Общество "Россия-Япония":
http://ru-jp.org/

Prof. Vadim B. Ramzes,
Head, Sector of Japan's Economy and Policy, IMEMO, Russian Academy of Sciences

CURRENT TENDENCIES OF JAPAN'S LABOR MARKET

Japan's extraordinarily severe labor market, built on lifetime employment and seniority pay, has been an object of heated debates in the scholarly, political and business circles of late.

Opponents of the existing system argue that the extremely low mobility of workforce will inevitably result in an upsurge of staff costs, an excessive number of aged employees, discrimination of younger staff, problems with staffing new, high-tech sectors of the economy and, consequently, a decrease in the national output. Advocates point out the inviolability of traditions and the contribution of lifetime employment and seniority wage to the nation's economic growth. According to them, traditional Japanese personnel policies promote corporate loyalty and an unparalleled motivation to work, giving employees a clear idea of their career development as soon as they are taken on and providing them with a comprehensive benefits package. After it caught up with the economically advanced nations of the West to experience an economic boom in the late '80s, Japan faced a long period of recession, when many elements of its economic miracle had to be reconsidered. Many analysts then came to realize the obsoleteness of the homespun methods of Japanese personnel management, particularly the practice of tying up promotions and pay raises with the duration of employees' service for one company.

The necessity of replacing seniority pay with performance-based pay is acknowledged by an ever-growing number of businesspeople and government officials. Most of them, however, are not yet ready to take decisive steps in this direction as they fear to disturb the existing social balance. These fears seem to be grossly exaggerated, though: The "fat reserves" built up by most Japanese in the era of prosperity make it possible for them to get by in spite of the economic woes their country has been experiencing in the past ten years.

Japan's labor market now displays two opposite tendencies, arising from an intricate interlacing of economic, demographic and social factors.

On the one hand, unemployment is on the rise. In the fourth quarter of 2000 and the first quarter of 2001, the jobless rate was at 4.8 percent. In a month-over-month comparison, the number of openings decreased by 5.2 percent in January 2001, 1.9 percent in February, and 4 percent in March. The supply/demand ratio on the job market was, respectively, at 0.65, 0.64, and 0.61. The number of those employed decreased by 0.3 percent in the first quarter of 2001, as against the fourth quarter of the previous year. In a tendency mirroring these changes, the amount of the extra hours worked in the manufacturing industries decreased, month over month, by 1.7 percent in January 2001, 0.6 percent in February, and 0.9 percent, March.

There is growing pessimism amongst members of Japan's business community. Their assessments of the country's current economic condition and their forecasts for its future development are eloquent enough, especially for the manufacturing industries. Thus, the gap between the proportion of corporate managers pointing out an increase in economic activity over the previous quarter and of those reporting a decline was (-)1 in the first quarter of 2000 and (-)25 in the first quarter of 2001. The gap between the corporate managers expecting business conditions to get better in the second and the third quarters of 2001 in comparison with previous quarters and those doubting the likelihood of improvement was (-)18 and (-)5. The respective figures for managers in Japan's manufacturing industries were (-)19 and (-)6.

In the first quarter of 2000, the gap between the corporate managers arguing that the conditions for business activity had improved as compared with the first quarter of 1999 and those maintaining that the conditions had worsened was (-)5.2. The figure for the first quarter of 2001 was (-) 16.1. The corresponding figures for executives in Japan's manufacturing industries were at 1.2 and (-)16.5, respectively. And, finally, the gap between the corporate managers expecting business conditions to get better in the second and the third quarters of 2001, over the same quarters of 2000, and those skeptical about the conditions improving was (-)17.9 and (-)14.6. The respective figures for managers of Japan's manufacturing industries were (-) 19.3 and (-)14.8. It is hardly surprising therefore that many of the leading Japanese companies have announced downsizing plans and some have already gotten down to layoffs. Nissan Jidosha is shutting down 5 of its factories and cutting 21,000 staff members from its payroll (another 65,000 of Nissan's employees will lose their positions at supplier companies); Sony intends to slash 17,000 employees off its staff; and Nippon Denki plans on a personnel cutback of 15,000. Smaller businesses are following suit. Even if these plans fail to be implemented in full, the number of jobless people in Japan will increase dramatically.

The actual and prospective layoffs undermine the morale of all actors on Japan's labor market, especially older ones. Japanese media now and then tell stories of former employees proving unable to come to terms with job loss and therefore committing suicide and also of forced early retirees spending their days in libraries, cheap cafes and parks downtown so that their families would think they still work. The sad irony is that Japan's older workers, now the primary targets of corporate restructuring, are destined to play a lead part on the Japanese labor market in the future. This is indicated by the medium- and long-term prospects of demographic processes. The aging of Japan's population is a rapid process. The proportion of people over 65 was 4.9 percent of the population in 1950, but rose to 17.2 percent in 2000 (the figure is expected to reach 32.3 percent by the year 2050). In the government's estimates, Japan's workforce will shrink by 60 million people (10 percent of the population) by the year 2025.

This can be accounted for both by the rising life expectancy rate and the declining birth rate. Life expectancy rose from 62.1 years for men and 65.9 years for women in 1950-1955 to 76.8 and 82.9, respectively, in 1995-2000; it is predicted to reach 80.8 and 86.9 years in 2045-2050. The birth rate has been declining since the late '40s. The average number of babies born to each woman in her childbearing years (the economic indicator known as the fertility rate) was 4 back then. But in 1999, it dropped to 1.34 children for every woman, down from 1973's 2.07 (the threshold for maintaining the population at its present level). If the tendency persists, the population of Japan, on reaching its peak-127.8 million in 2007-will reverse. The downward movement is to last 60 to 70 years even if the birthrate rises above the threshold of 2.07.

In the coming years, the proportion of older workforce will swell while the young labor shortages will become more acute. In 2000, the Japanese aged 65 and older outnumbered those under 15 years of age (22.3 million against 18.5 million). According to forecasts by Atsushi Seike, a labor economist at Keio University in Tokyo, the number of people in the 20-30 age group will have shrunk 4 million by 2010. And the Education Ministry announces that starting in 2009, Japanese universities will admit all applicants. This imbalance will be possible to rectify only through the import of human resources from overseas.

In 1974, the number of registered foreigners living in Japan was 745,600 people, or 0.38 percent of the population. In the 25 years that followed, the population grew by a mere 2.8 percent while the immigrant community grew by as much as 58.1 percent, to number 1.6 million people, or 1.23 percent of the population (as of late 1999). According to estimates by Japanese and foreign experts, the country's population will drop to 121 million people in 2025 and further down to 105 million in 2050, forcing Japan to let in 600,000 immigrant workers every year so as to be able to keep the national output up.

Japan, which has not yet grown out of its prejudice against foreign workers, will now have to come to terms with their presence. And not only in those niches of the job market that are traditionally ignored by the Japanese as non-prestigious (like positions in the construction industry and in certain sub-sectors of the services sector), but also in the high-tech industries. Let me give you just one example: a governmental advisory board has recommended to the Japanese government that it invite the services of 30,000 foreign specialists in information technologies by 2005. But as a matter of fact, people with IT skills are generally reluctant to come to Japan for work. They are scared off by the language barrier, the high cost of living, and the foreigner-unfriendly social security system (thus, for instance, Japanese legislation prohibits money paid by non-residents to Japan's pension funds from being subsequently transferred to bank accounts in the country of their citizenship).

On the other hand, there are changes, albeit not necessarily positive, that will hopefully lead to the modernization of the Japanese labor market, the abandonment of the anachronistic employment and pay practices, and the adoption of international standards. Curiously enough, most of such changes have to do with the social status, the behavioral patterns, the consumer preferences, and the lifestyles of young people, who aspire to leadership in modern-day Japanese society, despite its traditional orientation toward the older generation.

The number of Japanese people changing jobs grows slowly but steadily. In 1993, this category accounted in Japan for a little bit more than 4 percent of the working-age population, while in 2000 it reached 5 percent-the highest level since 1984, the year Japan's Management and Coordination Agency started gathering relevant statistical data. In the September 1999-August 2000 period alone, some 3.2 million people changed jobs-9.5 percent more than in the year-earlier period.

Their numbers proved to be in inverse proportion to their age. The list was topped by people in the 15-24 age group (12.5 percent of the total working-age population between September 1999 and August 2000-up 1.4 percentage points compared with the year-earlier period). This age group was followed by people aged 25 to 34 (6.9 percent), 35 to 44 (4.7 percent), 45 to 54 (2.3 percent), 55 to 64 (2.2 percent), and 65 and above (0.9 percent).

The conspicuous mobility of young Japanese labor indicates that the younger generation fosters values different from those of the old-timers. The ultimate goal of these latter has typically been to become loyal salaried employees, ready to perform any task assigned by their employer.

Until recently, the category of temporary employees has been at the bottom of Japan's job rankings. Temps were the last candidates to be considered for a vacancy, and they were paid for identical assignments considerably less than permanent staff. Today, thanks in many ways to younger people's changed approach to job choices, these one-time pariahs of the Japanese labor market have turned into a privileged cohort of workers, who are in great demand and who get as much as their salaried counterparts, or even more, for identical assignments.

No statistical data is yet available on the number of temporary workers in Japan, but their growing numbers and surging popularity are evidenced by accounts from temps themselves, as well as from corporate managers, administrators, and employment agency executives. According to the top management of Pasona, Japan's largest temporary-staffing agency, the annual number of applications for short-term positions has soared from 100,000 to a million over the past five years.

Among the Japanese temps, there is a group of workers dubbed freeters. The term "freeter," a combination of "free" and the German word "Arbeiter," or "worker," describes young people who do not commit to one line of work, but hop jobs in hopes of finding better working conditions or just for a change. Importantly, freeters will not, even if unemployed, take up a decent job if they don't like it.

Freeters reject their parents' heavily structured lifestyle and salaryman culture. Seeking challenging opportunities and more freedom, they choose life as temporary workers over secure, long-term employment. They tend to opt for more individual, unconventional careers. According to a survey conducted by the advertising giant Hakuhodo, prominent on the list of young Japanese's preferences are now such jobs as Web-site designer, television personality, musician, athlete, video game creator, beautician, and the like.

In contrast to the group labeled "parasite singles" (parasaito shinguru)-young working adults living off their parents well into their 20s and beyond-freeters are a prototype of dynamic freelancers, who work on contract, moving from one company to another.

Young freelancers make an attractive workforce to the most far-sighted of managers, who realize the necessity and the inevitability of corporate restructuring and see staff costs reduction as an essential prerequisite for the reform. These, along with executives at recruiting agencies, keep pressuring the government into softening regulations that restrict worker mobility. Until recently, the authorities, concerned over the skyrocketing unemployment rates and the opposition of trade unions, have been trying to avoid the unavoidable. Instead of encouraging companies with swollen staffs into restructuring and facilitating movement on the labor market for those willing to move, the government would allocate subsidies so that the companies could keep their surplus employees on the staff, busy doing meaningless work. The rules allowed the admission of new college graduates as temporary workers only a year after graduation, setting a flat transaction fee for employment agencies and a top limit of one year for contracts with temps and prohibiting those contracts from being extended immediately. Temporary workers therefore had access only to a small fraction of the jobs available on the labor market.

The government has softened its policies as it has come to realize that unless there is greater worker mobility to channel human resources into the most productive of economic sectors, Japan will not be able to achieve an industrial output high enough to ensure steady economic growth. The revised Law on Temporary Workers has brought deregulation to this sphere of labor relations, better working conditions for temporary workforce, and wider opportunities for aged people in getting a part-time job. It has also legalized the practice of having temps sit in for permanent staffers on leave looking for sick children or elderly parents. Only five professions have been left closed to part-time employment, and the staffing agencies' area of activity has broadened appreciably, as a result.

With the advent of the Koizumi Cabinet, with its sights set on long-range reform, the Japanese labor market may be in for more metamorphoses. These metamorphoses will satisfy the growing desire of the growing number of workers to get out of the cage of government regulation and obtain maximum flexibility and mobility in employment.