The working poor and poverty reduction in stable macroeconomic environments.

Japan has no official "poverty line", and subsequently no official statistics on poverty exists (Sekine, 2008). In practice, however, economists have applied the OECD index (50% of median income), or the "minimum standard of living" approach in assessing Japan's poverty. The OECD index assesses Japan's relative poverty rate to be 15.3%, the fifth highest ratio amongst the OECD countries. The Japanese government, however, states that according to absolute measurements, there are no severe poverty issues (Yuasa, 2006). However, there are worrying sings of a fast-growing low-income population accompanied by the fact that current safety nets such as social security and public assistance have large gaps in their personal scope (Kawai and Kanno, 2006).

The academic literature on comparative analysis of the working poor between Japan and other advanced economies is sparse. Murakami characterises the working poor in Japan and compares them with those in Canada (Murakami, 2011), and the UK (Murakami, 2009). The studies show that the working poor are most likely to be found among the young, those with a low level of education, unstable employment, and working for small companies. As regards to the main differences, male are more likely to belong to the working poor in western countries, and the number of working poor in the age group 25-44 is significantly lager in Japan compared to the UK and Canada.

The aim of this research is to improve on several drawbacks of Murakami's statistical analysis of absolute poverty measurement. (1) Murakami (2011) revises the definition of the working poor (Iwai and Murakami, 2007) and incorporates the definition provided by the US Bureau of Labour Statistics (BLS). However, the US defines poverty by a poverty line, which does not exist in Japan. This inconsistent use of definitions leads to incomparable results across countries. (2) Murakami's data set is based on the labour survey 1997 and 2002. He imposes a very simple statistical model on the data, and comparative analysis is based on simple percentage calculations. Hence, the robustness of his results, and the significance of the estimates are not investigated. (3) The data set does not provide the necessary structure to study the dynamic effects of the characteristics of the working poor between and within groups.


Our approach to problem (1) is to return to the original definition of the working poor (Klein, Bruce and Rones, 1989) and to establish a more rigorous metric function, which allows for intra regional cost of living variations and therewith a better measurement of the minimum living standards. Moreover, we will summarize all definitions of the working poor in all major advanced European economies in order to establish general relationships between number of hours of work, and definitions of poverty "line". This is the first study attempting to establish this relationship.

The Swiss model (Sekiguchi and Sato, 2014) is a very good stating point, which defines working poor independent of the number of hours in employment. However, the model's weakness is its very country specific definition of the poverty line. We attempt to tackle that issue under (3) below.

Our approach to problem (2) is to consider a much large panel data set including at least 5 waves of the labour survey and to impose advanced statistical models on the data. This will allows us to measure the statistical significance of our estimates and to establish the robustness of our model. (3) The richness of the structure of our data set allows us to apply sophisticated methods of machine learning such as unsupervised methods (Casella, 2015) to extract more general definitions of "poverty lines". It is precisely, this novel approach that will lead to significant new results in determining general metric functions in the measurement of absolute and relative poverty.