Business recovery not delivering more jobs: What to do?

The Minister of Economy, Trade and Industry Shoichi Nakagawa submitted the 2004 edition of the White Paper on International Economy and Trade to a June 29 Cabinet meeting, which approved it.

The White Paper, entitled "Towards a new value-creation economy," focuses on the most recent economic recovery period and points out that increased corporate profits are not leading to a rise in employee remuneration. It also confirms that there is an increase in the number of business categories that are not seeing increased employment. The reason why the changes in the macro GDP are not being linked to job creation, the White Paper concludes, may be because companies now decide on prices by following personnel strategies that focus on suppressing labor costs.

Needless to say, this unprecedented (for Japan) phenomenon of economic recovery not readily being linked to employment recovery clearly resembles that seen in the US.

The White Paper also proposes that, to make occupational training result in the creation of actual jobs, it is necessary to show the specific contents of the skills required, and develop occupational training into a more comprehensive program with education and training that caters more closely to corporate needs.

The report also discusses the positive labor market policies adopted in the UK, Germany and Sweden, and emphasizes the importance of establishing skills standards. According to the report, skills standards create a foundation for conducting appropriate skills development in tune with future demand in the changing job market, and for conducting efficient labor redeployment when faced with the risk of unemployment.

Let us then examine the current employment situation and business sentiment in Japan.

The total unemployment rate for May was 4.6%, down 0.1 points from the month before. There were 3.19 million completely unemployed persons, constituting a decline for 12 consecutive months. The number of employed persons as a whole has been increasing for six months in a row, while the month's effective job-opening-to-application ratio (seasonally-adjusted) recovered to a level of 0.80 for the first time in 11 years and 1 month (since April 1993).

The Short-Term Economic Survey of Principal Enterprises in Japan (popularly known as the "tankan", a quarterly survey conducted by the Bank of Japan) released on July 1 showed that the diffusion index of business sentiment (DI), which is an indicator of companies' business confidence, was +22 for major corporations. This was the first high level reached in approximately 13 years since 1991. Meanwhile, the index for small- to medium-scale manufacturers showed a positive figure for the first time in approximately 12.5 years.

Exports and production are brisk, and some bright prospects are also beginning to be seen in domestic demand, such as consumption.

If the employment situation continues to improve under these circumstances, Japan can be said to have achieved a full-scale economic recovery. Is this going to happen? If the rate of job availability is studied by region, we see a large discrepancy between major urban areas, that are enjoying booming activity, and regional areas that have traditionally relied on public works projects and suffer from sluggish activity. To solve these problems, the government's job creation policies that aim to revitalize regional areas require more flexible, personalized and effective measures than those currently being implemented. However, if the changes in corporate behavior are such that they cannot hope to increase jobs now or in the future, the outlook for Japan's employment situation will become bleak and could even destabilize Japanese society.

White Paper on International Economy and Trade 2004

　　－released by the Ministry of Economy, Trade and Industry