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Commentary: Japan must restore trust in the future among the young — here’s how

  • January 18, 2022
  • , The Japan Times
  • English Press

BY MAKIKO EDA, CONTRIBUTING WRITER

As the fastest-aging country in the world, Japan urgently needs to restore the younger population’s trust in the future.

 

The nation is facing economic and societal gridlock due to a vicious cycle: Anemic economic growth in the past three decades has depressed wages, and despite several policy changes, the younger population thus does not have enough confidence to begin starting families. This has resulted in a gradual shrinkage of the population — a 620,000 decrease this month from a year ago, according to a report by the Ministry of Interior and Communications.

 

Meanwhile, the older population’s personal wealth has, naturally, grown over time, but this has not necessarily driven up consumption as older people are more likely to save in this era of ever-extending longevity. These issues are compounded by the fact that traditional culture — which had long valued homogeneity and gender-based roles at home — did not provide enough opportunities for women, youths and foreign-born talent. Unfortunately for Japan, this has stifled innovation, which is so sorely needed for economic growth.

 

All these symptoms are connected — and to find a pathway out of this predicament, a systematic approach is needed.

 

What does Japan need to ensure a brighter future? Multiple initiatives must occur simultaneously, and they all require public-private partnership. Here are a few ideas:

 

Investing in youth

Public spending should prioritize investment in youth to ensure that they have access to quality education and skills development. This will prepare Japan’s population for the future with globally competitive education and skills regardless of family income levels and location of residence. The private sector also needs to be more proactive in re-skilling and up-skilling workers amid ever-increasing technological advancements.

 

Generating good jobs

It is clear that the private sector’s primary role is to create economic growth, and that real growth is what provides sustainable wage increases. However, wages in Japan have been stagnant. According to the status of private sector salaries recently announced by the National Tax Agency, the average annual salary for 2020 was ¥4.33 million ($36,000).

 

Even in the mid to long term, Japanese salaries have not increased but declined. This makes it harder for the younger generation to remain optimistic about the future. One way to jump-start corporate growth is for those firms operating outside of Japan to excel as the domestic market shrinks. To be competitive, diversity and inclusion are must-haves in an organization, as is the integration of foreign talent. Family-friendly workplaces are also critical to retain talent. The government can provide a framework to encourage labor mobility with robust safety nets as people change careers — something much anticipated to occur in the era of the Fourth Industrial Revolution, with its rapidly changing societal patterns and technology resulting from greater connectivity and automation.

 

Healthy and productive longevity

Take-home pay for the younger generation is depressed, partially because the burdens of social insurance premiums have increased in the past 20 years. Those people 65 years or older comprise the fastest-growing segment of the population and the burden of supporting this demographic will place heavy pressures on future generations.

 

How can we keep the population healthy as life expectancy extends? Technology is one solution. Today, 1 in 5 seniors live by themselves and there is an abundance of opportunities for innovation. If seniors can get more support from technology and automation, they can continue to live independently.

 

For starters, the government needs to deregulate health care and nursing services for businesses to enter and grow in that sector. Also, as we see more healthy seniors, there needs to be more opportunities for them to remain in the workforce and stay productive. This is an area where Japan leads as it has been exploring and implementing flexible ways to integrate older citizens into the economy.

 

Last summer, the World Economic Forum’s Global Shapers Community launched its Youth Recovery Plan. The plan included 40 recommendations — including ones for addressing climate change — to help policymakers integrate the voices and ideas of young people into the conversation and help shape a more equitable future. Young people are taking action on climate issues because they feel that the global environment that they live in is in danger and that such action cannot simply be left up to adults. The same is true for the future of Japan. If we do not set a course for sustainable growth, young people will not have trust in the future.

 

According to research by the Cabinet Office, just 38.8% of Japanese youth are either satisfied or fully satisfied with the state of the country compared with 57.8% in the United States and 56.9% in England.

 

The younger generation is watching. Rebuilding trust takes more than just an agreement; action must follow — and not by one single player, but by all sectors across the nation. With the trust of the country’s youth, Japan can step up.

 

Makiko Eda is chief representative officer, Japan, of the World Economic Forum.

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