Vol.38-No.12 December 1,1999

A View on the White Paper on Labour
Kaori Higashi Staff Economist Economic Research Division Nikkeiren (Japan Federation of Employers' Associations)

      The employment situation in 1998 was the most serious Japan has ever experienced. The ratio of job openings to job applicants was the lowest since comparable data had become available in 1963, and the number of employed people declined for the first time since 1954. Reflecting the sharp increase in the number of involuntarily unemployed people, the unemploy-ment rate reached a postwar high.

      With this situation in mind, this year's White Paper on Labour analyzes qualitative changes in unemployment, changes in the employment behavior of enterprises, and trends in industrial sectors where employment is growing. With regard to medium- and long-term changes in the structure of the labor market, the white paper considers the long-term effect of the growing tendency among young people to switch jobs, the increased re-entry of women and older people into the labor market, and the growing range of employment statuses that includes more part-time and temporary workers. It cites several points, such as the need to develop further the skills and ability of workers, to improve the job placement system, to reinforce “safety-nets,” and to create more jobs as future policies.

      It is necessary for workers, employers, and the government to grapple with structural changes in the labor market. However, as far as the role of the government is concerned, the white paper goes no further than broad outlines and references to past policy performance such as unemployment insurance and public vocational training. In this sense, government policies set forth in the white paper are not precise enough to cope with the structural changes now occurring in the employment situation which the white paper documents in such detail.

      Let us look at an example of governmental support for the development of skills and abilities. A survey on education and training outside the company conducted by Nikkeiren in 1997 showed that 76.5 percent of enterprises were satisfied with educational programs at various types of private educational institutions, and 44.3 percent for education run by non-profit organizations. On the other hand, the figure was only 18.3 percent for vocational training through national administrative organizations, and 15.1 percent for educational opportunities and support provided by local governments. Dissatisfaction with public educational institutions stemmed from a lack of specialities and the fact that the education they provide is outdated.

      As the skills and abilities needed for white-collar workers change rapidly, private educational institutions seem to keep up with the demand by offering timely and flexible curriculums. Public support, such as the Training Benefit System, should be further expanded to make the most of the private sector and to meet the individual need of workers.

      The white paper also mentions the importance of enterprises investing in human resource development. Ways to deduct such investment costs from taxable income deserve consideration and would surely be a practical and attractive way to promote enterprises to invest in human resources.

      In addition to providing a macroeconomic analysis of the present situation, the White Paper on Labour should propose more concrete government measures and an analysis of their effect. Nowadays, job creation is a critical issue in Japan. It is desirable that there be a more precise analysis on current trends in employment, including new types of self-employment such as small office/home office, freelance work, and so on.

Note:
For details on the White Paper on Labour, see “The 1999 White Paper on Labour: A Summary of the Analysis” in the September 1999 issue of the Japan Labor Bulletin.

Adjustment of Policies Seen in the White Paper on Labour
Yoji Tatsui Division Director Labor Policy Coordination Division Rengo (Japanese Trade Union Confederation)

      This year's White Paper on Labour revealed a slight modification in labor market policy, with a shift in emphasis from maintaining long-term employment practices to encouraging labor mobility. What kind of issues are likely to arise from this modification?

      It is interesting to note the timing in the announcement of this shift. The white paper claims that “it is desirable that steps to change long-term employment practices should be made when the economy is booming, not when it is in recession.” However, the shift occurs at a time when the economy is not booming.

      The second question involves the view taken of “excessive employment.” With no rational justification, this year's Economic Survey of Japan estimated that there are firms in a macroeconomic sense employing 2.28 million people in excess to requirements. It claims that this excessiveness is part of a larger picture in which physical plant and debt are also excessive. On the other hand, this year's White Paper on Labour states that any estimate of excess labor is affected by views on the future of business, and the figure may represent a simple process of hoarding labor in anticipation of the economy recovering in the near future. If that is the case, then the “excess” is not excessive. It also suggests that “there has been a strong tendency for firms to adjust downward their level of employment owing to pressure from global capital markets. In the equities market, for example, the value of shares of many companies planning to make massive cuts to their labor force tends to rise.”

      A third point concerns possible causes of the rise in the unemployment rate. The White Paper on Labour analyzes the recent fluctuations in the unemployment rate in terms of structural factors and of demand deficiency. It concludes that a sharp rise in the unemployment rate is due to demand deficiency pushing up the overall unemployment rate to more than four percent.

      If the rise in unemployment is actually caused by the reasons cited in the white paper, then “excessive employment” will recede as the economy recovers and future prospects improve. The view that “excessive employment” is hindering recovery of each enterprises' competitiveness has got the flow of causation going in the wrong direction.

      In practice, the policies of the government give precedence to the view expressed in the Economic Survey of Japan (protecting the more inefficient elements in the economy will not be sufficient to bring about the recovery of Japan's economy) over the view in the White Paper on Labour. As a result, the government's policies are actually aggravating the employment situation and making workers feel more insecure. It promotes “excessive employment” adjustment and the deregulation of temporary workers at the height of the economic recession. The implementation of such policies signifies that the government is under the thumb of employers' associations such as Keidanren (Japan Federation of Economic Organizations).

      The White Paper on Labour expresses concern that long-term employment practices may “hinder change in the industrial structure” or that they may deter enterprises from changing their management structure or type of business in response to changes in the environment. But are these in fact “drawbacks” in Japan's long-term employment practices? Has the Japanese economy not already experienced changes in the industrial structure with the existing practices? Rather, the problem lies in the fact that the economy has been unable to create a new leading sector. Unless this problem is solved, simply increasing “labor mobility” will put job-searching workers into a labor market with few stable jobs and will serve only to increase the number of workers who feel uncertain about their employment prospects.

      In this sense, the “small” modification of labor market policy seen in the White Paper on Labour is likely to end up with unexpectedly large change.

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