White Paper on Labour-1992
Vol.31-No.09 September 1,1992
The 1992 White Paper on Labour analyzes trends in the labor economy for 1991 in Part ‡T while Part ‡U deals with the "labour shortage, vigorous labor mobility and enterprises' adequate response to these factors." Here the white paper specifically analyzes a phenomenon which occurred in the labor market in the current phase of economic expansion while attention remains focused on the labor shortage and increased labor mobility. Next, it examines the ongoing corporate response to the phenomenon in the context of employment administration, thereby probing issues regarding labor policy under the condition that potential labour force will be limited.
Part ‡U Labor shortage, Vigorous Labor Mobility and Enterprises Response to Them
‡T. Labor Shortage in the Current phase of Economic Expansion and its Background
1. Details of Tight Labor Supply and Demand
The Japanese labor market trended to be tight from the mid-1960s and then continued to ease following 1975. It again tightened during the economic boom which lasted into early 1991. Comparing the current economic expansion with the so-called Izanagi Boom which spanned the period between October 1965 and July 1971, the ratio of active job openings to job applicants and enterprises' outlook on surplus or shortage of employees showed similar trends; the level of unemployment rate, however, was higher in the current phase of economic expansion than during the Izanagi Boom (Fig.1).
2. Features of Increased Employment and Background
The current phase of economic expansion witnessed an increase in labor supply which exceeded that of the Izanagi Boom. In addition, the most recent period of economic expansion was characterized by the rise in number of women and elderly workers. Behind this lies a rising labor force participation rate for women and older persons.
The background factors that caused demand for employment and the rising vacancy rate to expand in the current phase of economic expansion are thought to be the following. First, was the continued long expansion in the period of stable growth and domestic demand-oriented growth resulting in expanded employment. Second, greater employment demand surfaced due to a higher growth rate after the implementation of drastic employment adjustment in the past period of recession. Third, the need for securing talented workers arising from enterprises' advance into new business areas. Fourth, the growing share of the service sector in the industry and employment structure. Fifth, shorter working hours and rising numbers of part-time workers likely to result in expanding demand for employment. Sixth, increasing job openings to supplement those who quit work. Seventh and lastly, enterprises' expected strong desire to hire school graduates and enterprises' efforts to actively utilize women and elderly people.
3. Changes in Consumers' Preference and Their Effects on Labor
The services for Catering to the growing consumer perference to the pursuit of convenience often requires much labor. Take convenience stores, for instance. The longer the business hours, the larger the number of workers per store. The value of sales per store does not increase as the number of employees grows. What is more, along with the frequent delivery of articles in small quantity brought on by responses to the pursuit of convenience, the paucity of workers is worsening in the road freight transport. Such labor shortage triggered long hours of work in road freight transport, which then led to a further lack of workers.
Consumers' preferences for individualized goods and services is also growing. This, too, is likely to hamper higher labor productivity and exacerbate the labor shortage. For example, a wide choice of models and frequent model changes as typified by cars and electrical appliances, it is considered, were brought on by corporate behavior which always gives top priority to increased market share. Such corporate behavior will likely bring about constraint on working conditions, such as labor time, as a result of severe inter-corporate competition and also bring about competition without satisfying inter-corporate consumer essentially (Fig 2).
‡U Vigorous labor Mobility
1. Trends in and Features of Labor Mobility
The rate of job turnover is largely comparable to that of the mid-1960s. The recent characteristic trend is that the rate of job turnover has been rising notably among workers at large-scale establishments which have previously witnessed few workers change their jobs, and that it has become quite common among various groups, not just among specific groups.
2. Background of Vigorous Labor Mobility
The rate of those wishing to turnover jobs has followed a substantially consistent upward trend over the long term. It is thought that the growing rate of those who want to change jobs is influenced by the demand-supply situation of the labor market in the short run. However, the long-term upward tendency in the rate of those who wish to change jobs is becoming so strong as to offset the effects of the demand-supply situation of the labor market. The diversifying demand for jobs and diminishing sense of belonging to the company, particularly among the younger generation, seem to be partly responsible for the trend (Fig.3).
The percentage of establishments which implemented midcareer workers, grew dramatically in the current business boom. What is more, 32 percent of the establishments hired "daini-shinsotsu" (literally "second new graduates"), or "another class of new graduates." Thus, enterprises have come to employ midcareer persons in an active manner.
3. Changes in the Industry-wise Composition of Workers and the Effects of Labor Mobility
Much change in the industry-wise composition of workers has been engendered by job turnover. The relationship between job turnover and working conditions shows that the higher the wage levels for midcareer persons, the higher the rate of job turnover. Moreover, the longer hours the industries require of their workers, the higher the rate of job separations. It is thus considered that workers, on the whole, tend to take jobs with better working conditions.
The possibility is high, it appears, that labor mobility will tend to continue to be vigorous in the years to come. One reason is future restraint on labor supply. Another reason is a great possibility that the worker composition, workers' consciousness on labor and a job turnover environment will continue to undergo changes in the coming years. Easygoing job separations and job turnover fail to pose no problems, but vigorous labor mobility will constitute a factor to improve working conditions and will also provide workers themselves with an opportunity to demonstrate their potential abilities.
‡V Changes in the Labor Market and Corporate Response
1. Changes Occurring in Wage Structure and Wage System
In the current economic expansion, starting pay increased and this led to a higher rate of increase in wages for young workers. Thanks to this, relative wage levels of male middle-aged and older workers declined, causing the wage disparity between the ages of male standard workers to narrow down. In the wake of this situation, variations in wages for standard workers of the same age group expanded among the middle-aged and elderly. In this aspect of the wage system, the concept of the wage system with an emphasis on an individual's ability has been winning wider acceptance. It incorporates "promotion and pay hikes based on merit" and "an increase in job skill-related elements of basic pay."
In the midst of the tight labor supply and demand situation and vigorous midcareer employment against the backdrop of an acute sense of workers shortages, enterprises tend to largely equate treatment tied to wages for midcareer persons before and after hiring with that for workers on the payroll. This suggests that enterprises try to respond properly to employment of more midcareer persons in the context of the wage system. Comparing initial wages for those hired in midcareer with those for standard workers of the same age, the overall disparity is narrowing, particularly among young workers. Thus, the conditions which work against wages for midcareer persons under the seniority-based wage system are gradually disappearing (Fig.4).
2. The Present State and Problems of the Reduction of Working Hours
From the mid-1970s to the late-1980s total hours worked moved side ways, hovering around 2,100. They again decreased in and after 1989 and fell to 2,016 in 1991. The long-term decrease in total hours worked is due in major part to a dip in scheduled hours stemming from the expanded five-day workweek scheme. Declining non-scheduled hours in recent years are due in major part to a greater degree the product of implementation of the 1988 revision of the Labour Standards Law.
Reduction of working hours in Japan have been steadily progressing in recent years. However, Japanese workers still put in longer hours than their counterparts in Western countries. Causes of this are the delayed adoption of a complete five-day workweek and the gap in the number of annual paid holidays taken (Table 1).
In 1990, whereas the full-fledged five-day workweek has widely diffused in large enterprises, it was slow to diffuse in smaller enterprises. The spread of a five-day workweek is a special contributing factor to the cuts in the number of working days. It is safe to say that reduction of working hours contributed less to annual paid holidays taken.
3. Changes in Workers' Consciousness on Labor and Progress in Corporate Employment Management
(1) Progress in Female Employment Management
The country has been experiencing a scarcity of Labor force in recent years. Amidst this situation, enterprises are actively utilizing female workers. On the other hand, with their attitudes toward work diversifying, more and more women advance into a variety of jobs, thus expanding their employment fields. Furthermore, firms are increasingly adopting personnel management policies which allow for diversification as well as flexible career tracking. They are also adopting reemployment plans for women and childcare leave and domestic-care leave systems. Thus, it is clean that an increasing number of enterprises are conducting flexible female employment administration to secure and actively utilize the female Labor force.
(2) Progress of Employment of The Aged
The employment environment surrounding elderly people has improved as enterprises have turned to older persons to meet their employment needs. Mandatory retirement system with uniform age limit 60 has made progress significantly in the recent period of economic boom. Furthermore, spread of the employment extension system and re-hiring system has accelerated continuous employment up until 65. Enterprises have tackled employment management of older persons in a variety of manners-for instance, the introduction of diversified and flexible employment and work patterns, such as short-time work, working every other day and home-duty work.
(3) New Progress in Working Hours and Vacation Schemes
Responding to workers' growing tendency to emphasize private life away from a corporate-oriented life, increasing numbers of enterprises, and large ones in particular, are launching flexible work schedules. The forms of the schedules adopted by a large proportion of enterprises are "the variable working hours system on a monthly basis" and "flextime system." Also, it is predicted that in the years ahead more and more enterprises will introduce flexible employment administration practices, such as the †’counted-for-hours worked' system, vacation plans which take special care for individual workers' personal matters, satellite office system, the home-duty work system and the system of restricting places of employment.
(4) Changes in Workers' Consciousness on Labor
Changing attitudes toward work are major factors underlying change in enterprises' employment management. Let us observe changing attitude toward work from the answers to the question of "What aspect of your life will you stress in coming years?" Whereas emphasis on clothing, food and housing as well as durable goods has somewhat lost importance, stress on leisure has gained importance dramatically (Fig.5, 6).
Concluding Remarks
In future years, the Japanese economy will be confronted labor supply constraints and aging, both of which will progress simultaneously. In this situation, to cope with these problems in the mid and long term, the following seven areas are fundamental and constitute underlying tasks the government should tackle.
First should come realization of a society in which virtually everyone of those willing to work can work as they desire. Toward this end, it is necessary to further expand job opportunities for women and encourage employment of the handicapped.
Second, is realization of a comfortable and affluent working life. To achieve this continued efforts should be made to steadily promote reduction of working hours and inaugurate flexible working-hour schedules so that workers can shift their priorities to value family life, rather than corporate-oriented life, thus realizing a more harmonized working life.
Third, should come the building of an employment system which has respect for individuality and which gives one freedom to choose one's own pattern of employment from many options.
Fourth, should come improved vocational ability of each worker which will further grow in importance during the future period of workers shortages.
Fifth, should come smooth adjustment of labor supply and demand to resolve the mismatch in labor supply and demand.
Sixth should come realization of greater labor productivity. To this end, it is essential to further promote labor-saving and efficiency efforts to assure more labor-saving-oriented economic structure and to consolidate an environment which encourages smooth labor mobility.
The seventh and last task the government should tackle involves international considerations. From the viewpoint of international division of labor, creation of job opportunities overseas should be sought through promotion of overseas direct investment and expanded imports. This will support human resources development and contribute to development of an international community.
Thus, in order to sustain the vitality of Japanese society under the condition that potential labor force will be limited, it is necessary to review traditional ways of providing and enjoying goods and services and to realize a working life with emphasis placed equally on the enterprise, the family and the rural community, while moving away from a corporate-oriented life.
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