A Lost Generation of Workers

Ethan Devine, a venture capitalist, is worried.  He's seen that Japan has not really recovered from its economic troubles of the '90s.  Japan’s economy today is smaller than it was in 1992.  He thinks the problem is largely based on the inability of the young people of the '90s to find permanent jobs; this results in a loss of human capital and in the inability of these people to earn enough to get the economy moving again.

Today, more than 20 years after Japan’s bubble burst, youth unemployment is higher than ever.  In 1992, 80 percent of young Japanese workers had regular jobs.  Today, only half of working 15-to-24-year-olds have regular jobs, and another 10 percent are unemployed. The rest are “nonregulars” with jobs that pay half as much as regular jobs, offer few benefits, and can be eliminated on a whim—which they often are. Over the past 20 years, as the share of nonregulars in the Japanese workforce has nearly doubled, Japan’s productivity has barely improved.  There are social costs as well. This young generation accounts for 60% of the mental-health insurance claims. Japan’s suicide rate rose by 70 percent from 1991 to 2003, and the proportion of suicide victims in their 30s has grown each of the past 15 years.

Devine relates the Japanese situation to ours.  Unemployment here is already the longest in postwar history. And youth unemployment is twice the national average.  American companies, meanwhile, have shifted toward more part-time work since the crash of 2008, just as Japanese firms did in the early 1990s; 30 percent of America’s workers ages 20 to 24 were part-time in 2012, up from 23 percent in early 2008.

Will we repeat the Japanese experience?