The picture is what it looks like. A man holding a light stick at a construction or maintenance site, while a machine that serves the same function also operates at the same site. This is Japan’s flavor of Universal Basic Income (UBI). In this essay I will briefly describe it, the merits and demerits I’ve observed, and discuss.
You see it all the time. Elderly at some construction site, sweeping in front of an apartment building, or the plethora of admin workers at a university or office.
In Japan, many “正社員” (Seishain), full-time employees, meet the definition of people working under universal basic income, except that they do have a ‘job’.
Westerners tend to discuss UBI as being a government subsidy.
However, in Japan’s version of UBI, which has already been in operation before it became a vogue discussion topic in the West, both companies and government subsidize citizens' living expenses together.
Japanese companies subsidize citizen living expenses because they do not perform layoffs or fire as often as in the west. Many of these employees do not contribute significantly to the bottom line of the company and could be automated away. A mix of labor laws and cultural values enforce this.
Japanese government subsidizes citizens by subsidizing, bailing out , and investing in Japanese companies that are failing, or companies fundamentally unable to operate without subsidies. Example: <https://www.reuters.com/article/us-japan-display-funding/apple-supplier-japan-display-gets-920-million-bailout-from-ichigo-idUSKBN1ZU0ZH>
Further examples include subsidies for farmers, tariffs, and government grants to private companies. The Bank of Japan owns at least around 80% of domestic ETFs and in 2018 was a top shareholder of 40% of all of Japan’s listed companies <https://www.ft.com/content/aba02f8c-3eab-11e9-9499-290979c9807a>. I wonder what those numbers are now.
On a related side-note, the Bank of Japan owns nearly 50% of government bonds <https://www.japanmacroadvisors.com/page/category/economic-indicators/financial-markets/jgbs-held-by-boj/>. This topic is too complex to discuss in this essay, but is further evidence that Japanese people have no problem with government intervention in the economy.
This is not a government-lead economy. This is a government-owned economy. It’s a chimera of capitalism and socialism.
Years ago I read an article written by a Japanese economics professor (If my memory serves correct) that said Japanese society believes that the primary purpose of companies is to provide employment, not profits. This is an important distinction with America’s priorities, that corporations should provide profits to shareholders, and societal damage as a secondary effect is also a secondary priority.
Merits
- Society is more stable. You do not suddenly see companies appear and disappear. People do not suddenly lose their job or switch jobs.
- Because work is more stable, people’s psychology seems somewhat more stable than in the US, for example, with people experiencing fewer extremely chaotic and stressful situations.
- Society is less divided. There is a sense that everyone has a role, and that each role is important. That the CEO isn’t taking a huge payout and leaving everyone behind. There’s a sense of society.
- Increased dignity. Sometimes. The psychological benefits are very difficult to quantify.
Demerits
- Makes innovation harder. For example, it’s hard to sell software that automates something like calendar scheduling and basic accounting to a manager, when they have an employee who does those tasks, which they won’t fire, and the manager doesn’t know what that employee should do if they did buy the software and had an employee with the free time.
- Pay is very low while at the same time the people in these low-paying jobs do not have the freedom and time to learn more useful skills.
- Pay is very low. This should be emphasized. This is especially important as costs, like the Japanese consumption tax (sales tax) increase.
- People are not incentivized to obtain more useful skills. Say an employee tells their boss, “Hey boss, I can pay a small monthly fee for this software that will automate one of my tasks.” Many bosses would just point out that some processes would have to change and it’s hard to convince the boss that the worker can do more valuable things with their time. They only see the cost of the software.
- People are more fragile if they do get laid off. I met a Japanese man who was laid off from a global company when the US corporate office decided to cut unnecessary costs in Japan. He basically only knew how to coordinate delivery of the chemicals the global company was producing, and all the nuances that come with that job. All the relationships that were critical to doing that job. After he was laid off he moved out of Tokyo. I don’t know what he will do for work.
- These domestic companies are fragile in the global economy. How many companies in Japan eventually get crushed when a foreign competitor comes in? Examples of foreign products replacing domestic include Apple and Samsung phones, Facebook, Amazon (when they decide to hit the gas)…etc.
- Lack of meaning in work. I wonder what the man in the picture at the top thinks about his job.
- There’s an element of insanity. People waste their time doing futile work. I remember a woman I dated started working at Panasonic out of Unversity. She moved to Osaka and lived in the company dorm. In Tokyo she probably could have made more money as a non-full-time employee at an izakaya and living at home. But Japanese society values ‘full-time’ status. It seems something like a ‘career’. She would tell me her department is operating in the red because they couldn’t compete with the Chinese. So they were working harder every year. That’s insanity. To do more of the same every year, and lose more every year, and keep going.
Discussion
I don’t think Japan’s strategy is sustainable if they are going to continue to participate in the global economy as it currently looks today. The domestic environment generally stifles the birth of companies with the characteristics that would allow them to compete globally. However, it does create social stability, which can be pleasant on a day to day basis.
My general guideline is to let the companies die and it’s usually much better to subsidize the expenses of citizens directly, both in the US and Japan. Lay people off as well, but provide excellent unemployment benefits.
Japan’s current strategy is basically just burning money doing futile work. Resources would be better spent subsidizing people who would be free to form new companies, write poetry, or walk on the beach.
Dignity is a word I have no recollection of hearing in the US before I moved to Tokyo. I remember two of my close friends in Tokyo using it, a Canadian and a British. I remember how shocking it was to hear it those first few times. The idea that I should consider that in our discussion. It seemed, un-American.
When I reflect, the person that I became due to growing up in America, was not the kind of person I think I wanted to be when I was younger. America makes it difficult to be kind, to be considerate of others.
“I look at these people, these Americans,” Eliot went on, “and I realize that they can’t even care about themselves any more — because they have no use. The factory, the farms, the mines across the river — they’re almost completely automatic now. And America doesn’t even need these people for war — not any more. Sylvia — I’m going to be an artist.”
“An artist?”
“I’m going to love these discarded Americans, even though they’re useless and unattractive. That is going to be my work of art.”
(God Bless You, Mr. Rosewater)
