Vol.33-No.10 October 1,1994
This year's Labor Economy Analysis, which received Cabinet approval on June 24, first reviews trends in the labor economy in 1993. Then in the part titled "Tasks Concerning Affluent Working Life Based on Stable Employment," it examines the role of the labor market in achieving structural economic adjustments as well as tasks involving substantiated working life.
Active Ratio of Job Openings to Job Applicants Continued to Drop
The ratio of active job openings to job applicants, seasonally adjusted, peaked at 1.45 in the January-March 1991 quarter and turned downward. In the October-December 1992 quarter, the ratio dropped below 1.0 and it continued to dip throughout the year to stand at 0.66 in the October-December 1993 period. The degree and speed at which the active ratio of job offers to job seekers declined was second highest, next only to the recession following the first oil-supply crunch (Fig.1). By region, the ratio of job openings to job applicants posted a sharp decline notably in metropolitan areas.
Sharp Increase in the Rate of Unemployment
The rate of unemployment reached a record high of 3.0 percent in the April-June 1987 period, but it rapidly dropped through the July-September 1989 period in tune with the subsequent business expansion. Thereafter, the rate followed a stable trend in the low range of 2.1 to 2.2 percent. It was in the latter half of 1992 that the rate leaped due to the effects of the recession. Entering 1993, the rate continued to rise and did so at an accelerating rate in the latter half of the year (Fig. 1). The unemployment rate for males in the present phase of the slump was the second highest following only that of the recession following the first oil crisis, while that for females was comparable to that of the first oil crunch recession.
Sense of Surplus Labor Increasing in Large Enterprises and in Clerical and Manufacturing Jobs
The diffusion index (D.I.), an index for judging supply-demand conditions for regular employees at major enterprises, has continued to drop since February 1991, depending to-3 in August 1993, showing that workers are in oversupply. In February 1994, the figure declined further to-16. Incidentally, the D.I. is calculated by subtracting the percentage of establishments answering that workers are in "shortage" from that of those establishments replying they are in "surplus." By size of enterprise, the sense of surplus labor was strong in large enterprises with 300 and more employees. In addition, many enterprises saw managers and officials as well as clerical and related workers especially redundant, earlier in the current slump.
Higher Ratio of Establishments Implementing Employment Adjustments than in Endaka Slump
The rate of establishments implementing employment adjustments has continued to grow since the October-December 1991 quarter and has further surged from 1993 on. In manufacturing, the rate passed the peak level recorded in the endaka (high yen) slump and stood at 50 percent during the October-December quarter of 1993. By type of employment adjustments, the largest number of establishments have placed limits on overtime, and in the latter half of 1993 the ratio of establishments suspending employees with pay was on the rise, suggesting that employment adjustments methods were becoming increasingly severe. However, personnel cuts were smaller than the rate of decline in profits, presumably ascribable to the fact that accumulated corporate assets have served to stabilize employment.
2. Trends in Wages, Working Hours and Industrial Injuries
Trends in Wages
In 1993 the growth rate of total earnings remained low. This was brought on by a drop in the growth of special cash earnings in addition to a fall in the growth of scheduled cash earnings combined with the decrease in overtime cash earnings. Also, real wages posted their first drop in 13 years, since 1980.
Trends in Working Hours
Annual working hours declined for the fifth straight year. In 1993, they totaled 1,913, a drop of 59 hours from the year before, showing the second largest fall recorded only after that of 1974. Scheduled working hours posted a large 43 hours yearly decrease to 1,780, falling below 1,800 hours for the first time. Overtime working hours, meanwhile, dropped 16 hours from the year before to 133, representing a smaller yearly dip than that of 1992, though the decline was again substantial (Fig. 2).
Trends in Industrial Injuries
In 1993 the number of industrial injuries (deaths and injuries requiring four days or more of absence from work) totaled 171,602, a decrease of 7,117, or down 4.0 percent, from the previous year, with decline continuing in all industries. The number of deaths also decreased 4.6 percent from a year earlier to 2,245, with the rate of decrease surpassing that of 1992.
3. Trends in Prices and Workers' Household Consumption Expenditure
Trends in Prices
Overall wholesale prices dropped in 1993 by 2.9 percent year-on-year, showing a larger decline than the 1992 figure of 1.6 percent. Overall consumer prices rose 1.3 percent year-over-year, down from the 1992 level of 1.6 percent.
Workers' Household Income Trends
In 1993 workers' household income rose 0.1 percnet in real terms, down from the 1992 level of 1.1 percent. Disposable income fall 0.2 percent in real terms (up 0.5% in 1992), the first drop since 1981.
Workers' Household Expenditure Trends
Workers' household expenditures were down 0.4 percent in real terms (up 0.5% in 1992), the first yearly decline since 1980. The rate of increase in consumer prices slowed, but the smaller growth in nominal disposable income coupled with a lower average propensity to consume, contributed to the drop in real expenditures.
4. Trends in Industrial Relations
In the 1994 spring wage negotiations, labor and management settled on a lower wage hike than the year-ago level, reflecting the protracted economic slowdown. Major industrial unions in large enterprises accepted the following employee-based wage hikes: steel 1.56 percent; electrical machinery 3.05 percent; autos 3.02 percent; and private railways 3.72 percent.
Growth and Decline of Industries Closely Related to Trade
In the context of the ratio of the value of shipments in the overall manufacturing sector, the nation's "leading industries" shifted away from textiles, iron and steel and chemicals during the mid-1950s and early 1960s, toward the machinery-related industries in the period from the mid-1970s to the early 1980s. The machinery-related industries grew with the decline in the ratio of imports and the sharp increase in the ratio of exports. In the iron and steel as well as other industries, on the other hand, the trend was the opposite-the ratio of exports declined and that of imports rose.
Japan's Wage Costs Push Relative Advantage Down
The productivity growth rate has shown a long-term declining trend, with the gap in the rate between Japan and the U.S. and Germany narrowing. In the 1980s, the rate was still 2-3 percent higher than that for the two nations. The nation's dollar-denominated rate of increase in wage costs topped that of the U.S. and Germany due in part to the strong yen in the 1980s, manifesting the narrowing advantage in the context of the nation's wage costs. Japan's per capita labor productivity in manufacturing differs from that of the U.S. and European countries, while in non-manufacturing Japanese productivity is lower, constituting a factor behind the domestic-foreign price gap.
High-Value-Added Products and Higher Productivity: Tasks to be Tackled
The impact of shifting production bases offshore on jobs at home cannot be belittled (Fig. 3). To prevent the withering of Japan's manufacturing and employment, individual enterprises are asked to develop high-value-added products, to improve productivity through technological innovations and to restructure themselves. In the area of labor, an important task is to stabilize employment through development of human resources and efficient division of labor. In addition, it is vital to attain sustainable growth fueled by domestic demand in the coming years.
2. Changes in Industrial Structure and the Labor Market
Accumulation of Human Resources Closely Linked to Growth and Decline of Industry
There are close correlations between qualitative changes in the labor force as viewed by education and length of service and changes in labor productivity. This suggests that accumulation of human resources is closely related to changes in industrial structure (Fig. 4). Furthermore, problems confronting researchers and engineers who play a major role in technological innovation are fourfold. First, the "move away from manufacturing jobs" noticeable among university graduates majoring in science and engineering has not faded away. Second, enterprises' efforts to establish ability-development systems are still inadequate. Third, the personnel system remains unable to meet the needs of those wishing to continue to work on the frontline of R & D throughout all stages of their working life. Fourth, it is difficult to secure "intermediate-level" engineers at production sites.
Stable Employment and Structural Adjustments Which were Balanced
The nation's employment has been stable with fluctuations in employment and unemployment rate less significant than those in major Western countries. The contributing factors are flexible adjustment of working hours and wages as well as reassignments and temporary transfers.
However, reassignments have recently acted as a larger contributing factor than before to changes in the composition by industry of employed persons. They have also contributed toward higher productivity as a whole. Individual enterprises should use prudence in making personnel cuts in a recession.
Consolidating Long-term Employment Systems
Desirable for Human Resource Development and Stable Employment
Enterprises have so far accumulated professional staffs with in-house training as a fundamental policy and should stick to this in coming years. Recent years have witnessed growth in middle-aged and older workers and greater emphasis on professional ability. Thus, it is desirable that enterprises themselves consolidate the system of long-term employment in which middle-aged and elderly workers can display their hard-won professional abilities to the largest extent possible. Furthermore, this endeavor includes administrative support for corporate efforts toward improved labor mobility among middle-aged and older workers without having to become unemployed.
3. Tasks Regarding Affluent Working Life
Improved Living Standards and Problems Which Remain to be Solved
Living conditions of Japanese workers have improved phenomenally, and are comparable to Western levels in all aspects of income, spending, financial assets, pensions and employment stability. Yet high prices push down real purchasing power; working hours are still long, houses are small and overpriced, and workers spend many hours a day commuting to and from work. Furthermore, workers feel less satisfied with their work and have less latitude in decision-making than Western workers.
Employment Management Conducive to Maintenance of Employment But Which Forces Both Physical andPsychological Burdens on Workers
Relocation and transfer within related firms, tranfer and tanshinfunin (long-distance transters of employees without the accompaniment of their families) and shorter working hours are conducive to stabilizing employment, while on the other hand, they force workers to shoulder heavy financial and psychological burdens. Workers positively value relocations as effective in acquiring broad-based knowledge; however, they feel this hampers cultivation of professional knowledge and skills. Transfer within related firms, on the other hand, have won favorable support from the standpoint of maintaining jobs for middle-aged and older persons but have not been accepted in that they force on workers changes in the work environment and job content. Transfers and tanshinfunin, which are closely linked to promotion to a higher position and stable employment, are accepted as inevitable choices but force on workers heavy economic and psychological burdens. Regarding overtime, non-scheduled working hours constitute constant overtime for the most part. In addition, long work hours continue in specific job fields.
Tasks Involving Working Life with Many Options to Choose from
Looking at workers' attitudes, the traditional ideal of lifetime employment persists. Regarding promotion, demand not for promotion to a managerial position but for development of professional abilities and treatment based upon it is swelling. Enterprises are stressing diversifying management. The following can be pointed out as future tasks to be tackled. First, improving the system of evaluating workers' ability and accomplishments so that these are adequately reflected in the merit-rated wage system. Second, improving the environment so that women can display their ability to the fullest and giving them support for achieving a balance between careers and family life. Third, securing people of quality with versatile abilities and improving the system of welfare benefits so that it adequately meets the diversifying needs of working persons.
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