Time to Improve the Quality of Employment
November 07 (Tuesday) 2006
The Japanese economy has recovered. This November marks the longest period of growth in Japanese history, passing the mark of 59 straight months set by the Izanagi economy (1965-70). Thanks in part to the Koizumi administration's structural reforms, the cyclical structure of the Japanese economy is operating robustly and the process of economic recovery is expected to continue. Instead of "recovery", perhaps it would be more appropriate to label this long-term recovery process an "era of new growth".
From the latter half of the 1990s to the beginning of the 2000s – the post-bubble period that saw the Japanese economy suffer from severe deflation – the issue of increasing employment became urgent as the ratio of job openings to applicants decreased dramatically and the employment rate soared. Employment was affected not only by economic stagnation, but also by other structural factors such as the transfer overseas of production centers in the manufacturing industry, structural contraction of the agriculture, forestry and fisheries industry, and decline of construction projects as a result of cutbacks in public works projects. How to produce quantitative expansion in the face of these constraints became the focus of strategy.
As an economic advisor to Prime Minister Koizumi at the time, I proposed the "plan to generate employment for 5.3 million" focusing on services related to daily life, and then endeavored to realize the plan. As economic structures become more advanced, all developed economies are eventually swept up in the trend of becoming service economies, and the idea was to encourage that trend from a policy standpoint.
The "plan to generate employment for 5.3 million" later received a boost from the economic recovery and was nearly achieved. Regional disparities aside, from around 2002 quantitative expansion of employment progressed nationally and employment standards improved. The supply and demand balance of the labor market is even beginning to show a marked tilt towards labor shortages, especially in metropolitan and industrial areas. Considering that the economy was still in the process of breaking free from the serious problem of deflation, it is safe to say that quantitative growth in employment was achieved.
On the other hand, an important issue has gradually surfaced during this process: the deterioration of the quality of employment. This phenomenon is becoming conspicuous in the ranks of younger, middle aged and senior workers, and particularly so among 30-somethings in their working prime. Moreover, the potential for a widening in regional quality disparity is difficult to ignore.
I would like to examine these four issues below, with a look at the direction of future response.
1. The problem of young workers
With shifts in the Japanese demographic landscape, the supply of young labor is currently in decline. And yet "Freeters" (a Japanese-English word with English (free) and German (arbeiter) origins that refers to part-time workers) and "NEETs" (not in employment, education or training) are increasing. There are roughly 3 million Freeters, while the NEET population stands at about 800,000. Freeters are those who, aside from basic compensation, work without the fringe benefits, training, and various securities of stable employment. Among them there are those who choose this kind of work because of an aversion to being supervised, but most were simply unable to secure stable employment in the climate of post-bubble deflation and shrinking employment. NEETs are generally those who could not adapt to the working world and exist on the margins of society. Despite the fact that NEETs make up an invaluable labor force, at this rate they will go through life without acquiring basic skills and securing the stability of employment, and collectively could become a social problem in the future.
2. The problem of middle-aged and senior workers
2007 is expected to be the year when the post-war baby-boomers reach the compulsory retirement age of 60. However, while it is predicted that 2.16 million will turn 60 in 2007 (national census), the number of those who will retire is between 1 and 1.2 million. This raises the problem of how these people will support themselves in the face of an expected decrease in social security funds, as well as the issue of a substantial drop in skilled workers from the working force. Japan, which is facing a decline in the labor force, must make new efforts to make use of these valuable skills while providing a vision that will reassure the public of stable post-retirement life.
3. The problem of "salarymen" (businessmen) in their working prime
There is a serious problem in the employment and labor of "salarymen", primarily those in their 30s and working prime. As a result of companies curbing new new-hires and slashing employment in the long-term post-bubble deflationary process, there is now a trend at labor-intensive workplaces towards excessively burdening the relatively young laborers in their 30s. In particular, a large portion of capable white-collar workers in performance-based jobs are forced to work unpaid overtime to the point where problems of mental-health and damage to family-life can occur. Both companies and the government should work towards new ideas and policy that will protect the valuable health, work ethic, and future potential of these laborers.
4. The problem of regional employment
The Japanese population began to decline in 2005. The current population stands at about 128 million, but in 2050, in other words roughly 40 years from now in the middle of the 21st century, the population is expected to shrink to 100 million (middle estimates from the Institute on Population Research have the figure at 100,590,000 while low estimates reach 92,030,000).
Population decline will be especially pronounced in the Hokkaido, Kanto, Hokuriku, Shikoku, Chugoku, and southern Kyushu regions, and there is a fear that regional economic cycles will lose their functional power as regional economies hollow out. These regions are beginning to fall into downward spirals where young males in particular leave for urban and industrial areas to seek employment, and not only are the elderly left behind but the reproduction of families also stagnates as marriages decrease.
Japan is now at the post-war stage of becoming an aging society after a half century of migration to metropolitan and industrial areas. In addressing the problems mentioned above, it is important that local governments, the private industry, and government policy all provide options for these people to move to areas with healthy environments – in other words regions with low or decreasing populations – as a way to encourage new and diverse possibilities.
A look at the above four points reveals a common point: new ideas for employment. In other words, we have now entered a period where the priority in employment should shift from quantitative expansion to qualitative improvement.
The Abe administration is promoting the "new challenge strategy", but in the important part of this strategy the problem of improving the quality of employment lies dormant. Government policy, strategies to promote regional vitality across the nation, and private businesses that support exchange among people should produce new efforts and ideas focusing on qualitative improvement of employment.