June 22, 2020
The New York Times had a fascinating piece pointing out that Japan’s unemployment rate has barely budged in response to the pandemic recession, even as the U.S. rate (adjusted for measurement issues) has topped 15.0 percent. But the piece comes with an important warning:
“Critics say it makes companies reluctant to take risks in hiring new employees, reducing options for the country’s young workers. It may also make it more difficult for businesses to retool their work forces to adapt to changing conditions, making them less productive and hurting their ability to compete in the global economy.”
There actually is little evidence for the unnamed critics’ assertion. According to the OECD, since 2005, U.S. GDP per hour worked (the broadest measure of productivity) has increased at an annual rate of 1.1 percent. By comparison, Japan’s productivity has increased at a rate of 0.7 percent. This is a notable difference over time but does not imply that the U.S. is seeing a hugely different picture. In terms of international competitiveness, Japan has a trade surplus of roughly 3.5 percent of GDP, while the U.S. has a trade deficit of 2.4 percent of GDP.
In short, while it is clear that Japan’s workers enjoy much greater employment security than workers in the United States, it is not clear that the country is experiencing the negative outcomes of which the article warns.