Noah Smith on “Japan’s Growing Poverty” (that really isn’t growing)

Noah Smith writes wrote that he is leaving academics to work full time at Bloomberg as an economics writer. (He lived in Osaka, Japan for three years in the early 2000s)

Congratulations to him on that.

I then looked to see what he had recently written at Bloomberg View and yesterday he put up: “Japan’s Growing Poverty Defies Glib Explanations”

Here are some problems with the article…

1) I’m not sure why Smith’s poverty rate for Japan graph ends with 2009 when 2012 data is the latest available (2015 data out soon). The poverty rate for that year was 16.1%. It isn’t true that Japan’s poverty rate has “risen relentlessly” since 1985. The poverty rate did increase, not surprisingly, during the bubble years and some more in the late 1990s, but it hasn’t increased much from 2000 (15.3%) to 2012 (16.1%).

2) Just a month ago Smith correctly explained why using the post-transfer gini coefficient was a better way to measure income inequality than the pre-transfer gini number that is almost always reported in the press but here he did the same thing. There has been almost no rise in post-transfer income inequality in Japan since 2000. The increase was during the late 1980s and 1990s.

3) As for stating that Japan “was a very equal society as late as the early 1980s,” it wasn’t relative to Western Europe then and only somewhat less equal than the U.S. of the early 1980s — about .04 points lower post-gini coefficient.

4) Smith writes: “Japan has also resisted becoming more open to trade and immigration. It ranks lower than most rich countries on measures of trade openness,…” Japan as the second largest rich country, like the U.S., is a large country so trade openness will be lower than most rich countries. But according to the World Bank, while the U.S. measure of trade openness (% imports + % exports / %GDP) has declined slightly from the late 1990s when at 31 percent to 30 percent today, Japan went from 30 percent to 35 percent by the mid 2000s and further increased to 39 percent. I’m not seeing the resistance to [trade] openness.

5) One omission to the wage/economy picture presented here is the significant drop in hours Japanese worked in the 1980s compared with today: 2100 hours a year in the 1980s; 1730 hours a year today. So Japan’s standard of living is 80% higher using 25% fewer labor hours compared with 1985. One can argue that ain’t so great over 30 years, but I think it should be noted for a broader perspective.

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