Wednesday, November 25, 2015

What Womenomics Can Achieve

I have on-gain/off-again Twitter wars with the opinionated Professor Noah Smith of Stony Brook University on subjects Japanese. In a recent exchange I lost patience with the good doctor, for which I am only slightly sorry.

Dr. Smith asked a simple question: why did Japanese women's fertility (number of births per woman) fall when the level of participation of Japanese women in the workforce was still low? To which I offered a simple answer: because age of first marriage rose. (Link)

In the economics explanation women have fewer children based upon calculations marginal utility and opportunity cost. While in agricultural societies children represent potential increases in labor force and output, in industrial and post-industrial societies children represent zero increase in output. Furthermore, for the woman in developed societies the birth of each child represents an economic subtraction, time and energy that could have been spent furthering their careers or increasing their take-home pay.

In Japan's case, however, declines in fertility preceded and exceeded possibilities of tradeoff between work and childbirth.

Hence my answer -- that in East Asia behavioral effects of calculations of marginal utility and opportunity cost are small compared to the effects on fertility of later marriage and the social stigma/economic catastrophe of out-of-wedlock birth. In contradistinction to the economic explanation, married women in Japan are having children at the same rate they always have -- lost economic opportunity turns out to be a feeble predictor of Japanese fertility.

The policy implications of this for the second of the Abe Administration's New Three Arrows -- raising the number of births from 1.4 per woman to 1.8 -- are clear. More day care, including day care centers inside corporate buildings (Link- J)? Largely irrelevant for fertility. Relevant for the workforce participation rate? Sure, flattening the infamous "M Curve" (Link). But largely irrelevant for fertility.

To raise fertility, the government can:

1) Convince Japanese to marry in their early twenties like they did in the 1970s.

2) Eliminate the social stigma and economic consequences of out-of-wedlock birth.

3) Increase the rate at which women above 35 years of age have children or extend the window of fertility by a delay in the onset of menopause, or

4) A combination of all three.

Good luck with the above.

But don't take my word for it. Check out the amazing slide presentation of Saito Jun of the Japan Center for Economic Research on Japan's capacity to overcome its lower fertility and shrinking population (Link). The whole (expletive deleted) argument over Japan's demographic limits to growth is laid out in detail.

Those with a little more time can check out the Tokyo on Fire videos for discussions of these matters. Like this one perhaps.

Class dismissed.

Later - There are many, many debates where I am rooting for Dr. Smith, such as the one he is currently having with John Cochrane on inter-generational fairness. (Link)


Anonymous said...

2B) Let women who like other women marry each other, see if they marry younger.

Aquila-J said...

What about the costs of raising a child? It seems like school fees and juku is very expensive in Japan, and without much flexibility in careers, attending good schools seem very important. Are school fees rising? Have they stayed the same since the bubble years when the middle class had more discretionary income?

Michael Thomas Cucek said...

Aquila-J -

Education costs might possibly be significant. But then would we not see across-the-board-declines, rather than declines in the 20-29 cohort but rises in the 30-44 cohort?

Furthermore, the correlation between discretionary income and fertility may be NEGATIVE. The prefecture with the lowest total incomes -- Okinawa -- has the highest fertility and highest ratio of households with children.

A.J. Sutter said...

“To raise fertility, the government can: … 3) Increase the rate at which women above 35 years of age have children or extend the window of fertility by a delay in the onset of menopause”: I take it this is facetious, including the first clause? Or are you proposing that the government organize special squads for that purpose?

As for Saito-san’s presentation, the whole argument is absolutely NOT laid out. Aside from its borderline sociopathic memes that are considered normal among conventional economists (e.g., the reason Japan needs more people is to spur economic growth in order to pay off its debt), the presentation ignores all the most important factors: job stability, men, working hours and day care. Women don’t marry because their financial situation is terrible and they can’t get decent-paying, stable jobs - and because their prospective husbands are in the same boat. Who wants to marry, much less raise children, in that situation? Working hours for both men and women are long and oppressive and most overtime is uncompensated — so who has time to raise children? Who can pick them up from school? And while even PM Abe acknowledges that affordable day care is in short supply, his proposed and inadequately implemented solution is public private partnerships to increase day care facilities — meaning that “affordable” drops out of the equation for many families.

There is a lot of European thinking on these issues (e.g. Dominique Méda, Gøsta Esping-Andersen), which often emphasizes three elements in particular: (1) Shorter working hours (e.g. 30 or 32) at full pay for both men and women, so that husbands and wives can share duties of picking children up from day care and school; (2) Free day care for everyone, so that class barriers are not built up already from the toddler stage. This also reduces government expense because the whole apparatus of needs-testing becomes unnecessary. (3) Greater job stability, and a social safety net that “sticks” to individuals, not jobs. Based on academic discussions I’ve seen here, though, it looks like it will take another 40-50 years for mainstream Japanese sociologists and economists, be they men or women, to tune into these lines of thinking.

Even worse, all of these policies are pipe dreams under the current ruling coalition. The Koizumi-Takenaka destruction of the labor force was entrenched with gusto by the Kokkai earlier this year (thanks to legislation written in part by the same Takenaka, now chairman of Pasona, a temporary dispatch company). The instability and low pay of temporary work — which now afflicts 40% of all workers in Japan — have had a devastating effect on peoples’ ability to get married, and also is beginning to lead to increased infanticide, as was mentioned on an episode of NHK’s Closeup Gendai earlier this week. Not exactly what the country needs to get the population up.

Finally, as events in the West during the past few years should make obvious, inviting foreigners into a country for economic purposes without also welcoming them into society and giving them reason to shift their political allegiance to their new country of residence is an explosive recipe for disaster. It's just dangerous to trust economics to provide the solutions to these human, social and political issues.

Michael Thomas Cucek said...

A. J. Sutter -

Whilst I sympathize with all those who want society to be more humane and open, I must caution that a misapprehension of the nature of a problem has serious consequences, one of which is a mismatch in the distribution of limited resources. Rather than generating desired policy outcomes, emulation of European patterns could instead generate inefficiencies and resentments.

As for your argument against liberalization of immigration, it is straw man. Japanese immigration policy revision is slow-moving because policy makers are aware there is no such thing as an economic immigration only policy.

A.J. Sutter said...

Thanks for your reply. It’s an artful blend of what the late Albert Hirschman called the “perversity thesis,” i.e. the reactionary argument that any purposive action to improve some feature of the political, social, or economic order only serves to exacerbate the condition one wishes to remedy, with what the late Uwe Pörksen called Plastikwörter, “plastic words,” i.e. words that are empty and malleable in meaning while sounding as if only an expert is qualified to interpret them. My hat’s off.

I am not the one complaining about current Japanese immigration policy, BTW: rather, see, e.g., Saito presentation at 35-41.

Anonymous said...

"....extend the window of fertility by a delay in the onset of menopause."
I say go for that one. Japan could market the hell out of that solution.