly pays for full-time employees in their 20s and 30s increased by more than 10,000 yen ($65) over the decade through 2023 while workers in their late 40s experienced a rise of just over 1,000 yen and those in their early 50s saw a decline.
During the employment ice age, young people who did manage to find full-time jobs often faced challenges advancing their careers, mainly because older workers hired during the economic bubble were firmly entrenched in their positions. The recent trend of raising the retirement age has further exacerbated the situation.
In fact, over the past decade, the proportion of individuals in their early 50s holding senior manager positions has declined by 1.7 percentage points, according to the ministry. This change corresponds to increases in the share held by both younger and older generations: There has been a 0.9 point increase for workers in their early 60s and a 0.1 point climb for those in their early 30s.
Many individuals from the ice age generation have also ended up with limited work experience, curbing opportunities for mid-career job changes. For male workers in their late 40s, job turnover stands at 5.4%, which is 2.3 points lower than their counterparts in their late 30s, according to the ministry’s survey on employment trends. While 40% of workers in their 20s and 30s experience wage increases after changing jobs, this rate drops to about 30% for those in the ice age generation.
Faced with labour shortages, businesses in Japan have rushed to improve working conditions to attract new talent and retain current employees. However, this effort appears to have overlooked many workers from the ice age generation.
“Many employers seem hesitant to raise pay for ice age employees under the assumption that these workers are less likely to change jobs,” explained Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute.
Building assets may be difficult for individuals under such conditions. Data from the Central Council for Financial Services Information, a public entity, shows that the proportion of people in their 40s with financial assets totalling less than 1 million yen more than doubled from 2003 to 2023, reaching 14%. Yusuke Shimoda, a senior economist at the Japan Research Institute, said they may face “a challenging retirement” unless something is done.
In Japanese companies, traditional benefits like lifetime employment are no longer guaranteed. Without acquiring skills needed for digitisation and other advanced office tasks, individuals from the ice age generation risk being trapped in a cycle where they do not receive pay raises or promotions.
Meanwhile, an increase in the number of low-income individuals could significantly affect the nation’s social welfare system. Due to their weaker earnings, these people contribute less to public welfare through reduced premiums for nursing and medical care. This imbalance highlights concerns about the disparity between benefits received and contributions made.
Furthermore, many individuals from the lost generation have been unable to marry due to economic constraints. Experts warn that unmarried elderly people often face isolation and a greater risk of health issues.
Roughly 20% of Japan’s population belongs to the ice age generation, making it crucial to enhance their productivity for the economy. – Nikkei Asia
