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Monday, Oct. 22, 2001

Getting a positive grip on Japanese unemployment

According to preliminary figures released by the government on Sept. 28, there were 64.43 million people employed as of the end of August, a decline of 370,000 compared with the same period the previous year. As a result, unemployment continues to stand at a record high of 5 percent.

There are concerns that the job shortage will adversely affect the nation's economic prospects, and the government is being called upon to find solutions to the problem. This is one reason why the current extraordinary Diet session has been dubbed "the Diet session to tackle unemployment."

To implement effective policies, it is imperative to fully grasp the current circumstances surrounding the country's labor market. I would like to point out issues that are of special importance.

First, the latest unemployment figures put the number of jobless at 3.36 million (2.03 million men and 1.34 million women). But if we take a closer look, we find that those who voluntarily left their previous jobs account for over one-third of the total, or 1.2 million people. This figure exceeds the 1.03 million who were forced to quit their jobs.

These two categories are followed by the 800,000 who are out of work for "other reasons" and the 170,000 who graduated school but failed to land a job.

In Japan's corporate environment, the cloaked "encouragement" used to effectively make people quit their jobs probably helped nudge many of those unwilling to become jobless into the "voluntary resignation" bracket.

However, when we break down the figures by age, 2.13 million of those without jobs are aged under 45, while 1.23 million are 45 and older. I find it hard to believe the former were victims of corporate pressure to quit.

Should those who voluntarily left their jobs be provided the same public support as those who did not? If these people are excluded from the jobless figures, the unemployment rate falls to a level below 4 percent. On the other hand, the current government survey counts those who work a certain amount of time on a certain day as people who have jobs. This is a factor that makes the number of jobless look lower than the actual figures.

We need to take a closer look at these points and establish a method whereby the government's statistics reflect reality but at the same time become more comparable with unemployment figures from other countries. Second, when we examine employment by sector, we can see that structural reforms are progressing, albeit gradually. The number of those employed in the agriculture, construction and manufacturing sectors has been on the decline, while those working in the services sectors, such as transport, telecommunications and distribution, have been on the rise.

Third, of those who have jobs, the number that employ others has reached 160,000, logging an increase for the 16th consecutive month. In contrast, those who are self-employed or work in a family business have dwindled considerably.

Some of the factors behind this trend have been increased competition between mom-and-pop shops and major stores, the deterioration of shopping streets plagued by inadequate parking facilities, and the lack of younger people willing to take over such businesses from their parents.

But at the same time, the overall number of those employed at such businesses is rising steadily. This is probably the result of a rise in fledgling entrepreneurs, such as those who start up small or home-based offices.

Fourth, various forms of deregulation are becoming necessary to provide further liquidity in the labor market. Needless to say, we need to review the nation's social and economic frameworks to make a shift from the lifetime employment system to one in which labor can move more freely. However, the first condition for making the job market more fluid is to create a situation of excessive supply, and deregulation plays only a supplemental role toward that end. This is true not only for the labor market, but for other situations as well.

For example, in a situation where there is insufficient supply and choices are limited, it is difficult for market mechanisms to work; the distribution of resources becomes more effective under a planned economy.

In other words, the stage has gradually become set for a review of socioeconomic systems that have been established amid the chronic supply-side insufficiencies of the postwar era.

Of course, high unemployment is not a welcome thing, and for those who are out of a job it is a serious matter.

In the coming months, we can naturally expect to experience adverse effects from the terrorist attacks on the United States. But I still believe the situation in Japan is not one of despair, if compared with the jobless levels of over 8 percent in the euro group and near 5 percent in the U.S.

One could say that the factors fueling unemployment, which has lain dormant within Japanese corporations for so many years, have finally become visible.

We should interpret the nation's unemployment situation positively -- as a chance to fulfill the first condition of getting the labor market to function properly -- and formulate decisive steps to match the reality.

Teruhiko Mano is an adviser to Tokyo Research International Ltd.

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The Japan Times

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