As the world’s third-largest economy, many have long viewed Japan as an economic and global powerhouse. However, Japan has faced an increasing poverty level for the better part of the last two decades. According to the latest study by the Organization for Economic Co-operation and Development (OECD), Japan’s poverty rate currently stands at 15.7%. Here is some information about how Japan become impoverished.

Japan’s Lifetime Employment System

The determining factor of income distribution has long been Japan’s lifetime employment system. This system has been around for decades; Japan implemented it during the large growth periods the country experienced during the 1950s and 1960s. Established companies for regular or seishain employees mostly practice the lifetime employment system. The system’s focus is on three primary pillars. The pillars include an “implicit guarantee” to take care of regular employees until retirement, wages that seniority dictates and company-based labor unions for regular employees.

However, 37% of the country’s labor force are nonregular employees and the employees have revolted against this system in recent years. Non-regular employees receive less pay and do not receive the same level of benefits that their regularly employed colleagues receive. Another key aspect of this argument is that increased flexibility to hire and fire employees will increase economic efficiency.

The Outlook and Shift of Japan’s Lifetime Employment System

The fact that numerous companies have converted regular workers to non-regular, part-time employment has also affected the outlook of the lifetime employment system. At the same time, a large portion of available jobs remains non-regular. Within the last few decades, companies that routinely hired 20 to 30-lifetime employees a year, now only hire two or three new employees each year. This new process has contributed significantly to how Japan became impoverished.

One can largely attribute this shift to two major occurrences. The first occurrence involves emerging-market economies such as China, where labor costs are lower. The second is the increase in part-time workers, especially women who need work and may not be able to commit full-time due to childcare duties and seniors who aren’t able to enjoy retirement due to their pension benefits not covering living expenses.

The Lack of Bankruptcy Procedures in Japan

Oxford Head of Japanese Economics, Shigeto Nagai stated how Japan also lacks Chapter 11 or a similar bankruptcy procedure that could possibly give those who fail another chance. This leads to an overwhelming fear in citizens of Japan, which prevents the citizens from seeking change due to the absence of the program. The addition of this program could significantly help those in need and eliminate the underlying fear that exists.

Although no current implications are in place, certain companies are taking action into their own hands to possibly eradicate the issue. A number of companies have started adopting a variety of incentive plans including performance bonuses, share options, profit-sharing schemes and employee stock ownership plans. While this is not the end-all-be-all solution, it is a start toward reaching the proper employee benefit programs that are at the center of the cause of how Japan became impoverished.

Similar factors and the revolution of such a large part of the labor force against Japan’s long-established system have led to the disappearance of the middle class. Nagai also stated that “Income has declined across the income percentiles, and the share of low-income households has risen as those of middle- and high-income groups shrink.” The Economics Head further stated his concerns, stating that Japan’s middle class is gradually disappearing.

Nagai feels that the only way to save the Japanese economy is to create a more dynamic human resource allocation. The static allocation of human resources has greatly affected how Japan has become impoverished and the country’s best efforts to eliminate the deflationary equilibrium or the lifetime labor force.

Looking Ahead

Despite recent trends, there are a lot of changes underway to relieve Japan of its impoverished struggle. Labor shortages have led to employers raising salaries, which has attracted many younger, potential employees. Numerous Chinese startup companies have created employment opportunities which a substantial amount of young talent and many regular employees of larger corporations are quitting jobs early in their careers to seek opportunities elsewhere.

With the recent developments, the nation of Japan is closer to being the economic powerhouse that it has historically been for decades and its citizens once again have a fair chance at earning a living.

– Austin Hughes
Photo: Flickr

In El Triunfo, a small town located in Honduras, many farmers have battled food insecurity and poverty by pivoting to growing cashew trees. Worsening climate conditions have created a continuing drought in Honduras and cashews have become a way for some to adapt their crops to deal with the changing land.

Drought in Honduras

In September 2019, the drought in Honduras became so severe that the government declared a national state of emergency, a drought that had been going on for five years already at that point.

The traditional crops of maize and beans do not stand up well to the changing climate. According to Reuters, drought destroyed up to 80% of crops by 2019 in some regions. The lack of crop diversity is additional harm, as corn, in particular, can deplete essential nutrients from the soil.

Every year, the drought has more of an impact, as stocks deplete and the soil becomes worse. It eventually becomes difficult for farmers to recoup their losses.

The Dry Corridor is a stretch of land in Central America running through El Salvador, Guatemala, Nicaragua and Honduras. The region’s name comes from its ongoing drought and minimal rainfall. Within this region, over 25% of residents do not have the finances to purchase sufficient essential foods.

As of July 2021, more than 73.6% of Hondurans are in poverty with 53.7% in extreme poverty, according to estimates by the Honduran government.

How El Triunfo is Adapting Crops

The town of El Triunfo has taken an adaptive approach to combat the drought in Honduras. In 2018, a group of farmers in the area founded a community cooperative. There are currently 38 members of the cooperative, mostly women and their main focus is the growth and cultivation of cashew trees, The Guardian reported.

Cashews and cashew trees provide numerous long-term benefits. Primarily, they are extremely drought resistant and actually better the quality of the soil. They additionally benefit their environment by providing coverage for animals and other plants. In these ways, they differ from the crops that Honduran farmers traditionally grow.

Cashews are also packed with nutrients. One ounce of cashews contains five grams of protein and 12 grams of fat. They are additionally high in copper, which helps the body produce energy. Essentially, cashews provide a valuable supplement to the diet of those facing food insecurity.

Beyond being able to eat the cashews they grow, farmers in Honduras sell and make a profit from their cashew yields. While the cooperative does not currently have the means to process the cashews themselves, they are able to sell the nuts to an intermediary. Although, they do hope to have their own operations one day, according to The Guardian.

Etramasot

While the long-term efficacy of the cooperative remains to be seen, as much of their operation is still in its developing stages, there are also more established companies within the town of El Triunfo. Etramasot, for example, is a cashew farming company founded in 2003 that fully manages its own processing. Ninety-two farmers currently grow for Etramasot and the current president, Almí Martinez, has witnessed first-hand the qualitative benefits of utilizing stable, drought-resistant crops.

“I’ve seen people able to buy their own land, animals and educate their children who have gone into professions,” she said in an interview with the Guardian.

The drought in Honduras and the weather conditions throughout the entire dry corridor make it difficult for farmers in the area to produce consistent crop yields. Cashew trees, however, are able to thrive despite these conditions, leading many farmers in El Triunfo, Honduras to adapt their fields to grow cashews. The resulting cashews not only provide a steady source of nutrition for the farmers but allow them to reap the economic benefit of selling the excess.

– Eleanor Corbin
Photo: Flickr

The continent of Africa makes enough food to feed its entire population. However, there are still plenty of citizens who go to bed hungry and live in poverty. Due to the general struggle of exporting goods, Africa can barely get its products out to other countries, much less within the region, because goods cost much more than they normally would. However, there are organizations, such as USAID and legislation such as the African Free Continental Trade Agreement (AfCFTA) that are working on reducing trade tariffs and increasing trade within Africa.

Terrifying Tariffs

Africa’s infrastructure was designed to send out goods and other resources to other areas in the world, not for trading within the region. This dilemma has created many roadblocks to trading across borders. One of these is that the price of trading outside the continent has risen dramatically. Specifically, “the cost of goods in the region is nearly 40% above retail because it costs that much to get it to consumers,” according to USAID.

Trade within the region of Africa only makes up 13% of the total. According to USAID, the continent drags behind other global superpowers in trade. In fact, Asia is responsible for 40% of trade in the region, the EU is responsible for 60% of trade and North America has 31% of total trade.

Fighting the Good Fight

Food insecurity is one of the most significant impediments to economic prosperity in Africa and the result of a lack of increasing trade within Africa. More than 27 million people in the region are still food insecure and require assistance, amounting to a 39% increase since 2016.

However, USAID is working with the government in Africa and private sector organizations on reducing the costs of doing business, and increasing trade within Africa. USAID Trade and Investment Hubs are working to improve the opportunities for investment. “For every $1 of public money spent, the hubs leverage $9 in private sector investment.”

There are other solutions too. Under the African Growth and Opportunity Act, which reduced both the cost of importing/exporting goods by half, Africa has begun back-and-forth trade with the U.S. Over 10 years later, “U.S. businesses have exported $37 billion worth of goods to East Africa,” USAID reported.

Another effort toward increasing trade in Africa is the African Continental Free Trade Agreement Area Agreement, (AfCFTA), “a landmark trade agreement,” signed in 2018.

The AfCFTA, An Overview

The AfCTFA pressures countries to remove tariffs on 90% of goods and will create a market that has, “over a billion consumers” and a total GDP of more than $3 trillion, according to a Brookings report. This would make Africa “the largest free trade area in the world.”

Thanks to the fact that the AfCFTA has been increasing trade within Africa, the number of goods trading within the region has increased from around 10% in 1995 to about 17%. However, as stated before, the region’s total trade with itself still remains low compared to other global superpowers such as Europe, Asia and North America.

However, according to the Economic Commission for Africa (ECA), the AfCFTA will increase the number of agricultural products traded within the country by 20 to 30%. By accepting the agreement, state revenue, income for farmers, and investments in modern agricultural practices will increase. ECA wrote a report on the AfCFTA and explained that “the AfCFTA potentially embodies a ‘win-win’ approach such that all countries across Africa and vulnerable communities within these countries receive benefits from the agreement,” according to a Brookings report.

A United Nations Conference on Trade and Development (UNCTAD) report in 2021 showed that Africa’s, “untapped export potential amounts to $21.9 billion, equivalent to 43% of intra-African exports.”

Due to COVID-19, the date of free trade in Africa pushed back to January 1, 2021. Just a month before free trade was supposed to begin, an African coffee and cocoa merchant named Meron Dagnew visited the AfCFTA Secretariat in February 2020. “I am hoping to not pay as much as 35% tariffs on my goods… I could then make a profit, expand my business and hire more people,” she said.

The lack of modern transportation systems holds back traders like Dagnew to ship their goods. According to Africa Renewal, “African countries could rake in $20 billion yearly by simply tackling non-tariff barriers that slow the movement of goods.”

There are plenty of blockades to increasing trade within Africa, such as tariffs, food insecurity and a lack of modern agricultural practices. However, thanks to the help of organizations such as USAID, and legislation such as the African Free Continental Trade Agreement, Africa is slowly making their way towards being able to provide for each and every citizen and promote growth within the region’s hard-working traders.

– Henry Hyman
Photo: Flickr