Japan's 'Ice Age' Generation: Working Through Crisis, Retiring on Thin Wallets

Japan’s ‘ice age’ generation serves as proof that the wounds of an economic crisis can last far longer than the crisis itself. The term refers to those who entered the workforce between 1993 and 2004, after Japan’s economic bubble burst. An estimated 17-20 million people now in their 40s and 50s belong to this group. Many still work as non-regular employees who generally earn lower wages, receive fewer benefits, and have weaker job security.

They graduated from school or university while Japan’s economy was struggling and companies were cutting back on recruitment. As a result, competition for jobs was extremely fierce and many graduates failed to secure permanent positions. Some ended up working as contract, temporary, or non-regular workers with lower pay and less protection. Others had to move from job to job simply to survive.

The problem is that the impact is not only felt in today’s income, but also has the potential to depress their savings, careers, home ownership, and even the size of their future pensions.

Torigoe Atsushi embodies the experience of Japan’s ice age generation. According to The Economist, for nearly two decades, Atsushi, 50, worked in the warehouse of a fashion company in Tokyo. During that time, his income rose only slightly. Recently, his salary actually fell after the company cut bonuses and changed its pay scheme. He now earns only around JPY3.6 million, or roughly Rp36 million, per year.

He saw the company’s job advertisements offering higher salaries for new workers. ‘It is good that young people are getting better pay,’ he said. ‘But why has my salary not been raised?’ he told The Economist.

Torigoe and millions of other members of the ice age generation belong to Generation X, and they are once again being left behind. Japan is emerging from decades of deflation, prices are rising, and companies are granting the largest pay increases in decades. Yet these benefits are not being felt much by the ice age generation. An even worse situation may occur when this large cohort of baby boomer children—one of the last big groups in Japan’s population pyramid—begins to enter retirement.

Unlike Previous Generations

The difficulties experienced by the ice age generation stand in stark contrast to those of the previous generation. During the bubble economy era of the 1980s, Japanese companies hired on a massive scale. There were many stories of students finding their mailboxes full of job offer letters or even being treated to lavish meals by companies competing to attract them.

Everything changed when the economic bubble burst in the early 1990s. Japan’s rigid employment system made it difficult for companies to dismiss existing workers. As a result, companies chose to reduce hiring of new workers. The ratio of job openings to job seekers among university graduates, which had previously been nearly 3 to 1, plunged to below 1 in 2000.

Nagai Toshihisa, who graduated in 1999 shortly after the Asian financial crisis, eventually buried his hopes of working at a securities firm. ‘It felt completely futile looking for a job,’ he recalled. Many people from his generation sent dozens or even hundreds of applications but did not get a job. The situation was made even harder because the ice age generation was so large in number, creating an oversupply of labour.

Trapped in Non-Regular Work

Many graduates who failed to secure permanent jobs ended up in temporary or contract work. Japan’s labour market draws a sharp distinction between regular workers, who have strong legal protections and seniority-based pay rises, and non-regular workers, who often do similar work for far lower pay and are the first to be laid off when the economy worsens.

Such jobs had previously been filled largely by housewives seeking to supplement family income. But more and more young people were forced to take these jobs to support themselves, according to Kondo Ayako of the University of Tokyo. The term ‘freeters’, referring to young people who drift between informal jobs, became popular. So did the term ‘parasite singles’, meaning adults who still depend on their parents. Concerns about the phenomenon of hikikomori, or people who withdraw from social life, also grew.

Secured Regular Work, But Pay Still Lags

Time and an increasingly severe labour shortage have repaired some of the damage. According to Shimoda Yusuke of the Japan Research Institute, the proportion of the ice age generation who now hold regular jobs has largely caught up with older generations. However, their incomes have not caught up.

Those who spent long periods in non-regular work tend to be unable to fully catch up with their peers’ earnings even if they eventually enter regular employment. Those who already hold regular jobs face another problem. Senior positions in companies are still filled by workers hired during the bubble era. This has slowed promotions for the next generation.

Low labour mobility in Japan also makes it difficult for this less fortunate generation to switch companies in order to obtain higher pay. Japan’s economy is now changing. After three decades of stagnation, wages are beginning to rise as inflation returns, while job switching is also becoming more common. However, the improvement is mainly being enjoyed by young workers. Companies facing labour shortages are competing for new workers and offering higher pay to attract and retain them. By contrast, part-time workers remain left behind.