Monday, February 9, 2009

The dynamics of Japan's labor force shows welfare vulnerabilities

This is interesting. In Japan, the composition of the labor force is changing: since the early 1990s, the share of regular employees has been falling, while the share of temporary employees has been rising.

Source data comes from the Ministry of Internal Affairs and Communication (Table 4).

The chart illustrates the share of the Japanese labor force that is considered employed as regular status or as temporary and daily status. Starting in 1996, the share of temporary or daily workers has been rising, from 10.7% in 1996 to 13.7% in 2008.

The divergence of jobs away from regular status and toward temporary or daily status is particularly hard on the labor force during an economic contraction. First, the temporary workers are laid off first. In fact, 125,000 of the 131,000 layoffs since October (through December) were from the temporary category. This suggests that the share of full time workers rose in 2008 with the unemployment rate. Second, the temporary and daily employees often are not insured against cyclical factors that cause job loss (i.e., recessions).

From the International Herald Tribune, there has been a shift in the composition of the labor force:
As never before, the global downturn has driven home how a decade of economic transformation has eroded Japan's gentler version of capitalism, in which companies once laid off employees only as a last resort.
"This recession has opened the nation's eyes to its growing social inequalities," said Masahiro Abe, a professor at Dokkyo University who specializes in labor relations. "There is a whole population of workers who are outside the traditional support net."

Until a decade ago, nonregular workers accounted for less than a quarter of Japan's total work force, and included subcontractors and others outside the lifetime employment system as well as students or homemakers working part-time jobs at restaurants or convenience stores.

But the number of nonregular workers took off after an easing of labor laws in 1999 and again in 2004 allowed temporary workers to work on factory lines and in other jobs once largely restricted to full-time workers. During Japan's economic recovery in this decade, companies added millions of less expensive temporary employees while continuing to reduce overall numbers of full-time staff....

...According to the Organization for Economic Cooperation and Development, Japan spends about 0.3 percent of its gross domestic product on unemployment benefits, far below Western European countries and about the same as the United States, which tolerates far more social dislocation and poverty than Japan.

According to labor experts and Labor Ministry officials, Japan needs to revamp the system to fit a more dynamic labor market in which not all jobs are held for life, and to prevent layoffs from being so financially devastating.

Japan's social safety net has failed to keep up with changes in the labor market," said Yusuke Inoue, a section chief in the Labor Ministry's bureau of stable employment. "We must build a safety net that suits this more deregulated working environment."
RW: This recession is hitting the industrialized world head on. Especially in the labor force, efficiency gains may have been added through slackening hiring environments, and now, worker welfare is at risk.

Rebecca Wilder

Note: the article refers to the number of irregular employees as 35.5% of total employment. This comes from the Statistics Bureau's
annual report, which is different from the monthly release (chart above).


  1. Thanks, again, for a thought-provoking piece. have always thought of the Japanese workforce as consisting of mainly the "lifers" so talked about. Could it also be that there are more women in the workforce who are the part-time/daily hires as they have become a larger part of the workforce? The Company Man attitude just couldn't last and now we have proof.

  2. After the Japanese surrender of World War Two, American bankers and big corporatists set-up the Japanese economy.

    Americans decided the interlocking system of companies. Americans decided which companies would become dominant.

    Intrigue and even murder make up this story.

    Americans decided the design of the Japanese banking system.

    The Japanese Credit/Debt Bubble

    The Japanese experienced the biggest consumer debt bubble in their history during the 1980s, which culminated in a burst and crash of epic proportion.

    Instead of exposing the failed bets by Japanese banks, Japanese bankers and Japanese politicians followed dictates by American bankers.

    What ensued was a Keynesian-FDR style massive government public works spending program that caused the ordinary Japanese citizen to suffer an economic depression that has lasted for more than a decade.

    Even with a booming China next door, the Japanese have not been able to turn around their economy.

    The American Credit/Debt Bubble

    And now, this kind of crazed government spending, this already-proven to fail FDR-esque government action is what Obama, Tim Geithner, Wall Streeters, Harry Reid and Nancy Pelosi and the rest of the U.S. Congress want to impose upon good Americans everywhere.

    Americans ought to look to the Japanese for our future, if our Congress and President Obama enact this forthcoming, already-failed "stimulus" bailout.

    Why Temporary Workers Growth in Japan

    A growth of temporary workers at the expense of full-time workers reveals a structural defect in the design of the Japanese economy.

    Because of outrageous government intervention in the Japanese economy, those who rent cash (buy capital position in companies) cannot find worthy investments upon which to bet.

    Thus, the Japanese bounce like ping pong balls from one short-term gold rush like promise to the next hoping that the next find shall turn around their economy.

    When these promises happen, temporary workers get rushed into these new gambles.

    However, these promises soon turn to mirages and thus no one risks and makes the long-term investments needed to hire workers full-time.