Prosperity and Poverty in Japan

評決は。日本は公式統計が主張するよりも豊かである。

Simon and I at Himeji Castle, the most famous in Japan

1. How do living standards in Japan and the U.S. compare? Back in 2019, the last pre-Covid year, Japan’s purchasing-party parity-adjusted GDP per capita was about $42,000, versus $62,000 for the U.S. But as an apostle of the gospel of CPI Bias, I never let these official numbers settle the question. Above all, you’ve got to consider quality differences. The greater the level of unmeasured quality, the more artificially overstated the CPI gets, and the more artificially understated GDP per capita becomes. When you compare rich and poor countries, this implies that the gap is even greater than it looks. When you compare two rich countries, in contrast, you must concentrate intently. Keep asking yourself: What are the main ways that Japanese consumers enjoy higher quality products than Americans? What are the main ways that Japanese consumers enjoy lower quality products than Americans?

2. Japan’s most blatant edge: Service quality is almost always notably higher than in the U.S. Practically every Japanese worker I encountered was blatantly competent and eager to please. No tipping expected or even accepted. Random examples:

   1. The Japan Rail ticket agent who helped me with my reservations in Tokyo claimed to only speak “a little English,” but he had no trouble handling my most complex requests.

   2. My last hotel only had a single escalator, which went up during check-in hours and down during check-out hours. Since I paid for late check-out, however, the escalator was going the wrong way when I was ready to leave. Amazingly, the receptionist noticed my plight, dashed over to the escalator, took out a key, and reversed the direction of the escalator just for me.

   3. The 7-11 workers made sure to offer you a spoon whenever you bought a cup of ice cream.

   4. Kyoto prominently featured “Foreign Friendly” cabs with English-speaking drivers. No extra charge, and great conversationalists in both English and Japanese.

3. Another major Japanese edge: Every business is spotlessly clean, down to the last vending machine. That includes the inviting train stations. Trains run on time and - in Tokyo - less than five minutes apart. Stores are open for long hours; Japan today is better than the U.S. was before Covid. (Though some of that is probably limited to Tokyo).

4. Based on my personal experience alone, I would say that Japanese living standards are quite a bit closer to American living standards than official numbers claim. But my expat friends pointed out a bunch of downsides that tourists like me miss. Big ones:

   1. Package delivery is a giant pain in Japan, because companies usually insist that a human be present. This, in turn, confounds e-commerce.

   2. Living space is more expensive; most Japanese live in what Americans would consider cramped quarters. By European standards, however, Japan is only modestly subpar. And I bet that the quality of their residences is markedly superior to Europe’s, where “historic” and “run-down” go hand-in-hand.

      

   3. You could argue that Japan’s excellent customer service is mostly a transfer: you live better qua consumer, yet worse qua worker. However, this is probably mostly wrong. Excellent customer service seems closely tied to pride in one’s work, which in turn is closely tied to job satisfaction. In Japan, even the garbage trucks are shiny clean. Could that happen if the garbage collectors didn’t see themselves as proud professionals?

5. The comparison of living standards gets trickier if you count non-market goods. Which you should.

   1. GDP ignores leisure, and almost everyone seems to think that the Japanese work endless hours. According to Our World in Data, however, working hours in Japan are now about the same as the U.S. A little hard to believe, I admit. Could the suffering of the salarymen overshadow the leisure of the rest of the workforce?

      

   2. Crime. Most suburban Americans already enjoy low crime. How much would they pay to go ultra-low Japanese crime? I doubt more than $1000 a year. Yet for urban Americans - as well as Americans who would be urbanites but for the crime - I can see a value of $10,000 a year or more.

   3. Social pressure and social anxiety. While this is hard to measure, some will try to capture it with suicide statistics. According to Our World In Data, Japan today does worse than France, Germany, the UK, and the US. But in 1990, France was worse. Is some kind of reporting bias masking Japan’s suicide rate? If we switch to deaths of despair, does the U.S. actually do much worse? I know not.

      

6. Overall, my best guess is that relative to the U.S., Japan is 5-10% richer than official statistics claim.

7. Noah Smith famously claimed that Japan has a serious poverty problem despite its sky-high level of bourgeois virtue. Compliance with the success sequence - finish school, work full-time, don’t have kids until you marry - is top-notch. Critics correctly complained that Smith focuses on relative poverty. When I tried to get better measures, sadly, I couldn’t find anything good in English.

8. What’s clear is that almost every household in Japan has enough market income to avoid absolute poverty. Why? Because about 95% of prime-age Japanese men are in the labor force, its unemployment rate is below 3%, and the non-marital birth rate is 2-3%. Snap those pieces together, and almost every Japanese kid grows up in a home with a working father. High savings rates should take care of almost all dire elder poverty, too. (P.S. I’m still hoping to connect a researcher with the right language skills to UVA’s Brad Wilcox to re-do his work on the success sequence for one or more countries in East Asia. Email me if you’re up to the task).

9. Even so, I saw a few homeless men in Japan. Perhaps five total in two weeks. (Zero women). While they don’t actually beg, I assume they would accept money if offered. By the standards of the homeless in any other country, the Japanese homeless are neat-freaks: Their pushcarts look like low-end convenience stores, though they don’t seem to be selling anything.

10. How do you become homeless in Japan? My guess is that alcohol abuse is the main factor: You drink enough to lose your job, and eventually your family refuses to keep enabling you. Still, given their demeanor, I wouldn’t rule out a big share for plain bad luck.

11. Japan is the oldest country on Earth, but you wouldn’t guess this from touring around. My recent stay in Italy (third oldest) and my repeated visits to Germany (second oldest) could bias my optical least squares. Perhaps, but I doubt it. After all, I live in the U.S., one of the most youthful rich countries on Earth (about a full decade younger than Japan), and in a high-immigrant (hence young) region. The more likely story is that Japan’s elderly are especially inactive. Maybe because of Covid, or maybe they’ve always tended to keep to themselves.

    

12. Not convinced by my assessment? If you ever want to see Japan, go ASAP and judge for yourself! The dollar remains strong against the yen, Covid enforcement is near-zero, the tourism sector remains depressed and hence uncongested, yet nowhere I visited felt depressing. Airfare from DC was admittedly steep, but there’s a simple workaround: Stop over in Los Angeles, which offers about six affordable (~$900) nonstops to Tokyo per day. 後で自分に感謝することになりますよ。