Along with high economic growth in much of the postwar period, Japan achieved a relatively high level of economic equality. One of the secrets to this achievement was a set of social institutions that helped even less-educated young men secure relatively stable positions in the workforce. These institutions developed under specific historical circumstances in Japan and were particularly effective during the decades of the 1960s through the 1980s.

By the early twenty-first century, however, Japan was no longer a place where most young men, regardless of educational background, moved smoothly into their adult full-time work lives. This new reality can only be understood by looking at how key social institutions have changed. Both schools and workplaces helped the prior generation acquire and utilize their skills and abilities, or human capital in economists’ terms. But these institutions and the relationship between them changed during the 1990s in ways that are fundamentally disadvantageous to young people, especially the least educated. The institutional changes have not happened principally because of young people’s behaviors. Rather, they stem from employers’ and policymakers’ decisions about how risk should be distributed across different segments of the labor force.