What Japan's Lost Decade Meant For Youth Employment - Business ...

In the mid and late 90s, Japan experienced a deep recession that was?mainly rooted in a?collapse of land and property prices and the aftermath of sovereign debt crises in other East Asian countries.

Riva Fromovich?points us to a 2000 study by The University of Tokyo's Yuji Genda of what happened to Japanese youth during the recession. It is ugly.

First, the hiring rate of new graduates relative to the initial number of employees, using?human resource stock variables?as explanatory variables in a regression?analysis:

Click to enlarge.

Genda:

The hiring rate of new graduates relative to the initial number of employees?is signi?cantly lower at establishments with a higher share of employees aged?forty-?ve or older. In particular, high school graduates had greater di?culty??nding full-time jobs in large establishments with a higher share of older employees. There were also fewer college graduates recruited by these establishments. Those with nonscienti?c majors (bunkei in Japanese) were least likely?to be hired. The regression model can be applied to data from 1991 to 1996,?and the negative and signi?cant coe?cient on the middle-aged and older employee ratio is observed in every year.?

?Next, job growth rates (declines) per capita by age ? they basically collapsed for young folks:

Finally, job growth rates by age and sector. The drop off for younger workers is especially noticeable at large firms:

The reason for these results are somewhat unique to Japan: the country boasts the toughest separation laws among OECD nations; in most cases employers have?a judiciary duty either to verify just cause for dismissals or to attempt alternative measures to avoid them.

This makes it harder to get rid of older employees and easier to not hire young people.

But it was mostly the effect of basic plunging labor demand caused by total GDP declining 25 percent.

Genda's conclusion about what this would mean for Japan is pretty scary:

An increase in youth joblessness may cause social problems in Japan.?The youth crime rate is closely linked to labor market conditions (Ohtake?and Okamura 2000). The failure to transfer skills from older generations?to younger generations might seriously a?ect future productivity in the?Japanese economy.

Youth unemployment?has reached 16.8% in the US.

The Japan experience has an ominous lesson for the US. Politicians love to talk about ensuring the economy is strong for future generations, but when they do, they're usually talking about the national debt, and how we need to lower it.

But the killer for youth is lack of growth. Slowing the economy through austerity is the exact opposite thing that should be done for future generations.

Source: http://www.businessinsider.com/what-japans-lost-decade-meant-for-youth-employment-2012-10

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