Japan's 'Ice Age' Workforce Faces Stagnant Wages Amid Economic Growth

Japan's "ice age" generation, primarily those in their 40s and early 50s, faces stagnant wages and limited career advancement despite the country's economic growth, exacerbating financial and social challenges.

Japan's 'Lost Generation' Struggles with Stagnant Wages Amidst Rising Salaries for Other Age Groups

The plight of Japan's "lost generation"- primarily individuals in their 40s or early 50s- is enduring, as they cannot keep up with the pay growth and career advancement prevalent in both elder and younger age groups.

This generation, who graduated from high school or college, experienced the "ice age" of hiring from the late 1990s to the 2000s. Many individuals found it difficult to secure stable employment following the collapse of a bubble economy inflated during the 1980s by soaring real estate and stock prices.

Although the aggregate wage level in Japan has begun to increase, data indicates that there are still significant disparities among various age groups, per Nikkei Asia.

Over the past two years, the country's inflation rate has maintained above 2% in response to the global price increase. Since January 2022, the Ministry of Health, Labor, and Welfare has conducted a survey indicating that total monthly cash earnings, or nominal compensation, have increased yearly.

However, a subsequent survey by the ministry indicates that the average monthly salary of full-time employees in their 20s and 30s increased by over 10,000 yen ($65) from 2010 to 2023. Conversely, employees in their late 40s experienced a rise of just over 1,000 yen, while those in their early 50s experienced a downward trend.

"I was so busy just making a living when I was a nonregular employee in my 30s," said a publishing company worker in his 40s living in Tokyo. Another person around the same age added: "I had such low bonuses and slow pay raises when I started working. In my mid-20s, my annual income was surely about 1 million yen less than what workers of the same age make now."

During the employment ice age, young individuals who could secure full-time employment frequently encountered obstacles in their professional development. This was primarily because older workers employed during the economic bubble were deeply entrenched in their roles. The recent trend of increasing the retirement age has further exacerbated the situation.

The ministry has reported that the percentage of individuals in their early 50s who hold senior manager positions has decreased by 1.7 percentage points over the past decade. This change indicates an increase in the share held by both younger and older generations: Workers in their early 60s have experienced a 0.9-point increase, while those in their early 30s have seen a 0.1-point ascent.

The ice age generation has also left many individuals with limited work experience, impeding their ability to pursue mid-career job changes. According to the ministry's survey on employment trends, the job turnover rate for male workers in their late 40s is 5.4%, 2.3 points lower than that of their counterparts in their late 30s. Although 40% of workers in their 20s and 30s experience wage increases after changing jobs, this rate decreases to approximately 30% for those in the ice age cohort.

Ice Age Workers Left Behind as Japanese Companies Enhance Conditions to Combat Labor Shortages

Japanese businesses have implemented measures to enhance working conditions amid labor shortages to attract new talent and retain existing employees. Nevertheless, this endeavor has yet to consider many laborers from the Ice Age. "Many employers seem hesitant to raise pay for Ice Age employees under the assumption that these workers are less likely to change jobs," explained Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute.

Under such circumstances, it may be challenging for individuals to accumulate assets. From 2003 to 2023, the proportion of individuals in their 40s with financial assets comprising less than 1 million yen more than doubled, reaching 14%, according to data from the Central Council for Financial Services Information, a public entity. According to Yusuke Shimoda, a senior economist at the Japan Research Institute, they may encounter "a difficult retirement" unless action is taken.

Traditional benefits, such as eternal employment, are no longer guaranteed in Japanese companies. Individuals from the ice age generation risk being trapped in a cycle where they only receive promotions or pay raises if they acquire the necessary skills for digitization and other advanced office duties.

In the interim, an increase in low-income individuals could considerably impact the nation's social welfare system. Due to their lower earnings, these individuals contribute less to public welfare by paying lower nursing and medical care premiums. This imbalance underscores apprehensions regarding the discrepancy between the benefits and contributions.

Additionally, economic constraints have prevented numerous members of the lost generation from marrying. Unmarried elderly individuals are at an elevated risk of health complications and isolation, according to experts.

Increasing the productivity of the glacier age generation is imperative for the economy, as approximately 20% of Japan's population is of this age.