Womenomics and Japan's modernization

Anthony De Bondt, a student at Tokyo's Sophia University, explores the participation of Japanese women in the economy, one of country's biggest challenges.

Building on modernisation theory and on the concept of the middle-income trap this paper looks at one of the main challenges facing Japan in its attempts to guarantee a sustainable growth and its related efforts to reach a higher stage of development.

One of the main issues Japan has to deal with nowadays is the low participation rate of women on the labour market. Tackling this issue would not only foster inclusive growth, it would also render the Japanese social model sustainable.

Modernization theory has a long history. Starting with the two competing world views on development, the theory as proclaimed by Marx predicted a proletarian revolution that would put an end to private ownership. This was challenged by the capitalists who argued economic development would lead to prosperity and democracy. These competing versions reached their peak during the Cold War but neither of them has proven to be entirely correct.

Today, virtually no one expects a revolution to take place that will abolish private property. Nor will anyone claim that economic development (or more concretely industrialisation, as it was conceived by the capitalist wing) inevitably leads to the creation of democratic institutions. Indeed, industrialization has also led to the emergence of fascism and communism.

While the theory may not have given the right prediction it has reinvented itself after the demise of the USSR. To be sure, the theory took new life and indicated where economic development is most likely to lead to. So what is the added value of modernisation theory exactly? It correctly stipulates that economic development leads to more or less predictably social, political and cultural changes.

According to Inglehart & Welzel (2009), modernization now happens in two phases, each of them leading to different changes. The first phase is one of industrialisation that is said to lead to “bureaucratization, hierarchy, centralization of authority, secularisation, and a shift from traditional to secular-rational values”.

The second is one of a post-industrial society that leads to “a set of cultural changes that move in a different direction: instead of bureaucratization and centralization, the new trend is toward an increasing emphasis on individual autonomy and self-expression values, which lead to a growing emancipation from authority.”

While economic development does not automatically lead to democratization, it does trigger the social and cultural changes that make it more probable. We know that economic development can be depicted as a ladder a state has to climb.

While climbing, the first step of the ladder is related to improving basic infrastructure such as roads, providing water and sanitation, but also ensuring good basic education and health services and this usually goes together with a general increase in the GDP per capita. The next step demands more complex policy measures.

A government should now satisfy more sophisticated needs like higher education, open markets for trade and investment, IT infrastructure, etc... To reach the highest steps on the development ladder, however, investment in research and development and innovation are quintessential. If these last investments are not made, the so-called middle-income trap is likely to unfold.

There is an interesting interplay between the two last steps of the ladder in terms of democratisation. In order to establish an innovation-driven economy a state has to rely on well-educated citizens. A knowledge society cannot work without citizens that have become accustomed to critical and out- of-the-box thinking. In addition, rising incomes are likely to lead to a shift from materialism to post-materialism and will incite people to demand freedom of press, speech, elections, etc.

Hence, it appears that economic development, when it reaches a certain step on the ladder, inevitably leads to demands for democratization.

Modernization may well be seen to unfold in the coming decades in Asia. For instance, many commentators expect changes in the coming years in China. However, what I am interested in this paper is not how economic development leads to democratisation in the form of free elections and freedom of speech but rather how economic development goes hand in hand with gender issues and a change of mindset in corporate life. To demonstrate this point I will elaborate on the case of Japan.

What are the current challenges facing Japan?

Japan can be considered as a high-income country with a GDP per capita of approximately $46100. Furthermore, it ranks high (17th) on the Human Development Index, a variable that combines aspects as life expectancy, years of schooling and Gross National Income. However, if it wants to go higher up on the development ladder and surpass the United States, measures need to be taken to overcome barriers to development.

First and foremost, Japan’s population is aging. Japan has the world’s highest number of elderly people in relative terms and has seen this share rise from 11,9% in 1990 to 24,3% in 2012. This is the result of both a high life expectancy (Japan’s has the world’s highest) and a decreasing fertility rate. The latter, in turn, is mainly due to Japanese people getting married at a low rate and those that do say their vows usually doing it at a later age. This leads to a problematic and even unsustainable situation in the Japanese economy and welfare system.

Under the dominant leadership of the LDP, Japan created a well-developed social security system, including pension schemes. With an aging population it is evident that the part of society that is paying for the social benefits allocated to seniors in society is constantly being reduced in numbers. At first sight, a solution might include encouraging elderly to work longer, attract immigrants to work (and pay social contributions) and especially in the case of Japan, encourage women to enter the labour market.

Second, Japanese culture has always been one of homogeneity and respect for hierarchy and authority. While this may have been a factor contributing to Japan’s rapid economic recovery after WWII it may now be one the main obstacles blocking Japan’s way up on the development ladder. As explained, innovation and research and development are needed to avoid the middle-income trap (the name may be misleading as in my opinion this also applies to high-income countries).

While a country like the United States welcomes, embraces, yes even celebrates diversity, creativity and uniqueness, a popular Japanese saying is that ‘the nail that stands out gets hammered’. This conservative way of thinking impedes new industries from rising and can also be connected with the struggles women face when they want to enter the labour market.

Women in Japan’s labour market?

Japan witnesses a low rate of female participation on the labour market. In 2010, 48.5% of women participated in the labour force while the percentage of men amounted to 71.6%. Japan’s female labour market participation can be depicted in the shape of the letter M. Participation is high in the early 20s but then decreases to the age of 34 after which it rises again to finally bend down around the age of 45. A more logical curve would be the one we see for male participation, i.e. a plateau-shape.

What are the reasons behind this M-curve?

One of them is childcare. Roughly 60% of Japanese women give up their jobs after giving birth to their first child. This reflects a weak public policy as to the support for working mothers. On the other hand it also displays the limited career opportunities for women in Japan. Many women are employed in so-called non-career positions, that pay less and usually require less demanding tasks. Career positions on the other hand demand a great investment in human and social capital and are harder to combine with childcare. Only a mere 6% of Japanese women are employed in this category.

Furthermore, there is an attitudinal reason to his situation too. Japanese women still find great satisfaction in doing the household. In short, the Japanese economy is still very much male-dominated. What we see is thus a combination of unfavourable policies and a conservative attitude in society. The current picture is even more regrettable if we take into consideration that an increase in female labour participation could in fact give impetus to the fertility rate.11 Fortunately, not all hope is lost.

Solutions

A number of solutions to increase female participation on the labour market can be listed. Companies’ employment and promotion policies should be more equitable. Men still earn more than women and are overrepresented in higher ranks. Women also need role models so that they are encouraged and can look forward to being a successful career woman. On the other hand, the government could act as well.

By changing its parental leave policy it could allow women to combine childcare with work. On a same token, it could promote parental leave for fathers. The use of official day-care services for young children could also be promoted so that women can focus on their jobs while care is taken of their children. Finally, the Japanese government could put in place more flexible work environments.

Japan’s PM Abe Shinzo has already launched a series of reforms, bundled as ‘womenomics’ that aim to get women to work. While many of the proposals are in line with the proposed solutions outlined above, it remains to be seen how successful they turn out to be. Generally it is expected to take a very long time for significant results to unfold.

Conclusion

Modernisation theory correctly stipulated that economic development leads to profound social, cultural and political changes. In the long run, economic development is likely to trigger a democratisation process. In a country like Japan, democratisation has already unfolded after WWII. There are, however, other post- materialistic values that it should promote. One of them is gender equality on the labour market.

If Japan wants to avoid being caught in the middle-income trap it should be innovative. Not only does this apply to facilitating the entry of new enterprises to the economy and give way to creative individuals to come up with new, progressive ideas. It also touches upon the male-dominance in Japanese economy.

PM Abe has launched a series of reforms to increase female participation on the labour market. It is quintessential that they are successful. It is truly one of the recipes that could foster Japan’s sustainable and inclusive growth. Even though this paper has elaborated on the Japanese case, many of the elements dealt with are equally true for other Asian countries. Therefore, in addition to the benefits for its own economy and society, if Japan succeeds in its efforts it could become a role model for its neighbouring countries.