In the second part, I pointed out the core of my argument: the folly of trying to increase productivity under a deficit of demand. To begin this third part, let’s revisit the simplified, non-exponential formula for TFP (Total Factor Productivity) introduced in Part 1:
Output Growth Rate = Labor Input Growth Rate + Capital Input Growth Rate + TFP Growth Rate
Therefore: TFP Growth Rate = Output Growth Rate − (Labor Input Growth Rate + Capital Input Growth Rate)
The significance of this equation is that it represents a retrospective decomposition of the result—which is output growth. TFP is merely the name given to the portion that cannot be explained by increases in labor and capital. In other words, this formula does not demonstrate a causal relationship where “if TFP rises, output will increase.” It is utterly baffling to me that the majority of renowned economists and analysts fail to realize that striving to raise productivity is futile when demand is lacking. Furthermore, as a matter of practical fact, the Cabinet Office reports that the output gap for the April–June quarter of 2025 remains near zero, and real wages continue to stay in negative territory.
During these “Lost 30 Years,” I believe workers have made various efforts to “increase productivity” through self-improvement and other means. However, because there was a fundamental surplus of labor, wages failed to rise meaningfully. Since workers studied on their own initiative while wages remained low, the only result was that business owners reaped the benefits. The “Employment Ice Age” generation, in particular, must have endured agonizing experiences. No matter how hard they tried, they were dismissed with the cold rhetoric of “self-responsibility” for their low wages. Even passing difficult certification exams led to little, if any, increase in pay. It has been a truly hellish struggle. The responsibility for this lies entirely with the LDP-Komeito administrations, which unilaterally demanded productivity increases from workers without ever expanding demand.
Despite this situation, in 2022, then-Prime Minister Kishida proposed further expanding the “reskilling” system. I find myself thinking: Are they still saying this? How much more do they intend to make workers suffer? Even if one passes an incredibly difficult professional exam, I highly doubt they could earn an annual income commensurate with that effort in the current economic environment.
The priority must be to realize an economy where wages actually rise; once it is clear that wages will increase, workers will naturally pursue studies on their own. Instead, Mr. Kishida told workers: “We will provide government support, so work hard under your own responsibility,” all while real wages continued to decline. It is beyond preposterous. I want to tell them to stop pandering to business owners at the expense of the people.
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