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Monday, Nov. 3, 2003


Creating more jobs that pay

Despite reports that the Japanese economy is on a recovery track, the nation's unemployment rate still exceeds 5 percent. Let me make some proposals for increasing employment opportunities on a long-term basis.

Job creation through public-works investment is only temporary, since jobs disappear when the projects end. In the traditional pattern of economic recovery, a temporary rise in the income of those employed in public-works projects would lead to more consumer spending, resulting in lower inventories and higher employment in the manufacturing and service sectors.

It no longer works that way. The following are my proposals for increasing employment opportunities:

First, urban decentralization should be promoted. In Japan, 13 cities have a population of more than 1 million. If 10 million of the 30 million people in the greater Tokyo area moved to outlying cities through decentralization, the number of cities with a 1 million-plus population could double.

Many new hotels, restaurants, large shopping centers, bank and insurance company branches, schools and hospitals would be established, creating millions of service-industry jobs.

Decentralization would be highly effective in creating jobs. Although the concentration of the population in megacities creates myriad menial jobs in the service sector that serve as a buffer for employment, the wages are low.

Second, the medical-care system should be reformed. Japan's medical-care system largely depends on revenues from drug prescriptions and medical tests. There are no published data on this, but some estimates show that drugs account for about 30 percent of Japan's total medical-care cost. The comparable U.S. figure was 9.4 percent in 2000, although it is reportedly rising.

The proportion of drugs and medical tests to Japan's health-care cost is abnormally high compared with data in Western countries. Meanwhile, the proportion of labor to Japan's medical-care cost is low.

Reducing unnecessary drug prescriptions could cut the proportion of drugs to total medical-care cost to the U.S. level of 10 percent while producing a surplus of 6 trillion yen. This amount could be spent on hiring personnel, producing 1.5 million additional jobs on the assumption that per capita labor and overhead costs come to 4 million yen. The number of medical-care workers in Japan would almost double from the 2000 total of 1.64 million.

The per capita number of medical-care workers in Japan would rise to a level similar to that in the U.S., which had 5.19 million such workers in 2000. Furthermore, the U.S. has 6.76 million medical- and nursing-care workers working outside medical institutions.

Third, the average number of pupils and students per class in primary and junior high schools should be cut to between 15 and 20 (the U.S. level is 16.2) by doubling the number of teachers. In 2001, the number of primary and junior high school teachers in Japan was 1.33 million, compared with 7.74 million in the U.S.

Meanwhile, the size of the university teaching staff in Japan was 340,000, compared with 3.01 million in the U.S. The average number of students per teacher in Japan was 9.4, compared with 5.2 in the United States.

More than 15 million students are enrolled at U.S. universities. The large enrollment stems from the fact that nearly 70 percent of U.S. high school graduates advance to universities, that many students come from overseas and that the student population covers all ages.

In summary, the relocation of service industries to outlying cities should be encouraged through urban decentralization, and employment should be doubled through structural reform of medical care and education. Otherwise, workers displaced from manufacturing industries will be stuck with low-paid menial jobs in megacities.

It is assumed that the unemployed are people who are willing to work but are unable to find jobs. Decentralization, 20-student classes and medical-care reform are feasible if the government is serious about achieving its goals. Furthermore, it is possible to create attractive jobs with good pay -- higher than the wages earned from menial jobs in megacities.

Takamitsu Sawa, professor of economics at Kyoto University, is also the director of the university's Institute of Economic Research.

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