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Japan’s wages are finally rising, but a large group of middle-aged workers is being left behind. In “Frozen out”, The Economist traces how entering the job market at the wrong moment can depress earnings for an entire working life—and leave a country facing a costly retirement problem.

A bad start that never quite ends

Japan’s “ice-age” generation entered the labour market between 1993 and 2004, after the collapse of its economic bubble. Strong protections for existing employees encouraged companies to cut recruitment instead of dismissing established staff. A large generation of graduates therefore competed for unusually few openings.

Many accepted temporary or contract jobs. These offered lower pay and fewer protections than regular employment, without the same progression through seniority-based wages. Even workers who secured regular positions found promotion blocked by the large cohort hired during the boom. Limited movement between employers made it harder to escape those disadvantages.

Labour shortages have since helped this generation catch up in its share of regular employment. Earnings have proved harder to repair: moving into a better job does not recover years of missed pay and advancement.

Recovery rewards the mobile

Employers now compete for younger recruits with higher salaries. Middle-aged staff are less likely to change jobs, giving firms less reason to increase their pay. The article cites estimates that nominal wages for university-educated workers in their 20s and 30s rose by 10–16% between 2020 and 2025, while those in their early 50s fell by 1.3%. With prices rising, that decline further erodes purchasing power.

The consequences extend beyond today’s household budgets. Lower lifetime earnings mean smaller savings and pensions. This generation is also less likely than older Japanese to own a home, while older renters face an inhospitable rental market. More people may consequently need welfare, including publicly funded medical care, just as smaller younger generations shoulder the cost of supporting them.

The government has begun broadening its response beyond employment assistance, with a three-year plan covering issues such as asset-building and housing. Longer working lives may help, but cannot erase decades of disadvantage. The article’s central warning is that a stronger labour market alone cannot repair the lasting damage of a weak career start; retirement policy must account for it too.

Source: The Economist, August 22nd–28th 2026, “Frozen out”, Asia, pp. 42–43.