“Turning Japanese, I think I’m turning Japanese, I really think so”…. sang The Vapors in their sole hit of 1980. While widely assumed to be in reference to the face a male makes while masturbating, songwriter David Fenton later explained that the song finds meaning in “the clichés about angst and youth and turning into something you didn’t expect to.” In today’s world, one could say that the fear of Western economies trending towards something they didn’t expect, chiefly Japanese-style economic stagnation, is a tune backed by a substantial chorus. One could also say that the current federal and monetary policy embarked on by the US, chiefly buying its own debt to artificially keep interest rates low while simultaneously injecting the economy with fiscal stimulus, is self satisfying and therefore, ehem, masturbatory in nature.
True, there are eerie similarities between the “lost decades” of Japan and the current tepid growth story in the United States, yet there is also a stark contrast between how the Yankees and Japanese handled their respective slow-downs. The argument listed below is one of the more popular refutations you could lob. While it may provide support for the “We are not Japan” camp, this same point is indicative of a larger structural problem in the United States; a low unemployment rate during the economic boom years did not represent the most efficient use of our labor capital and the resultant downturn may have shown us just how misguided the hiring craze was.
Productivity Gains in America, post-2008
While the US and Japan endured similar drawdowns in GDP growth rates, labor productivity (measured in either GDP output per aggregated hours worked or GDP output per employee depending on your data set) improved markedly in America in 2008. A chief cause for this increase in productivity has to do with the mass firing of full time employees in the non-government sectors. These jobs were either replaced by part time employees (who would not count as “employees” and therefore would not influence the denominator in some measures of labor productivity) or liquidated altogether. A greater burden of output falls on a smaller labor force. Labor productivity improves in either case.
Meanwhile in Japan, corporate loyalty remains strong, both a blessing and a curse depending on what rung of the corporate ladder you’re sitting on. The youth scream and stammer that elder generations of fumbling businessmen stay in power for too long, yet the painful retrenchment of job opportunities was not felt in the Land of the Rising Sun as it was in the Land of the Free. For example, from 1990-1992, when the Japanese economy started experiencing lower annual growth rates (around 1%-2% annually) unemployment stayed at an exceptional 2%. From 2008-2009, the United states economy shed 2.6 million jobs, driving the unemployment rate from 5% in January 2008 to 10.1% in October 2009. American business owners will gut staff much more readily than their Japanese counterparts. Labor costs (wages) dropped substantially in the US and this process lead to increased profits and leaner balance sheets for US companies.
True, while corporate earnings have been strong for many companies, the on-going shit-show of global economic uncertainty has only reinforced the process of funneling excess labor-cost savings into mountainous cash reserves rather than job creation initiatives.
The question is: Could US businesses hire more workers with that cash? Sure! I would love to have an actual human being check out my items at a nearby convenience/grocery store. My utter lack of technology acumen typically removes the “Self” from the self-scan check out process any way, forcing a baffled employee to come over and help a college graduate student slide cereal boxes from left-to-right over a red laser. Furthermore, how many fucking times do you have to press “zero” or “#” or “*” before you can cut-off the automated voice message on a customer service hot-line from speaking at a stroke victims pace?
Yet, no matter how much I want to fill those jobs with living, breathing humans, they aren’t coming back. On a national level, we have almost reached the same level of GDP as we were at before the crisis, albeit with 600,000 less people contributing to the output (see above chart). This number does not take into account people who have just given up looking for employment altogether. Many have been automated out of jobs that existed only because the economic boom allowed business owners and shareholders to overlook bottom line bloat and focus their sights on top-down growth. Things aren’t looking so hot.