Expanding Social Welfare Employment and Promoting Regional Decentralization

Shuntaro Namba
Senior Fellow, Economic Research Center

September 10, 2009 (Thursday)

In April 2009, a JPY 14.7 trillion “economic crisis measure,” drafted by the former LDP administration, was passed by the Diet as part of the supplementary budget. Creating employment (JPY 1.3 trillion) and supporting healthcare, nursing care, child raising, and education (JPY 2 trillion) are pillars of this measure. What is behind this move to prioritize social welfare measures instead of the traditional public works projects?

Traditional employment measures in Japan have centered on response within company labor markets. When a “simultaneous global recession” such as this one hits, however, manufacturing companies, facing global competition, cannot cope internally and are forced into mass layoffs. Meanwhile, Japan has already entered an unprecedented stage as an aging society, and according to estimates of the author, the current ratio of social security benefits to GNP (19.1% in 2005) could surpass that of European countries in 15 to 25 years. The growth of welfare-related jobs in this aging society has been an urgent issue for some time, and, according to the ILO(*), Japan’s ratio of workers in the welfare sector to overall workers (14.6% in 2007) is significantly below the ratio in European countries. The “economic crisis measure” aims to use the demand for welfare-related employment as an opportunity to create jobs and eliminate the mismatch in employment.

To shift from company to social employment, however, it is important to strengthen the functions of municipal governments. The Decentralization Reform Committee is currently clarifying the division of roles regarding regional welfare between the national and municipal governments, and is recommending the transfer of authority to local governments. The expansion of welfare employment should not end with this temporary “economic crisis measure.” Rather, it is necessary to regard it as reform of the employment structure that follows decentralization reform for an aging society.