Vol.39-No.9 September 1,2000
On June 27, the Ministry of Labour submitted its 2000 White Paper on Labour to the Cabinet and released it to the public. Part I of the White Paper is entitled Trends in and Features of the Labor Economy in 1999. It presents an analysis of trends in Japan's labor market in 1999. Part II is entitled How Best to Mix the Young, the Middle-aged and the Elderly in an Aging Society and surveys the effects of aging on the macroeconomy and on the labor market. It analyzes employment issues related to young people in an aging society and explores the best ways to mix the young, the middle-aged and the elderly at work. The following provides a chapter-by-chapter summary of the White Paper.
1.0 Part I: Trends in and Features of the Labor Economy in 1999
1.1 Chapter 1: Trends in Employment and Unemployment in 1999
The employment situation in the first half of 1999 was characterized by an unprecedented surplus of labor, by the further adjustment of employment levels, by the further deterioration of the job market, and by an increase in unemployment due to involuntary separation. During this period, unemployment rose to a record 4.8 percent in March; the ratio of job openings to job applicants dropped to a record low 0.46 in May; and the decrease in the number of employed people exceeded the decrease registered in 1998. In the latter half of 1999, the moderate improvement in business conditions resulted in slight increases in the number of non-scheduled hours (overtime) worked in the manufacturing sector and in the number of job openings; the pressure to adjust employment levles downwards seemed to recede, while the number of job-seekers began to decline, and the ratio of job openings to job applicants rose. However, despite the reduction of any labor surplus, surplus continued to exist, and the restraint exercised by companies in terms of recruitment activities continued to make it difficult for newly graduated job-seekers to get a job. Although the number of regular employees continued to decline, the number of temporary workers increased; this also was seen as being a reflection of how bleak the employment situation actually is. In February and March 2000, unemployment reached a record high 4.9 percent (Figure 1). This seems partly to have resulted from an increase in the rate of structural and frictional unemployment during this period, which had been around three percent since 1998 (Figure 2).
1.2 Chapter 2: Trends in Working Conditions
(1) Wages and Working Hours: While non-scheduled cash earnings (e.g., from overtime) increased, scheduled cash earnings fell for the first time since 1991 when comparable figures first became available. Special cash earnings (e.g., bonuses) also fell substantially. This resulted in a decline in total cash earnings by 1.3 percent over the previous year, the second consecutive decline on a annual basis. Real earnings fell by 0.9 percent compared with the previous year, also for the second consecutive year. The total number of hours worked in 1999 declined by 1.1 percent compared to the previous year. The drop reflects a decrease in the number of scheduled hours worked due to a decrease in working days; the decline in the number of non-scheduled hours worked slowed due to a slight recovery in production levels.
(2) Industrial Accidents: The number of industrial accidents (deaths and injuries resulting in an absence of four or more days from work) continued to drop. Although the number of deaths totaled 1,992 and was below 2,000 for the second consecutive year, the figure represented an increase over the previous year.
1.3 Chapter 3: Trends in Prices and Workers' Households
(1) Prices: In 1999, the wholesale price index continued to fall, dropping a further 1.5 percent from the previous year, although the rate of decline slowed in the third quarter (July to September). The overall consumer price index dropped 0.3 percent from the previous year. This was the first drop in four years, and marked the largest drop since 1971.
(2) Workers' Households: The will to consume among workers' households rallied in 1999, but an unusually large drop in real household income (as in the previous year) resulted in an overall drop of 1.7 percent in actual consumption expenditure for the year.
1.4 Chapter 4: Trends in Labor-Management Relations
During this year's spring wage negotiations, the major industrial unions in the electrical goods industry settled for an average increase of ¥500, equivalent to the regular annual increment built-in for 35-year-old workers. Unions in the steel industry settled for basic wage hikes of ¥1,000 over the next two years. Unions in 11 automobile firms obtained an increase of ¥6,494, which included the annual increment calculated by the average wage method. For unions in the shipbuilding industry the figure was ¥6,000 and also included the annual increment calculated by the average wage method.
2.0 Part II: How Best to Mix the Young, the Middle-aged and the Elderly in an Aging Society
2.1 Chapter 1: Changes in Economic Structure and the Progressive Aging of Society
Despite the signs of some improvement in the overall performance of the economy, many Japanese firms felt they had excess labor and some began to implement plans to restructure. Often the approach taken was to adjust employment levels by reducing the hiring of new employees. While these developments have been equated with those taken during the first oil crisis, there have also been signs that new jobs are being created. Also, due to the establishment of businesses and employment opportunities in new industries which make use of part-time workers, the proportion of non-regular employees has been increasing at a rapid pace, even though it continues to be relatively rare for companies to substitute part-time employees for regular ones.
The aging of the population will affect the macroeconomy by positively shaping both the supply and the demand side in the labor market. For example, aging will stimulate technological progress and the expansion of consumption. In order to respond to changes in the composition of the labor force due to the aging of society and the declining number of children, it is essential that companies change their patterns of demand for labor. At the same time, the shrinking labor force requires that firms consider carefully how to make more effective use of the elderly and of females in the population.
2.2 Chapter 2: Issues concerning Employment among Young People
The labor market for new graduates is in serious recession. The percentage of new high school graduates without a job exceeded 30 percent. However, the largest proportion of youth unemployment is due to voluntary separation which seems to be possible in part because of the financial support young people receive from their parents. The recent increase in voluntary separations and job switching among young people is attributable to the increased proportion of free workers (known in Japanese as freeters*) and other non-regular workers who tend to switch jobs many times. In recent years, the number of these freeters has tripled between 1982 and 1997 to reach 1.51 million (Figure 3).
Behind the recent employment pattern of young people is their lack of commitment to working and a kind of unfounded optimism created by the economic affluence in which they grew up. The outlook of the increasing number of freeters these days varies. They can be categorized into four types according to the reason they became freeters. One type wishes to have more time for something else they really want to do. A second type feels uneasy about the future. The third type simply wants to remain a freeter. The fourth type does so for other reasons. Although two-thirds of freeters wish to settle down to regular work sooner or later, some actually fail to switch to regular employment because they have had little opportunity to develop their abilities. An increase in frequent job-switching with no prospects for the future is a loss not only for the individuals involved but also for society as skills and abilities are not accumulated.
There has been a moderate increase in the willingness of firms, especially among large firms, to recruit throughout the year, though the recruitment is still focused on the hiring of new graduates. In future, it will be necessary for firms in various industries to adjust their labor force through labor turnover. The White Paper recommends that steps be taken to reorganize the labor market so that it is more open to recruiting activity throughout the year. As for the recruitment system for new graduates, emphasis must be placed on the desirability of providing young job-seekers with the knowledge they require to choose jobs and with opportunities to take a closer look at, or even to experience (as trainees or interns) how work is actually carried out in the workplace.
Finally, particular attention should be given to the need to deal with the structural problems which have resulted in changes in the work ethic of young people and in changes to the industrial structure. Important for the smooth transition of young people from school to the workplace are the provision of long-term training systems within companies, a greater seriousness when choosing their first job, the creation of an environment to support such young employees, and greater cooperation among school, the bureaucracy and private companies. In particular, it is necessary to improve the abilities of high school graduates as well as to persuade a wider range of firms to recruit them. In addition, in order to create a more flexible market where young people can have more than one chance, it will be important to enhance vocational training outside the company while also taking steps which will help young people settle down in one job.
2.3 Chapter 3: The Aging of the Population and Problems concerning the Employment of the Elderly
At present, unemployment is a more serious issue for those aged under 60, but when the baby-boomers reach their early 60s in 10 years, it will be important for them to secure employment up to the age of 65. To ensure them satisfactory employment, it will be necessary for them to establish conditions that will provide them with ample opportunities to find jobs. Compared with people in their early 60s in the past, a larger proportion of those currently in their early 60s are working, and an increasing number continue to work for the company at which they were employed on their 55th birthday.
The average remaining life expectancy of males aged 60 is 20 years, up five years from 1970, when the calls to move the mandatory retirement age from 55 to 60 were first heard. The challenge of employing the elderly underlines the importance of creating schemes whereby the specialized skills and abilities which accumulate with age can be fully utilized. The willingness of Japan's elderly to work is, in international terms, high. Thus raising the minimum pensionable age under the Employees' Pension Plan (a public pension system for salaried employees) is likely to strengthen still further their incentive to work.
Age-wage profiles are becoming flatter. It is expected that wage systems based on performance will become more common, but there are many issues to be resolved in terms of how to conduct personnel evaluations. As the labor force ages, promotion to higher posts is coming later for many. It is not so unusual nowadays for a younger employee to be promoted over a senior colleague. New personnel systems are being introduced whereby a company encourages its employees not via rank but via the tasks themselves (Figure 4). The practice of continued employment up to age 65 is gradually becoming more common; changes in wages and employment status do not in many cases affect the duties and working patterns of the workers in question.
The re-employment of middle-aged and older workers will require them to develop their abilities further. Nevertheless, in principle the extension of employment should be within the same type of job the employee has been engaged in. However, the age limits that go with some job openings make it difficult for them to get a job. The system of transferring older employees to an affiliated or related company eases the shock involved and helps them to secure employment opportunities. Presently many companies have difficulty finding posts for older employees who need to be transferred. However, the proportion of middle-aged and older people among business starters is increasing.
In the years preceding retirement, the necessity to work for financial reasons is diminishing, and an increasing proportion of those concerned wish to continue working for other reasons. On the other hand, comparisons with other countries highlight particularly Japanese issues. For example, the aged in Japan seem to feel more uneasiness about the future in relation to pension schemes. Their weak relationships with their local community also result in low levels of satisfaction with their life in retirement. For a spiritually fulfilled life in retirement, it is necessary to think about the balance between each individuals' work life and his or her social life over their entire career in the labor force.
Steps to make fuller use of older workers include (1) having wage and contract schemes that are not affected by age, (2) being assigned duties which will allow them to take full advantage of their work experience, and (3) decentralizing work through the allocation of responsibility and authority. To create employment opportunities for older workers, the White Paper called for (1) voluntary efforts by labor and management over the next 10 years to raise the mandatory retirement age to 65, (2) gradual efforts to ensure employment opportunities are available for workers up to age 65, (3) efforts to dispel stereotypes as to the age requirements of companies (i.e., relaxing age limits for recruitment), and (4) support for individual efforts to acquire one's own unique set of skills and abilities.
Once young, middle-aged and older workers have built a complementary relationship in the workplace, newvalues will likely emerge. The aim should be to create a situation in which a decreasing number of young people and an increasing number of middle-aged and older employees can work together in more efficient ways as personnel systems are designed to produce ideal combinations of younger and older workers. The end result, it is hoped, will be a new set of values that will result in more jobs and in young and old alikebeing able to demonstrate their respective abilities to the full.
*Freeters are young people, chiefly in their teens or 20s, who are not working because they have gone onto higher education or failed to get a regular job, or who are working as part-time or side-job (arubaito) labor.
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