In particular I believe Japan should consider entrepreneur visas. Everybody says (and has been saying for years) that Japan needs to let in more foreign talent. Why not focus on folks starting up businesses? If dysfunctional corporate culture is holding back the country's productivity (and thus ultimately growth, and living standards) one way to change that culture might be to import a bunch of business people from different, erm, cultures.
Don’t they have those? There’s a popular startup guy in Japan by the name of patio11 who got in that way. Their skilled worker visas are also very very generous now.
The main obstacles for Americans are simply cultural issues and lower pay. It’s hard to pay off your student loans. But they really do have many more immigrants now and nobody noticed. I was last there in Jan 20 and was shocked at how many workers and business owners everywhere were foreign.
Worst of all, they kept telling me my Japanese was good!
They have the entrepreneur visa in certain dedicated entrepreneur regions such as Tokyo and Fukuoka. You need to bring about $50,000, dedicated for your business, over to start and you only get a year to get it off the ground to get granted more time. People in their early 20s may not have the ante to get in. For skilled executives, you can get a 1 yr, 3 yr, and sometimes 5 yr, visa right off the bat now, especially if you can do certain things like manage financial portfolios or run existing companies more efficiently. Those visas are free to apply for at your outside of Japan embassy/consulate and get processed usually in less than a week. They really want/need skilled people. There are way more spaces than applicants for these visas, as in many cases, the pay offered is quite a bit lower than in the US, Europe, or Australia. Where a senior executive in some industries in the US might make $300-$400K base, that base is likely less than $200, even in Tokyo. Also equity grants and bonuses in the Western sense, on top of the main salary, are nearly non-existent. Bonus in Japan for Japanese is usually where a Japanese market salary for the year is cut by 30% and that money is paid deferred as "bonus" in two chunks of 15% of the annual. Of course, some companies realize to get the talent, they have to pay more of a Western wage. But that creates resentment within the employees of the Company who work the crazy hours and get less than the "special foreigner." In the 90s and early 2000s there were a number of people on expat packages at the Asian Head Office of multinationals or at the Financial Services company that paid a Western salary, housing, cars, private international school fees, etc. Those are nearly gone now. Where an investment bank used to have up to 20 people on packages, they now may have 1 or 2. The home office lately isn't of the opinion that this is worth the investment for the potential returns or they feel there are people around in the industry who stayed in Japan and started a family so they get hired on a local hire basis with local salaries. There are some very large institutional investment funds for venture capital (multi-billion) both from the government and quasi-public/private such as Tokyo University, that are having problem attracting the creme of Japanese talent to run the money as the wages offered are extremely high for Japan (close to $350,000)- but the experienced people know that to manage that much in other countries the base and bonus percentage of the returns would be in the more than $1MM range. An amount such as that is unconscionable for the Japanese government or government supported institutions to offer.
I see Noah is still using GDP/capita as a stand in for comparing standard of living between countries. I remain skeptical. Maybe we can have a column about the various ways of comparing standards of living some day. Pretty please?
Why are you skeptical of the use of GDP per capita for comparing the standard of living of different countries?
GDP is a measurement of the total output of an economy in a given time period. GDP per capita is the GDP equally divided among the population. It is strongly correlated with a string of positive outcomes such as;
1) Lower poverty rates
2) Higher literacy rates
3) Higher primary, secondary, and tertiary education rates
4) Lower crime rates
5) Lower infant and maternal mortality rates
6) Political stability
7) Larger more redistributive governments
Basically, better outcomes on just about every important quality of life measurement.
I don't know if this is true or not but it certainly is not true for the United States. We have one of the highest per capita GPD rates in the world, but lag behind OECD countries on pretty much all of the measures you stated. Where is your evidence for these claims?
Here is a comparison of poverty rates for example:
The main problem with per capita GDP is that it doesn't say much about the standard of living of the middle class. In a country with a high gini coefficient as the United States, the top 10% can live very well while the media is middling. Median income in the US has only gone up a very small amount since 1989, for example, while GDP per capita has increased much more. Per capita GPD also includes things that don't really improve standard of living very much, like military spending.
There are other ways to measure standard of living, like median incomes. I would like to see how they compare and if they are more valid in some cases.
Cut and pasted from my own comments on Slow Boring. Matt didn't take the bait either:
One thing I would like to touch on here is the comment about the difference in wealth between The United States and France. I have travelled all over both countries and it doesn't seem like the average French person is really poorer than the average American. That doesn't even consider the quality of life difference, just economically. They drive smaller cars if they drive at all and live in slightly smaller houses, but the difference just doesn't seem that great to me.
So I dove into the statistics I could find using Google and this is what I discovered. compared.
GDP/person
United States: $ 63,400.00
France: $ 39,300.00
This is the number usually reported and boy it sure does look like the United States is much wealthier right? The US is almost 60% more wealthy per capita. This number is kind of useless for comparison to actual people though because it include a bunch of stuff like government spending (the US spends a lot on its military) and government borrowing.
Mean Income/person:
United States: $ 25,300.00
France: $ 19,400.00
This feels more right, the average citizen of the US has 30% more income on average than the average Frenchman. But the US has a lot of income disparity, which skews these figures. How is life like for the typical (median) American vs. France:
Median income/person:
United States: $ 19,400.00
France: $ 16,400.00
This lowers the gap to 18%. Noticeable but not really that big a gap.
The French spend less per capita out of pocket on health care too. Looks like $1130 vs. $460.
United States: $ 18,300.00
France: $ 15,960.00
This should all come with the caveat that I am comparing difference sources in many cases, so they are not exactly comparable between values reported, say GDP/capita vs. mean income/capita, though I was able to find sources that directly compared France vs. the US for all values. I am a layperson with an interest in data and finance, but this is far from my speciality, which is technology.
I also am kind of fuzzy on whether income means post-tax income or not. So maybe Americans have more money after taxes.
My main sources were statista, the FRED, and wikipedia.
This is a good explanation. The median American is a little richer than the median French person, though America has a very large upper middle class that's much better off.
Unfortunately more money doesn't always bring better health and happiness. Also Poor and middle class Americans are doing pretty well financially, but some things like housing and healthcare are unaffordable here (due to regulations, not the lack of a welfare state).
To me the median American certainly seems to have a higher material quality of life than the median Western European...e.g. the American has a bigger House, AC at home, a bigger Car, more Food available, etc.
And the Western European has more security. No need to worry about or pay much for health insurance, education, or save for retirement.
It really depends on what type of person you are. If you are top 10th percentile or higher in drive, talent, and smarts, the US is the best place in the world to be. Definitely if you are top 1 percentile by far.
If you are 50th percentile or lower, Western Europe is a better place to be.
Comparing GDP-per-capita against the actual outcomes is pretty much what policy discussions are all about, no? "Why, despite a small GDP-per-capita, is the life expectancy so high in XYZ country?" or "Why, despite such a large GDP-per-capita, is the quality of life in country ABC so low?"
I think it is valid to include GDP-per-capita as context in discussions of standard of living, in terms of overall social capacity. But it is not a measure of, nor a substitute for measure of, the actual standard of living itself.
Specifically, in the context of this article, discussing the fraction of GDP allocated to social welfare makes total sense; comparing "average living standards" between multiple countries by way of GDP-per-capita seems like an indirect and weak comparison.
Take a look at the GDP/capita for Ireland, whose economy is distorted by multinationals exploiting the low tax regime . Ask yourself how much it actually represents the average spending power of Irish citizens
I was wondering about that myself. I know Ireland is a "Celtic Tiger" but it doesn't seem half again as prosperous as the United States.
Your link gave me another indicator that might be more useful: Actual Individual Consumption (AIC), which appears to have the mean/median problem but might be a better indication of the quality of life over GDP.
Years ago I heard John Quiggin cheekily suggest that the three main problems with using Gross Domestic Product as a measure were that it is 1. Gross, 2. Domestic, and 3. Product. In that talk he suggested Net National Income would be more aligned with actual outcomes for individuals.
Definitely! Overall, I think GDP per Capita is a very flawed measurement for quality of life...of course, there is no pure objective standard. But as someone who has lived both in Western Europe and North America (USA and Canada), I view the high GDPs of Western European countries somewhat suspiciously...they certainly count for something, but I think it's obvious for anyone who has lived in both regions that the material living standard for people of the same income is simply higher in NA than it is Western Europe... so obviously GDP per Capita also measures other things, but I think that other measures (median wages/consumption/life expectancy etc.) are better for providing an overview of the living standard in various nations etc...
I feel like this article glosses over Japan's most important problem: population density. The woes of Japanese society seem to revolve around living space. The poorest workers are "sleeping in tiny bare rooms". People are having a hard time starting families because they can only afford a cramped apartment. Parents are forced to share living space with their children. There's three solutions for this that I'm aware of:
1) YIMBY - build dense buildings everywhere! Unfortunately Japan is already the most YIMBY nation in the world and hardly anyone could accuse them of having restrictive construction codes.
2) Build new cities / expand small cities. This is difficult for Japan because they don't have that much room left to develop. Most of the unbuilt territory is either used for agriculture (which you can't entirely eliminate for national security reasons) or is taken up by mountains where construction is very expensive.
3) Make it easier to commute over long distances. Again, Japan is the leading nation in the world by public transport development, so there's not much room there for improvement.
So even if productivity in Japan grows to the levels of Switzerland... how will this change the livelihood of the average citizen? They could afford the latest iPhone instead of a 2 year model? They could take more vacations abroad? They'll be able to buy a fancier car? These are nice luxuries to have but at the end of they day its living space that's the fundamental problem and you can't solve it via larger productivity.
From this perspective Japan's immigration strategy makes perfect sense - why allow even more people to come when your core problem is around the lack of living space? Instead they'll wait out another few decades until their population comes down to the point where every citizen could get 1500 sq.ft. of living space and have a happier life as a result. I don't know if doing this is actually sustainable or necessarily desirable, but it seems to be the only way to grant people bigger houses.
Japan is not overpopulated (to disagree with the other comment). I think the correct approach is your #2 - the problem is they're doing the opposite. The rest of the country is depopulating as everyone moves to Tokyo, where all the jobs are.
For #3, Japan's long-distance transit is remarkably expensive; I think people get a good image of the Shinkansen because of tourist discounts. It is cheaper to fly inside the country than use it.
a) Assuming you won't be removing agricultural land, how many square feet per person are available in Japan as a whole? Can every adult reasonably get 1500 sq. ft. of space?
b) Japan doesn't really need higher GDP to encourage moving out of Tokyo. So if there's enough buildings available for every adult to live in a luxuriously large space, you could improve everyone's life by a huge margin by just discouraging moving to Tokyo.
As for #3 - is a low GDP per capita to blame here? Would the ratio between Shinkasen ticket prices and incomes be better if the GDP doubled?
Yeah, that's definitely true...that's why the median American could be considered to have a higher standard of living than the average Swiss person (materially of course)...
The US, Canada and Australia all rank higher than any Western European country except for Norway, which is 3rd behind AU but in front of CAN. And I think many people would consider housing to be one of the most important, maybe even the most important aspect in determining quality of life...
I hadn't realized France has less poverty than Sweden. They must be doing something right... I know their health system is rated best in the world but I wish someone would explain to me how it works.
Progressives in the US are suppose to treat Northern Europe as their social ideal--Bernie Sanders always talks about Denmark--but I think this underestimates the extent to which some Scandinavian cultural peculiarities, like intense pressure for social conformity, are pretty unattractive to most Americans. (This goes double or triple for Japan, obvs.)
If we switched the slogan to "Let's be more like the French, another nation of relentless individualists but one that does some stuff better than us" we might be able to associate progressive ideas with great food and cool avant-garde cinema instead. It's worth a try.
Japanese people are individualists who live in a group based society. You can do anything you want as long as it’s a “hobby”. The downside is this includes things like being gay; that’s just a hobby and you still need to get married.
I think the above is a Noah line I stole (sorry) but I’ve noticed it too. The way I’d put it is Japan is England and Korea is America.
I don’t know much about France except that French people absolutely love Japan. The French have the strangest ability to come to Japan, speak perfect Japanese, and somehow still be just as rude as they are at home. It’s a mystery how they get away with it.
Interesting...reminds me a bit of Germany. As a society, Germany seems more conformist than the Anglo countries (and also most other European countries, really), e.g. Taxes or the political ("consensus") system...but on a "base level" it seems Germans are quite individualistic...certainly more than Canadians or Americans I'd say. This is expressed e.g. in the Radio, which quite often plays songs in French, Spanish, Italian, Portuguese etc., while this isn't the case in the US or Canada (unless to listen to radio aimed at these communities). Also, a certain kind of "eccentric German person"...it's different than the typical "English eccentric"...think Lagerfeld instead of Bozza Johnson.
I've noted that the Germans and Japanese are pretty similar (rigid formal rules-based society, high expectations of quality in everything, rather traditional views on the role of women, especially among the older generation, leading to a lower birthrate). A friend and I have between us a Japanese wife and a German wife so we notice the similarities.
Closer politically but their economies are kind of different, Korea has more real industry and Ireland is known for (somewhat unfairly) tax havens.
(Japanese are ex-colonizers, atheists, have weird hobbies, nobody likes their TV except for nerdy stuff which is popular worldwide, bland food, have a lot of music and fashion subcultures, are bad at software except for video games. Their cars are reliable though.
Koreans are neurotic, Christian, not individualist at all, rather into mass trends, all the celebrities are beautiful and got plastic surgery, their mass-market music and TV are popular worldwide, they’re into PC games, and they make cars and cell phones.)
There's quite a difference between Japanese "bland" and English "bland". Traditional Japanese food is subtle, but pretty much all food in Japan is bursting with flavor. English bland is like McDonald's.
Traditional English food has spices (mustard) and umami (several different kinds of pickle). It is all the same color but there’s some flavor.
On the other hand, one of Japan’s most popular foods is literally British navy curry, and they like their bread whiter than white, preferably without any crusts even.
I'd push back pretty hard against Scandis being very conformist. Scandianvian music is constientely some of the most avant-gaurde and interesting in world, Sweden has some of (the?) highest entreprenuship rates in the Europe. Spotify and Nokia are both Scandi, somewhat embarrisingly Europe's biggest consumer tech companies.
Also, just anacdontely, the Scandis I know don't seem unusally conformist.
They do have the world's highest number of metal bands per capita, don't they?
And Roy Andersson also makes great movies, like "Songs From The Second Floor". But I'm not sure whether to count that as an argument for or against Nordic conformity, since that seems to be exactly what his films are satirizing. (And now that I think of it, that might explain the metal bands too.)
It goes for Japan (and Germany) too, IMO. Because most of their society is such a straitjacket (by American tastes), when they're allowed to let their freak out, they really let it out.
I appreciate the mention of the GDP of $48000 per capita as a limiting factor. One repeatedly sees financial commentators focusing on Income inequality as the core economic issue, as if redistributing money can increase standard of living for an entire nation.
A curious question, you said "low-income Japanese people will still be behind their German or British or French counterparts, because Japan is simply a poorer country", I read that Japan is a (much) poorer country compare to German, UK, and French, and I'd assume their GDP per capita at least 20% higher than Japan.
According to https://www.worldometers.info/gdp/gdp-per-capita/, GDP per capita for UK is $44,920, France $44,033, Japan $42,067, Italy $40924. There is not a big difference among these 4 countries. Are you using a different source?
Interesting piece! I'm sure I'm not the only one reflecting on what they saw in Japan a little differently with all this information in mind.
But shouldn't the title be the other way round. Japan's living standards are too high, given their relatively low GDP per capita. And maybe that is why things don't change. Changing the growth model might also change the institutions and social conventions that make Japan such a nice place despite relatively modest resources. I don't know if that is a real trade-off but it seems that political debates might run that way.
I agree here. Japan has managed decline remarkably well and has maintained as pleasant a society as possible under the circumstances of anemic/no growth.
I daresay when other countries face demographic decline as well, they will manage it much worse.
"First of all, it means that many Japanese people are suffering in quiet, hidden poverty. Tourists from the U.S. tend to assume Japanese people are almost all middle-class, both because we’ve been inundated with stereotypes of Japan as a highly equal society, and because you don’t see a lot of crime, dirt, urban decay, or the other visible markers Americans associate with poverty."
Without those visible markers, can we really assume that there's much poverty happening? If it is, then maybe we shouldn't be so quick to link poverty or inequality with poor social outcomes. If Japan can go through decades of stagnation and rising inequality without really developing any of the social pathologies we like to blame on those things in the West, maybe we are blaming the wrong things. It suggest there is a way to avoid the problems currently associated with inequality and poverty without resorting to much redistribution.
If so, it should definitely be identified and pursued. After all, one person's virtuous and ethical redistribution is another person's confiscatory mugging (for charitable purposes of course).
Yes, his measure of poverty is based on being below the median for Japan, rather than any absolute measure. Which might indeed make it seem poorer than many first world countries, but still without many of the problems we'd associate with poverty.
Noah - your reference to OECD social spending data reminded me of something notable, which I remember being surprised about when I first learned it long ago:
Out of the top 10 countries in terms of % GDP spent on social spending, the U.S. is *the most generous* out of any of them, on an absolute $ (PPP) per person basis. Top 10 (did it in excel, source links at bottom):
Country | Total Net Social Spending $ (PPP) per capita:
P.S. Thanks for the post! Love visiting Japan and always surprises me when I see how poor they are relative to a lot of the rest of the developed world. It certainly doesn't "feel" like it when you're in Tokyo station as a tourist about to board the bullet train.
Why is there such a huge difference between "Total net social spending" and "Public social spending" in the US? It's not clear to me what the difference is or why it is so much more in the US than in most countries. Is this all the home mortgage deduction?
It counts tax deductions. The EITC (mentioned in Noah's post as a recommendation for Japan) is very "expensive" in terms of lost revenue. Think also of benefits like the Child Tax Credit, etc. These all are equivalent to writing checks to people for pro-social reasons (families, low income earners, etc.)
"Japan’s famous culture of overwork rewards employees who put in long hours at the office instead of those who accomplish tasks quickly and efficiently. This is mostly a result of the country’s notoriously low white-collar productivity rates —workers are working overtime to make up for broken corporate cultures. But it’s also likely that there’s a feedback loop involved; excessively long hours have been shown to make workers tired and ineffective."
Not just a 'feedback loop', but I would tend to think of this as a CAUSE of low productivity. If employees are rewarded for working long hours without necessarily accomplishing much, then that is what most of them will do. And that is pretty much the definition of "low productivity".
Thank you for the informative article. I would like to reformulate part of the article, using something quite Japanese: Humility. This cultural trait is rather specific to Japan---unaware of any other country with this level, border-line interpretable as submissive behaviours. What is sometimes baffling is to see sharp entrepreneurs taking advantage of others, exploiting this humility, and at the same time radiating status to the others. And this status seems to be all that matters. There is something beautiful and respectable in there. And when this "pristine" way of doing gets mixed with different cultures, and now cornered into deep change because of the need for immigrants, this creates discomfort inspired by the need for change. But here again, the cultural humility kicks in, and people usually lower their head and get to it. Except the ones longing for some glorious isolationist past.
Another aspect, perhaps surprisingly absent from the article is the startup world. Japan is no Silicon Valley, but the past decade is peppered with measures to facilitate innovation. In fact many new entrepreneurs are "underdogs", and more incubators/accelerators have accepted people without "credentials" (slowing down with the pandemic and war). Yet stepping back, measures like the 2001 changes on setting up a company (from more than ¥1M to about ¥200K of consolidated costs), the trend to re-name startups from the dirty "venture company" to the cool "startup" anglicism, the multiplication of general and local government programs, is quite encouraging. And this is long term structural investment that should hopefully pay off in a few years. Yet as Noah's reporting, living standards remain "low" here, from a western eye at least (inequality is clearly and objectively large), but the trend looks good albeit slow.
Anecdote: What does it mean that "venture company" were "dirty" ? In 2008 I joined a venture company (ベンチャー企業). My salary was above median salary, even in my industry. All in the team were rejecting when applying for credit card (there was no debit card at the time, 2008!). When we were at events, we did not exist. To get appointment with clients, we needed to get introduced (typically Japanese), but were asked for many more "credentials", and were put at more work right from the start to prove any claim. Fast forward circa 2017 and many young and less young create "startups" (スタートアップ)---using only characters for foreign words---and no one uses the former word of venture company. Now attending events is easier, and deals or trials can be signed any other day. Still a la Japan, which does often come with many advantages (deeper and stronger relationships, way easier up-sales, etc). When Japan "switches" it is always impressive, as it looks like the whole "group" does---group is basically the nation here.
What I see from Japan is a country that has castrated its younger demographics to support the elderly people. The elite politicians have abused their power and made the country a dull, old place for their own eternal control. The first two sentences are connected as majority of voters are elderly ppl who will sacrifice younger demographics for their well-being. Young ppl just don't have interest in politics as they think they can't make a difference(which is true) and also think all politicians are the same(which is also somewhat true). i.e., castrated. I don't see the country as democratic. It's more of a one party dictatorship, with some flavor of aristocracy. It is a slowly dying country hoping for a war to happen not in their territory but somewhere in their neighborhood 'hopefully' in Korea or Taiwan so that they can have another shot at growth.
This is an excellent article on a sad situation. For many years Japan had the reputation of being a country with a relatively equal income distribution (at least post-World War II). I wonder how much of this is due to a widening gap between rural and urban districts, a phenomenon common to the US and Canada?
On a personal note I would appreciate it if my contact e-mail address could be changed to;
Thanks for putting words to what I had felt for a while when traveling in certain areas of Japan.
Hey, will you consider politics in your next post? I mean, Japan is essentially a one-party "democracy". Can you really hope for some change initiated by politics there?
Some things are more democratic than elsewhere (great press!). But politics...
Everywhere needs to make houses, public transport and food (including eating and drinking out) cheap.
Plus not too long daily working hours and a four day week. Somewhere to live, not too long a commute, ability to meet friends for some food on a long weekend.
This may sound like a pipe dream. But I reckon it's probably not. Start with houses.
More immigrants, please!
In particular I believe Japan should consider entrepreneur visas. Everybody says (and has been saying for years) that Japan needs to let in more foreign talent. Why not focus on folks starting up businesses? If dysfunctional corporate culture is holding back the country's productivity (and thus ultimately growth, and living standards) one way to change that culture might be to import a bunch of business people from different, erm, cultures.
Don’t they have those? There’s a popular startup guy in Japan by the name of patio11 who got in that way. Their skilled worker visas are also very very generous now.
The main obstacles for Americans are simply cultural issues and lower pay. It’s hard to pay off your student loans. But they really do have many more immigrants now and nobody noticed. I was last there in Jan 20 and was shocked at how many workers and business owners everywhere were foreign.
Worst of all, they kept telling me my Japanese was good!
They have the entrepreneur visa in certain dedicated entrepreneur regions such as Tokyo and Fukuoka. You need to bring about $50,000, dedicated for your business, over to start and you only get a year to get it off the ground to get granted more time. People in their early 20s may not have the ante to get in. For skilled executives, you can get a 1 yr, 3 yr, and sometimes 5 yr, visa right off the bat now, especially if you can do certain things like manage financial portfolios or run existing companies more efficiently. Those visas are free to apply for at your outside of Japan embassy/consulate and get processed usually in less than a week. They really want/need skilled people. There are way more spaces than applicants for these visas, as in many cases, the pay offered is quite a bit lower than in the US, Europe, or Australia. Where a senior executive in some industries in the US might make $300-$400K base, that base is likely less than $200, even in Tokyo. Also equity grants and bonuses in the Western sense, on top of the main salary, are nearly non-existent. Bonus in Japan for Japanese is usually where a Japanese market salary for the year is cut by 30% and that money is paid deferred as "bonus" in two chunks of 15% of the annual. Of course, some companies realize to get the talent, they have to pay more of a Western wage. But that creates resentment within the employees of the Company who work the crazy hours and get less than the "special foreigner." In the 90s and early 2000s there were a number of people on expat packages at the Asian Head Office of multinationals or at the Financial Services company that paid a Western salary, housing, cars, private international school fees, etc. Those are nearly gone now. Where an investment bank used to have up to 20 people on packages, they now may have 1 or 2. The home office lately isn't of the opinion that this is worth the investment for the potential returns or they feel there are people around in the industry who stayed in Japan and started a family so they get hired on a local hire basis with local salaries. There are some very large institutional investment funds for venture capital (multi-billion) both from the government and quasi-public/private such as Tokyo University, that are having problem attracting the creme of Japanese talent to run the money as the wages offered are extremely high for Japan (close to $350,000)- but the experienced people know that to manage that much in other countries the base and bonus percentage of the returns would be in the more than $1MM range. An amount such as that is unconscionable for the Japanese government or government supported institutions to offer.
If you join Yoshimoto comedy school, then you get a staying visa like a cake
I see Noah is still using GDP/capita as a stand in for comparing standard of living between countries. I remain skeptical. Maybe we can have a column about the various ways of comparing standards of living some day. Pretty please?
Why are you skeptical of the use of GDP per capita for comparing the standard of living of different countries?
GDP is a measurement of the total output of an economy in a given time period. GDP per capita is the GDP equally divided among the population. It is strongly correlated with a string of positive outcomes such as;
1) Lower poverty rates
2) Higher literacy rates
3) Higher primary, secondary, and tertiary education rates
4) Lower crime rates
5) Lower infant and maternal mortality rates
6) Political stability
7) Larger more redistributive governments
Basically, better outcomes on just about every important quality of life measurement.
I don't know if this is true or not but it certainly is not true for the United States. We have one of the highest per capita GPD rates in the world, but lag behind OECD countries on pretty much all of the measures you stated. Where is your evidence for these claims?
Here is a comparison of poverty rates for example:
https://data.oecd.org/inequality/poverty-rate.htm
The main problem with per capita GDP is that it doesn't say much about the standard of living of the middle class. In a country with a high gini coefficient as the United States, the top 10% can live very well while the media is middling. Median income in the US has only gone up a very small amount since 1989, for example, while GDP per capita has increased much more. Per capita GPD also includes things that don't really improve standard of living very much, like military spending.
There are other ways to measure standard of living, like median incomes. I would like to see how they compare and if they are more valid in some cases.
Cut and pasted from my own comments on Slow Boring. Matt didn't take the bait either:
One thing I would like to touch on here is the comment about the difference in wealth between The United States and France. I have travelled all over both countries and it doesn't seem like the average French person is really poorer than the average American. That doesn't even consider the quality of life difference, just economically. They drive smaller cars if they drive at all and live in slightly smaller houses, but the difference just doesn't seem that great to me.
So I dove into the statistics I could find using Google and this is what I discovered. compared.
GDP/person
United States: $ 63,400.00
France: $ 39,300.00
This is the number usually reported and boy it sure does look like the United States is much wealthier right? The US is almost 60% more wealthy per capita. This number is kind of useless for comparison to actual people though because it include a bunch of stuff like government spending (the US spends a lot on its military) and government borrowing.
Mean Income/person:
United States: $ 25,300.00
France: $ 19,400.00
This feels more right, the average citizen of the US has 30% more income on average than the average Frenchman. But the US has a lot of income disparity, which skews these figures. How is life like for the typical (median) American vs. France:
Median income/person:
United States: $ 19,400.00
France: $ 16,400.00
This lowers the gap to 18%. Noticeable but not really that big a gap.
The French spend less per capita out of pocket on health care too. Looks like $1130 vs. $460.
United States: $ 18,300.00
France: $ 15,960.00
This should all come with the caveat that I am comparing difference sources in many cases, so they are not exactly comparable between values reported, say GDP/capita vs. mean income/capita, though I was able to find sources that directly compared France vs. the US for all values. I am a layperson with an interest in data and finance, but this is far from my speciality, which is technology.
I also am kind of fuzzy on whether income means post-tax income or not. So maybe Americans have more money after taxes.
My main sources were statista, the FRED, and wikipedia.
My sources:
https://worldpopulationreview.com/country-rankings/median-income-by-country
https://en.wikipedia.org/wiki/Median_income
https://www.census.gov/library/publications/2021/demo/p60-273.html
https://www.statista.com/forecasts/1156504/transportation-consumer-spending-per-capita-by-country
Not all very comparable, but the best this layman could find a couple of hours of Googling.
This is a good explanation. The median American is a little richer than the median French person, though America has a very large upper middle class that's much better off.
Unfortunately more money doesn't always bring better health and happiness. Also Poor and middle class Americans are doing pretty well financially, but some things like housing and healthcare are unaffordable here (due to regulations, not the lack of a welfare state).
To me the median American certainly seems to have a higher material quality of life than the median Western European...e.g. the American has a bigger House, AC at home, a bigger Car, more Food available, etc.
And the Western European has more security. No need to worry about or pay much for health insurance, education, or save for retirement.
It really depends on what type of person you are. If you are top 10th percentile or higher in drive, talent, and smarts, the US is the best place in the world to be. Definitely if you are top 1 percentile by far.
If you are 50th percentile or lower, Western Europe is a better place to be.
Maybe. But in terms of material comfort, you are still better off in the US...
Comparing GDP-per-capita against the actual outcomes is pretty much what policy discussions are all about, no? "Why, despite a small GDP-per-capita, is the life expectancy so high in XYZ country?" or "Why, despite such a large GDP-per-capita, is the quality of life in country ABC so low?"
I think it is valid to include GDP-per-capita as context in discussions of standard of living, in terms of overall social capacity. But it is not a measure of, nor a substitute for measure of, the actual standard of living itself.
Specifically, in the context of this article, discussing the fraction of GDP allocated to social welfare makes total sense; comparing "average living standards" between multiple countries by way of GDP-per-capita seems like an indirect and weak comparison.
Take a look at the GDP/capita for Ireland, whose economy is distorted by multinationals exploiting the low tax regime . Ask yourself how much it actually represents the average spending power of Irish citizens
https://www.politico.eu/article/ireland-gdp-growth-multinationals-misleading/
I was wondering about that myself. I know Ireland is a "Celtic Tiger" but it doesn't seem half again as prosperous as the United States.
Your link gave me another indicator that might be more useful: Actual Individual Consumption (AIC), which appears to have the mean/median problem but might be a better indication of the quality of life over GDP.
Paul Krugman memorably rubbished the Ireland claims as 'leprechaun economics'
https://en.wikipedia.org/wiki/Leprechaun_economics#:~:text=Leprechaun%20economics%20was%20a%20term,restating%202015%20Irish%20national%20accounts..
Years ago I heard John Quiggin cheekily suggest that the three main problems with using Gross Domestic Product as a measure were that it is 1. Gross, 2. Domestic, and 3. Product. In that talk he suggested Net National Income would be more aligned with actual outcomes for individuals.
Definitely! Overall, I think GDP per Capita is a very flawed measurement for quality of life...of course, there is no pure objective standard. But as someone who has lived both in Western Europe and North America (USA and Canada), I view the high GDPs of Western European countries somewhat suspiciously...they certainly count for something, but I think it's obvious for anyone who has lived in both regions that the material living standard for people of the same income is simply higher in NA than it is Western Europe... so obviously GDP per Capita also measures other things, but I think that other measures (median wages/consumption/life expectancy etc.) are better for providing an overview of the living standard in various nations etc...
I feel like this article glosses over Japan's most important problem: population density. The woes of Japanese society seem to revolve around living space. The poorest workers are "sleeping in tiny bare rooms". People are having a hard time starting families because they can only afford a cramped apartment. Parents are forced to share living space with their children. There's three solutions for this that I'm aware of:
1) YIMBY - build dense buildings everywhere! Unfortunately Japan is already the most YIMBY nation in the world and hardly anyone could accuse them of having restrictive construction codes.
2) Build new cities / expand small cities. This is difficult for Japan because they don't have that much room left to develop. Most of the unbuilt territory is either used for agriculture (which you can't entirely eliminate for national security reasons) or is taken up by mountains where construction is very expensive.
3) Make it easier to commute over long distances. Again, Japan is the leading nation in the world by public transport development, so there's not much room there for improvement.
So even if productivity in Japan grows to the levels of Switzerland... how will this change the livelihood of the average citizen? They could afford the latest iPhone instead of a 2 year model? They could take more vacations abroad? They'll be able to buy a fancier car? These are nice luxuries to have but at the end of they day its living space that's the fundamental problem and you can't solve it via larger productivity.
From this perspective Japan's immigration strategy makes perfect sense - why allow even more people to come when your core problem is around the lack of living space? Instead they'll wait out another few decades until their population comes down to the point where every citizen could get 1500 sq.ft. of living space and have a happier life as a result. I don't know if doing this is actually sustainable or necessarily desirable, but it seems to be the only way to grant people bigger houses.
Japan is not overpopulated (to disagree with the other comment). I think the correct approach is your #2 - the problem is they're doing the opposite. The rest of the country is depopulating as everyone moves to Tokyo, where all the jobs are.
For #3, Japan's long-distance transit is remarkably expensive; I think people get a good image of the Shinkansen because of tourist discounts. It is cheaper to fly inside the country than use it.
For #2:
a) Assuming you won't be removing agricultural land, how many square feet per person are available in Japan as a whole? Can every adult reasonably get 1500 sq. ft. of space?
b) Japan doesn't really need higher GDP to encourage moving out of Tokyo. So if there's enough buildings available for every adult to live in a luxuriously large space, you could improve everyone's life by a huge margin by just discouraging moving to Tokyo.
As for #3 - is a low GDP per capita to blame here? Would the ratio between Shinkasen ticket prices and incomes be better if the GDP doubled?
Japan like most of Asia is grossly overpopulated. There is simply no room for either humanity or other species. Nikita has hit the nail on the head.
Yeah, that's definitely true...that's why the median American could be considered to have a higher standard of living than the average Swiss person (materially of course)...
E.g. here is Housing by the OECD:
https://www.oecdbetterlifeindex.org/topics/housing/
The US, Canada and Australia all rank higher than any Western European country except for Norway, which is 3rd behind AU but in front of CAN. And I think many people would consider housing to be one of the most important, maybe even the most important aspect in determining quality of life...
I hadn't realized France has less poverty than Sweden. They must be doing something right... I know their health system is rated best in the world but I wish someone would explain to me how it works.
Progressives in the US are suppose to treat Northern Europe as their social ideal--Bernie Sanders always talks about Denmark--but I think this underestimates the extent to which some Scandinavian cultural peculiarities, like intense pressure for social conformity, are pretty unattractive to most Americans. (This goes double or triple for Japan, obvs.)
If we switched the slogan to "Let's be more like the French, another nation of relentless individualists but one that does some stuff better than us" we might be able to associate progressive ideas with great food and cool avant-garde cinema instead. It's worth a try.
Japanese people are individualists who live in a group based society. You can do anything you want as long as it’s a “hobby”. The downside is this includes things like being gay; that’s just a hobby and you still need to get married.
I think the above is a Noah line I stole (sorry) but I’ve noticed it too. The way I’d put it is Japan is England and Korea is America.
I don’t know much about France except that French people absolutely love Japan. The French have the strangest ability to come to Japan, speak perfect Japanese, and somehow still be just as rude as they are at home. It’s a mystery how they get away with it.
Interesting...reminds me a bit of Germany. As a society, Germany seems more conformist than the Anglo countries (and also most other European countries, really), e.g. Taxes or the political ("consensus") system...but on a "base level" it seems Germans are quite individualistic...certainly more than Canadians or Americans I'd say. This is expressed e.g. in the Radio, which quite often plays songs in French, Spanish, Italian, Portuguese etc., while this isn't the case in the US or Canada (unless to listen to radio aimed at these communities). Also, a certain kind of "eccentric German person"...it's different than the typical "English eccentric"...think Lagerfeld instead of Bozza Johnson.
I've noted that the Germans and Japanese are pretty similar (rigid formal rules-based society, high expectations of quality in everything, rather traditional views on the role of women, especially among the older generation, leading to a lower birthrate). A friend and I have between us a Japanese wife and a German wife so we notice the similarities.
Given their history, it's more like Japan is England and Korea is Ireland.
Closer politically but their economies are kind of different, Korea has more real industry and Ireland is known for (somewhat unfairly) tax havens.
(Japanese are ex-colonizers, atheists, have weird hobbies, nobody likes their TV except for nerdy stuff which is popular worldwide, bland food, have a lot of music and fashion subcultures, are bad at software except for video games. Their cars are reliable though.
Koreans are neurotic, Christian, not individualist at all, rather into mass trends, all the celebrities are beautiful and got plastic surgery, their mass-market music and TV are popular worldwide, they’re into PC games, and they make cars and cell phones.)
There's quite a difference between Japanese "bland" and English "bland". Traditional Japanese food is subtle, but pretty much all food in Japan is bursting with flavor. English bland is like McDonald's.
Traditional English food has spices (mustard) and umami (several different kinds of pickle). It is all the same color but there’s some flavor.
On the other hand, one of Japan’s most popular foods is literally British navy curry, and they like their bread whiter than white, preferably without any crusts even.
Have you tried Japanese curry and Japanese bread?
If you have, I can’t imagine how you would consider either bland.
In case anyone thinks I'm overgeneralizing: does Bernie understand why attitudes like these wouldn't fly in the US?
https://en.wikipedia.org/wiki/Law_of_Jante
I'd push back pretty hard against Scandis being very conformist. Scandianvian music is constientely some of the most avant-gaurde and interesting in world, Sweden has some of (the?) highest entreprenuship rates in the Europe. Spotify and Nokia are both Scandi, somewhat embarrisingly Europe's biggest consumer tech companies.
Also, just anacdontely, the Scandis I know don't seem unusally conformist.
They do have the world's highest number of metal bands per capita, don't they?
And Roy Andersson also makes great movies, like "Songs From The Second Floor". But I'm not sure whether to count that as an argument for or against Nordic conformity, since that seems to be exactly what his films are satirizing. (And now that I think of it, that might explain the metal bands too.)
It goes for Japan (and Germany) too, IMO. Because most of their society is such a straitjacket (by American tastes), when they're allowed to let their freak out, they really let it out.
I appreciate the mention of the GDP of $48000 per capita as a limiting factor. One repeatedly sees financial commentators focusing on Income inequality as the core economic issue, as if redistributing money can increase standard of living for an entire nation.
Very insightful article (as usual).
A curious question, you said "low-income Japanese people will still be behind their German or British or French counterparts, because Japan is simply a poorer country", I read that Japan is a (much) poorer country compare to German, UK, and French, and I'd assume their GDP per capita at least 20% higher than Japan.
According to https://www.worldometers.info/gdp/gdp-per-capita/, GDP per capita for UK is $44,920, France $44,033, Japan $42,067, Italy $40924. There is not a big difference among these 4 countries. Are you using a different source?
Interesting piece! I'm sure I'm not the only one reflecting on what they saw in Japan a little differently with all this information in mind.
But shouldn't the title be the other way round. Japan's living standards are too high, given their relatively low GDP per capita. And maybe that is why things don't change. Changing the growth model might also change the institutions and social conventions that make Japan such a nice place despite relatively modest resources. I don't know if that is a real trade-off but it seems that political debates might run that way.
I agree here. Japan has managed decline remarkably well and has maintained as pleasant a society as possible under the circumstances of anemic/no growth.
I daresay when other countries face demographic decline as well, they will manage it much worse.
"First of all, it means that many Japanese people are suffering in quiet, hidden poverty. Tourists from the U.S. tend to assume Japanese people are almost all middle-class, both because we’ve been inundated with stereotypes of Japan as a highly equal society, and because you don’t see a lot of crime, dirt, urban decay, or the other visible markers Americans associate with poverty."
Without those visible markers, can we really assume that there's much poverty happening? If it is, then maybe we shouldn't be so quick to link poverty or inequality with poor social outcomes. If Japan can go through decades of stagnation and rising inequality without really developing any of the social pathologies we like to blame on those things in the West, maybe we are blaming the wrong things. It suggest there is a way to avoid the problems currently associated with inequality and poverty without resorting to much redistribution.
If so, it should definitely be identified and pursued. After all, one person's virtuous and ethical redistribution is another person's confiscatory mugging (for charitable purposes of course).
Yes, his measure of poverty is based on being below the median for Japan, rather than any absolute measure. Which might indeed make it seem poorer than many first world countries, but still without many of the problems we'd associate with poverty.
Noah - your reference to OECD social spending data reminded me of something notable, which I remember being surprised about when I first learned it long ago:
Out of the top 10 countries in terms of % GDP spent on social spending, the U.S. is *the most generous* out of any of them, on an absolute $ (PPP) per person basis. Top 10 (did it in excel, source links at bottom):
Country | Total Net Social Spending $ (PPP) per capita:
USA 21,000
Switzerland 19,250
Denmark 16,500
Netherlands 16,250
Belgium 16,200
France 15,810
Germany 14,750
Sweden 14,400
Finland 14,000
Italy 11,750
Source 1: OECD 2017 Net Social Spending % of GDP: https://www.oecd.org/social/expenditure.htm
Source 2: OECD latest available GDP per capita (PPP $): https://data.oecd.org/gdp/gross-domestic-product-gdp.htm
P.S. Thanks for the post! Love visiting Japan and always surprises me when I see how poor they are relative to a lot of the rest of the developed world. It certainly doesn't "feel" like it when you're in Tokyo station as a tourist about to board the bullet train.
Why is there such a huge difference between "Total net social spending" and "Public social spending" in the US? It's not clear to me what the difference is or why it is so much more in the US than in most countries. Is this all the home mortgage deduction?
It counts tax deductions. The EITC (mentioned in Noah's post as a recommendation for Japan) is very "expensive" in terms of lost revenue. Think also of benefits like the Child Tax Credit, etc. These all are equivalent to writing checks to people for pro-social reasons (families, low income earners, etc.)
It looks like it is $188B in 2019, according to this source:
https://www.pgpf.org/budget-basics/what-is-the-earned-income-tax-credit
That is about 4% of the federal budget.
"Japan’s famous culture of overwork rewards employees who put in long hours at the office instead of those who accomplish tasks quickly and efficiently. This is mostly a result of the country’s notoriously low white-collar productivity rates —workers are working overtime to make up for broken corporate cultures. But it’s also likely that there’s a feedback loop involved; excessively long hours have been shown to make workers tired and ineffective."
Not just a 'feedback loop', but I would tend to think of this as a CAUSE of low productivity. If employees are rewarded for working long hours without necessarily accomplishing much, then that is what most of them will do. And that is pretty much the definition of "low productivity".
worth the wait Noah
Thank you
Thank you for the informative article. I would like to reformulate part of the article, using something quite Japanese: Humility. This cultural trait is rather specific to Japan---unaware of any other country with this level, border-line interpretable as submissive behaviours. What is sometimes baffling is to see sharp entrepreneurs taking advantage of others, exploiting this humility, and at the same time radiating status to the others. And this status seems to be all that matters. There is something beautiful and respectable in there. And when this "pristine" way of doing gets mixed with different cultures, and now cornered into deep change because of the need for immigrants, this creates discomfort inspired by the need for change. But here again, the cultural humility kicks in, and people usually lower their head and get to it. Except the ones longing for some glorious isolationist past.
Another aspect, perhaps surprisingly absent from the article is the startup world. Japan is no Silicon Valley, but the past decade is peppered with measures to facilitate innovation. In fact many new entrepreneurs are "underdogs", and more incubators/accelerators have accepted people without "credentials" (slowing down with the pandemic and war). Yet stepping back, measures like the 2001 changes on setting up a company (from more than ¥1M to about ¥200K of consolidated costs), the trend to re-name startups from the dirty "venture company" to the cool "startup" anglicism, the multiplication of general and local government programs, is quite encouraging. And this is long term structural investment that should hopefully pay off in a few years. Yet as Noah's reporting, living standards remain "low" here, from a western eye at least (inequality is clearly and objectively large), but the trend looks good albeit slow.
Anecdote: What does it mean that "venture company" were "dirty" ? In 2008 I joined a venture company (ベンチャー企業). My salary was above median salary, even in my industry. All in the team were rejecting when applying for credit card (there was no debit card at the time, 2008!). When we were at events, we did not exist. To get appointment with clients, we needed to get introduced (typically Japanese), but were asked for many more "credentials", and were put at more work right from the start to prove any claim. Fast forward circa 2017 and many young and less young create "startups" (スタートアップ)---using only characters for foreign words---and no one uses the former word of venture company. Now attending events is easier, and deals or trials can be signed any other day. Still a la Japan, which does often come with many advantages (deeper and stronger relationships, way easier up-sales, etc). When Japan "switches" it is always impressive, as it looks like the whole "group" does---group is basically the nation here.
What I see from Japan is a country that has castrated its younger demographics to support the elderly people. The elite politicians have abused their power and made the country a dull, old place for their own eternal control. The first two sentences are connected as majority of voters are elderly ppl who will sacrifice younger demographics for their well-being. Young ppl just don't have interest in politics as they think they can't make a difference(which is true) and also think all politicians are the same(which is also somewhat true). i.e., castrated. I don't see the country as democratic. It's more of a one party dictatorship, with some flavor of aristocracy. It is a slowly dying country hoping for a war to happen not in their territory but somewhere in their neighborhood 'hopefully' in Korea or Taiwan so that they can have another shot at growth.
Sadly true. The sobering thing to realize is that Japan is often a harbinger for the first world.
This is an excellent article on a sad situation. For many years Japan had the reputation of being a country with a relatively equal income distribution (at least post-World War II). I wonder how much of this is due to a widening gap between rural and urban districts, a phenomenon common to the US and Canada?
On a personal note I would appreciate it if my contact e-mail address could be changed to;
dylanmosk@gmail.com
Thank you in advance,
Carl Mosk
Thanks for putting words to what I had felt for a while when traveling in certain areas of Japan.
Hey, will you consider politics in your next post? I mean, Japan is essentially a one-party "democracy". Can you really hope for some change initiated by politics there?
Some things are more democratic than elsewhere (great press!). But politics...
Everywhere needs to make houses, public transport and food (including eating and drinking out) cheap.
Plus not too long daily working hours and a four day week. Somewhere to live, not too long a commute, ability to meet friends for some food on a long weekend.
This may sound like a pipe dream. But I reckon it's probably not. Start with houses.