Melting the Employment Ice Age: How Will Japan Save Its Lost Generation?

In most countries, graduating from university is traditionally met with the expectation that graduates can land stable jobs and advance their careers in a competitive and hierarchical employment system. Japanese culture, in particular, emphasizes the importance of higher education and the young professional’s career path. With one of the best educational systems in the world, why is Japan’s middle-aged population burdened with limited job prospects and isolation from society? 

Japan was once an economic powerhouse. Japanese companies were purchasing assets globally at an astronomical rate. In 1989, the Nikkei Stock Average culminated at a record of almost $40,000. This booming economy was met with turmoil as Japan’s asset bubble maxed out, resulting in disastrously low property prices. A significant amount of work migrated abroad to escape Japan’s economic downturn. The 1990s became a dark time for eager graduates awaiting a coveted position at major companies. To cut costs and protect older workers, companies offered a scant amount of jobs, shutting recent graduates out of the workforce. The labor market entered an employment “ice age.” To this day, those shut out of Japan’s job market in the 1990s are still struggling. They make up what is known as the “Lost Generation”. 

The Lost Generation began as a large population of hikikomori, a Japanese term used to describe adolescents who withdraw from society and confine themselves to their bedrooms. Failure to find employment resulted in ⅓ of the now 40-year-old population becoming shut-ins, or hikikomori. Today, there are around 613,000 hikikomori, according to a government survey in March 2019. The Lost Generation also presents the “8050s Problem”, which entails middle-aged, reclusive and unemployed Japanese still dependent on their elderly parents for housing and financial assistance. Social worker Reiko Katsube identified the 8050s Problem and strives to cultivate connections among this community through the Toyonoka Council of Social Welfare. Katsube recognizes that shut-ins deserve acceptance and a place within society. Katsube began reaching out to this community after the 1995 Kobe earthquake that left hundreds of thousands of people displaced. “Since the quake, we have been striving to nurture connections in the community to prevent lonely deaths,” Katsube says. Hikikomori have endured societal isolation and a discouraging labor market for far too long. Unfortunately, the Covid-19 pandemic has exacerbated these issues. 

Prior to the pandemic, the Japanese government realized the Lost Generation was in dire need of assistance after a May 2019 knife attack. A middle-aged man who had been without a job and living with his parents committed this brutal attack, killing two, injuring 18 others and subsequently stabbing himself to death. Japanese media alluded that this man had been suffering from the 8050s Problem, indicating that shut-ins may be a “ticking time bomb.”

The 1990’s employment ice age had extended into multiple decades and its consequences prompted the government to finally take action. Former Prime Minister Shinzo Abe’s government announced plans to create over 300,000 jobs within three years

Government action, however, is untimely. Experts predict that another major employment ice age will occur due to the pandemic. 2020’s April to June quarter indicated a 28% dip in the Japanese economy – the most drastic during the postwar period. According to Recruit Works Institute’s statistics, the class of 2021’s ratio of jobs per graduate will drop from 1.83 to 1.53. In an employment system characterized by the saying, “The doors only open once,” graduates may face a futile job market. Japan’s Chamber of Commerce reports that 78% of small to midsize businesses will cut back the number of new hires because of the pandemic. How will the Japanese government save its Lost Generation while preventing another one? 

Government intervention should include not only job creation but also psychological assistance. The government largely ignored psychological disorders until 2004, when a law was passed to support those with developmental disabilities. Many shut-ins struggle with hypersensitivity, compulsive tendencies, and lack of social awareness. If the government had addressed these disabilities earlier on, then the 8050s Problem would not be as pervasive today. Many elderly parents of these middle-aged shut-ins regret treating their children terribly because they were unaware of the psychological inflictions from long-term unemployment. Japan’s social welfare system must pursue efforts towards creating communities for shut-ins to share their experiences and network for employment opportunities, even if the pandemic limits connection to an online platform.  

Approximately 1 million Japanese in their mid-30s to mid-40s are experiencing long-term unemployment. Boosting incomes while meeting the domestic demand for labor requires significant cooperation among local and national governments and companies. Former Prime Minister Abe’s cabinet expressed willingness to use flexible macroeconomic policies, hoping to raise the minimum wage to 1,000  ¥ ($9.20) and create over 300,000 jobs. However, these measures entail real sacrifices. Securing economic stimulus funds requires serious social security reforms, including increasing revenue from wealthier older people and raising the age to receive public pension from 65 to 70yearsold. The new Prime Minister Yoshihide Suga is fairly popular among Japanese citizens. In a recent interview with Japan Forward, Abe describes Suga as a “results-oriented politician” who will continue the policies of the previous administration. 

Thousands of people apply for a national public service job, knowing that it provides a steady income. Not just any unemployed Japanese person can be granted a government-created job. To be hired as national public servants, the “ice age” generation must first pass government exams. Those who pass the exam must then undergo interviews. Out of the most recent 5,634 applicants who took the exam, only 157 will be offered a position, signifying a competition rate of 35.9 applicants to one job. This system seems much more cutthroat than the 1990s post-graduate job search, which may not resolve the problem. 

Japan’s ambitious plans for economic revival may flounder given the current circumstances. Emphasis on a flexible macroeconomic policy has entrenched Japan in a debt-to-GDP ratio of 200%. Experts worry that government safety nets will hinder structural reforms from advancing economic development, causing companies to lose profit in the long-term. In order to escape and prevent another employment ice age, Japan must shift its focus to reducing trade barriers, attracting more foreign direct investment, and expanding the labor market. 

As the workforce dwindles due to the aging population, the Lost Generation deserves a second chance to establish a career for themselves and repair Japan’s stagnant economy. 

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Hannah Keenan

Hannah Keenan is junior majoring in International Relations Global Business and minoring in Chinese for the Professions. She was born and raised in Chicago, Illinois. Growing up in a part-Chinese family, she has always been fascinated by the Chinese language and have been studying it since high school. She loves learning about the financial and legal aspects of international affairs, which she hopes to pursue a career in someday. At USC, Hannah is a member of Delta Phi Epsilon Foreign Service Fraternity and Pi Beta Phi.

hkeenan@usc.edu