JILPT Research Eye
Realities and Challenges of Initial Career Formation
From secondary analysis of the "Employment Status Survey" (Statistics Bureau, MIC)

February 26, 2015
(Originally published on July 17, 2014 in Japanese)

Reiko KOSUGI

Senior Fellow

Transition in Japan amid the global downturn in youth employment

Although there are signs of improvement in youth employment in Japan, the situation still remains difficult worldwide; in 2013, the global youth unemployment rate (ages 15-24) was 13.1%, almost three times as high as the adult unemployment rate (ILO, 2014). In particular, there are concerns for a long-lasting "scarring effect" left on the subsequent careers of young people who are neither in employment nor in education or training (NEETs^{[Note 1]}) (OECD, 2012).

Japan’s youth unemployment and youth NEET ratio were not so critical in the first place, seen in global terms, and Japan seems to be one of the countries that have been relatively successful in coping with the problem. Factors said to have contributed to this are the employment practices of recruiting new graduates and in-house training, as well as the job placement system that has developed with the involvement of schools. Compared to many countries where there is often a long wait after leaving school before finding a job, in Japan, it used to be common for young people, upon graduating from school, to enter “regular employment” with open-ended employment contracts.

It was in the mid-1990s that this “seamless transition” started to be undermined. Quota for new graduates narrowed, while the number of young people in non-regular employment^{[Note 2]} rapidly increased.

Here, the aim is to clarify the subsequent vocational careers of young people who have graduated from school since then, based on fact-finding surveys. Data are taken from the five-yearly “Employment Status Survey” conducted by the Statistics Bureau of the Ministry of Internal Affairs and Communications (MIC). The most recent of these was in 2012, when the targets were some 470,000 households and about one million individuals sampled all over Japan. This is a sample survey that can withstand various kinds of analysis. With the permission of the Statistics Bureau, JILPT made its own analysis of individual data from around 370,000 respondents aged between 15 and 44. The analysis results are compiled in the recently published Research Material Series “Current Situations of Youth Employment, Careers and Vocational Ability Development (2) – From the 2012 Employment Status Survey”^{[Note 3]}.

Changes in the "seamless transition," and the transition from atypical to regular employment

A new survey topic was added in the 2007 survey, namely "first job after graduation". Attention will first be focused on this. Fig. 1 shows the ratio of senior high school and university graduates whose first job was in atypical employment, divided into each graduation year group. For senior high school graduates, the ratio was low for "1986-1990 graduates", both males and females, but highest amongst "2001-2005 graduates", decreasing thereafter. "2001-2005" was the period when the job opening-to-application ratio for senior high school graduates was the lowest in recent years. If we identify the first job from the individual’s point of view, the proportion of graduates who started their professional careers in atypical employment was very high, accounting for 30% of males and more than 40% of females^{[Note 4]}. For university graduates, meanwhile, the numbers entering atypical employment were not so high as for senior high school graduates, but there was still an increasing trend. In fact, the number has continued to rise among males until very recently. The "seamless transition" has changed enormously, in that it refers to a transition to regular employees. The system for new graduates to find employment has been transformed.

Fig. 1 Ratio of workers whose first job was in atypical employment*1
(by year of graduation*2; the denominator is "graduates who are not attending cram school or similar")

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• *1 Atypical employment refers to workers who are not “Regular staff” but are categorized as “Part-time”, “Arbeit (temporary worker)”, “Dispatched worker from temporary staffing agency”, “Contract employee”, “Entrusted employee” and “Other” in their place of employment.
• *2 Years of graduation are estimated from educational background and age, and include cases not coinciding with the real graduate year.
• Source: Compiled by the author from JILPT (2014).

To see their subsequent careers, we have ascertained the employment type of a worker’s current job and that of the previous job (if there was one) from the survey results. In this paper, initial careers have been classified with attention to the employment type at three points (first job, previous job, current job). Fig. 2 shows these data from the 2007 and 2012 surveys compiled by different age groups. Partly due to lack of space, only the data for male senior high school graduates are shown here. Paying particular attention to the "2001-2005 graduates", who had the highest ratio of atypical employment in the first job, the "Persistent atypical" type (i.e. those who remained in an unstable market) accounted for 20% of those in their early 20s and 15% in their late 20s. On the other hand, for the "Other employment type to regular employee" type (i.e. those who changed to regular employees along the way), the ratio was nearly 10% in their late 20s. These facts suggest that about one-third of male senior high school graduates in this generation whose first job was in atypical employment have shifted to regular employment. Even then, the ratio of those in atypical employment and not in work is more than double that of those "1986-1990 graduates" (reaching their early 40s in 2012), revealing that this generation still remains in the bad employment environment just as when they graduated. If this generation goes on this way into their prime age, their problem will be more serious than that of non-regular employment of the second baby boomer generation.

Fig. 2 Chronological change in initial careers of male senior high school graduates (by year of graduation*)

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• * Years of graduation are estimated from educational background and age, and include cases not coinciding with the real graduate year.
• * "Late teens" are used for 2006-2007 graduates only.
• Source: Compiled by the author from JILPT (2009) and JILPT (2014).

To promote independence and family formation by workers who are stuck long-term in this atypical employment, conceivable measures could include improving various conditions within atypical employment, improving conditions by introducing new employment categories (e.g. limited regular employees^{[Note 5]}), or supporting the transition from atypical to regular employment. JILPT (2014) analyzed cases of transition from atypical to regular employment. This clarified a number of facts, including the large influence of business cycles, in that many of the companies hiring workers out of atypical employment as regular employees belong to industries that are enjoying high demand at the time. Other findings are that, at the individual level, males have the advantage over females, many are in their 20s, and a higher educational background is an advantage; and in 2012, the transition to regular employment was more difficult for those in their 30s, compared to 2007.

In addition, in order to identify factors governing the transition to regular employment, we focused on workers who had left atypical employment within the previous year, comparing those who moved into regular employment with those who did not (For details of the analysis, please refer to the Research Material Series). Study of the results, after controlling various individual conditions such as age, gender and marital status, reveals that a number of conditions have a significant impact: a certain length of service in the previous job as atypical employment, self-development over the past year, and the experience of being hired as regular employee in their first job. This shows that ability development while in the previous job promotes the transition to regular employment.

NEET situation and careers

Some information on the careers of young people in NEET situation^{[Note 6]} can also be obtained from this survey. At the beginning of the 1990s, there were few people who had experience of employment before becoming NEETs, but from the end of the 1990s to the beginning of the 2000s, there was an increase in NEETs with employment experience. NEETs with employment experience increase when the economy is sluggish, and a worsening labor market is regarded as one factor behind the increase in NEETs. In addition, over the last 5 years, while NEETs with employment experience have decreased, even those with employment experience are increasingly facing long periods after leaving work. In other words, this means that more people are stuck in NEET situation over the long term, and even when the economy recovers, there could be a backlog of people who have difficulty in entering the labor market. The long-lasting "scarring effect" left by NEET situation is also happening in Japan.

This phenomenon, in which poor economic condition at the time of graduation has an impact on subsequent careers and people stagnate in NEET situations even when the economy recovers, has become an all the more important issue precisely because, in the meantime, the "seamless transition" whereby new graduates directly enter the employment system is being continued. The situation in Japan is not unrelated to the increasingly serious problems of youth employment around the world.

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