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Changing Labor Market and Government's Employment Policy

By Chikara SAITO


In the backdrop of economic globalization, the Japanese government under Prime Minister Junichiro Koizumi is pushing ahead with "structural reforms" on behalf of Japanese multinationals trying to strengthen their international competitiveness. Government policy concerning employment is one of forcing workers to endure hardships caused by workforce cuts and labor mobility, which is in line with capitalist cost cutting strategy. This report discusses Japan's worsening employment situation, problems of the measures the government has taken to secure jobs and the present state and problems of the government administration of the public jobs placing agency −the Public Employment Security Office (“Hello Work”).

I. Issues

In Japan, unemployment is growing at a faster rate than ever, and more and more workers lack job security.

1) Unemployment increases and becomes protracted

Let me first discuss the "Labor Force Survey" by the Ministry of Public Management, Home Affairs and Post and Telecommunications. It is a survey that helps understand the problems of unemployment in Japan.

First, the unemployment rate has reached an all time high. In January 2003, it was 5.5%, and the average of 2002 was 5.4%. Both figures represent the worst state since the government first conducted the survey. The number of unemployed was between 3.3 million and 3.8 million.

Second, there are many unemployed people who are not counted as unemployed in the statistics. They are willing to get a job but are not active job seekers because they think it difficult to get an appropriate job. The number of such persons for the third quarter of 2002 was 2,19,000. If these people were included in the statistics, the real unemployment rate would have been around 8%.

Third, in 2002, the nation's active workforce contracted for 22 months in a row. In January, the number was 61,930,000, down 640,000 from a year before. The number of employees continued to fall for 17 consecutive months to 52,620,000, a decrease of 140,000 from the previous year. The long-time contraction of active workforce and job opportunities testifies to the Japanese economy's inability to provide jobs. This is due not only to the prolonged economic recession but to the fact that large corporations as multinationals are moving their production out of Japan.

Fourth, unemployed periods tend to become longer. In 1993, 15.3 percent of the unemployed were out of job for more than a year, but in later years, the number kept on increasing sharply to 30.8 percent in 2002. This shows how difficult it is for those who have lost jobs to find another one.

Fifth, people out of jobs are forced to endure very difficult living conditions. A recent Ministry of Public Management survey shows that in October-November, 2002 period, about 1,720,000 unemployed - nearly half of the 3,490,000 unemployed, i.e., those who were out of work during the last week of the month by government definition - said they were without any income. Only 700,000 people (about 20%) said they received the "Employment Insurance" (read Unemployment") benefit. This means that the safety net in Japan is dysfunctional.

Sixth, unemployment among young people is a serious social problem in our country. The pre-seasonably adjusted unemployment rate among young people between 15 and 24 is 9.6% , the highest of all age groups. The percentage of high school and university graduating students who were able to get jobs before March 31st (school year end) was all time low in 2002. About 20% of university graduates and 10% of high school graduates were unable to get jobs or continued their academic career at higher schools. The number of freelance workers - who have no regular (full time) work - is estimated at more than 2,000,000. An increasing number of young people have uncertainty about their future.

Despite this bleak employment situation, the Koizumi Cabinet shows little enthusiasm for its swift improvement. On the contrary, it not only predicts that a further increase in unemployment will be unavoidable in the process of implementing its "structural reform" agenda, but encourages corporate restructuring that entails further workforce cuts.

2) Increasing unstable employment

In addition to the unemployment problem, which is becoming increasingly serious, we need to pay attention to a dramatic increase in the number of contingent workers and their worsening working conditions. These are clear signs that the quality of employment in Japan has substantially declined.

The government's "Labor Force Survey" for the 4th quarter of 2002 shows that the number of non-regular (non-full time) employees (part-timers, temps, contract workers, etc.) was 15,100,000, which accounts for 30.5% of the 49,550,000 employees which do not include management people.

As the number of contingency workers increases, working conditions are worsening limitlessly. The average hourly wage for part-time workers, who make up the largest group of contingent workers, is under 900 yen (about 7.5 US dollars). Although their wages are held very low, part-tie workers now tend to be forced to cope with as heavy workload and responsibility as full-time workers. This is why part-time workers' biggest complaint is about their wages being held very low.

The number of temporary workers was 175,000 in fiscal 2001 (Apr. 2000-Mar. 2001) up 26.1% from the previous year. Their wages are also declining. A survey in September 2001 shows that the average annual wage for them was 2,39,500 yen. In particular, temps on clerical work (back-office operations), who account for all temporary workers, receive only 2,047,000 yen on average a year.

In 2001, the average wage for private sector workers was 4,540,000. The figure has been falling after it peaked in1997at 4,670,000 (The National Tax Administration Agency's Report of on Private Sector Workers' Wages). This is an outcome of a major attack launched jointly by capital and the government to hold down wages. The point is that the increase of low wage contingent workers who receive around 2,000,000 yen can be the leverage for worsening the working conditions of workers in general.

The Japan Business Federation, which represents the nation's employers, in a labor policy report called for the use of a variety of forms of employment, including temporary and contract workers. The report reveals the capitalists' strategy to cut as much labor cost as possible by replacing full-time workers with low-paid contingent workers who are easier to hire or fire. The idea is that this can be implemented by combining various forms of work or employment: short-term employment; employment by contract; indirect employment; and telework.

II. Government Jobs Policy and its Contradictions

1) Government's jobs policy

In April 1998, the government announced the "Urgent Job Creation Program". Since then, it has announced measures aimed at improving the employment situation twice a year.

In Japan, the business circles have led a campaign to promote the labor market's mobility since the middle of the 1990s. The concept later adopted by government jobs policy. However, in the Urgent Job Creation Program and in the "Comprehensive Plan for Revitalization of Employment" the main focus was on measures to keep employment stable and prevent dismissals. Promotion of mobility of the labor market was not emphasized in these programs. However, a major change in emphasis was put forward by the June 1999 "Urgent Measures for Jobs", which called for the need to help unemployed swiftly find jobs as well as job creation in the private sector. This was how labor mobility was high on the agenda. The latest of those programs is "Comprehensive Measures to Speed Up Reforms", which calls on the private sector to take a lead in adjusting demand and supply in the labor market and adopt a variety of types of employment. Thus, the government has reduced its responsibility and roles in keeping employment stable and begun to call for more to be done by the private sector.

The catchphrase "Encourage workers to accept a variety of forms of employment" sounds promising, but its real aim is to cut labor costs by replacing regular and full-time workers on long-term and stable jobs by non-regular workers. The Japanese Parliament is not considering adverse changes of labor laws: the Labor Standards Law; the Employment Security Law; the Law on Staffing Business; and the Unemployment Insurance Law. (See Note 2.) These bills, if enacted, would certainly further accelerate the mobility of the labor market and even help cover up the truth of unemployment, which will mean furtherincrease in unstable employment.

Government measures for jobs are often used to justify a supplementary budget. It's even the case that they are used as part of a feature policy put forward with a parliamentary election in mind. That's why the policy-making, planning and practical application of employment measures of this kind is carried out in a very short period of time. So the government office concerned is forced into a rush work for drafting measures. Measures drawn up in this way often lack clear ideas and mid-term and long-term visions. Measures that mark a departure from the existing policies or framework may be put forward unexpectedly without any explanation. This tendency has become conspicuous since the Cabinet Office was given greater powers in January 2001.

One of such measures is the establishment of a fund for financial assistance to subsidiaries that accept personnel from their parent companies which have more than a 50% stake in the subsidiaries. That was part of the jobs package of September 2001. That marked a major policy change. Up till then, the government had never permitted the use of government money for assisting in changing worker transfer from parent company to its subsidiaries on the grounds that such subsidies could encourage easy employment adjustments. Despite it being a 180-degree policy change, the government introduced the subsidies as a centerpiece of its jobs package. Apparently, the government needed to take into account Nippon Telephone and Telegraph Corporation (NTT)'s large-scale corporate restructuring plan that would cut its workforce by 110,000 by forcing workers out to subsidiaries with a 30% pay cut. It also must have tried to respond to the proposal for a law concerning company spin-offs.

Without doubt, the government's jobs policy has focused on providing measures to help large corporations carry out corporate restructuring rather than trying to achieve stable employment.

The government's fund for helping emergency regional efforts to create jobs can be instrumental for helping the unemployed maintain their living and find jobs. But the problem is that the measure limits the term of work on this program to six months, that it falls short of meeting the needs of long-term unemployed, and that the government is reluctant to make the measure permanent. Many trade unions and local governments are demanding that the measures be improved.

2) Contradictions arising from policy of shifting burdens onto workers

The government's jobs policy is always in line with corporate management's employment strategy that condones corporate restructuring, mainly at large corporations, even if such restructuring means forcing many workers out of jobs. It also helps replace regular workers with contingent workers, which has set the trend for the government's jobs policy. The present jobs measures set forth in connection with the policy of accelerated disposal of bad loans held by banks are virtually designed to induce categories of employment that make employment more flexible through more frequent worker movements between industries or between companies, using more contingent workers: part-time workers, temporary workers, fixed-term workers and contract workers.

However, the attacks by the government and business circles bring about various contradictions not only to workers but companies.

First, all workers, including middle managerial workers and young workers, are targets of corporate restructuring. This gives rise to sharp contradictions in Japan's business community which used to be proud of "stable labor-management relations". Many companies have introduced new methods of controlling individual workers by evaluating individual workers job performance by what he or she has achieved. This, however, impedes an atmosphere that bolsters efforts to pass technologies and expertise to coming generations while trying hard to provide quality goods and services.

Second, an increase in labor mobility and cuts in labor costs are rapidly undermining the potential Japanese companies have displayed in improving workers' ability through on-the-job-training. The government's jobs policy focuses on utilizing the "vitality of the private sector", but it has had no visible effect. If this continues to be the tendency, Japan's international competitiveness will certainly decrease.

Third, unrestricted corporate restructuring at large corporations is threatening the very basis of small- and medium-sized businesses, which are the mainstay of the Japanese economy and have the great capacity to employ workers. But the government subsidizes for job creation mainly directed to assisting in promoting labor mobility. Subsidies for maintaining jobs, which are essential for small- and medium-sized businesses, are being reduced or abolished on the grounds that such assistance only helps declining sectors survive despite their low-productivity.

The struggle of workers and small- and medium-sized businesses are beginning to make steady progress, though they need to become stronger to be able to repel these attacks or force them to retreat. For example, although the two major trade union national centers - the National Confederation of Trade Unions (Zenroren) and the Japanese Trade Union Confederation (Rengo) - exchange yells in union actions, although they fall short of carrying out joint struggle. In some regions, trade unions and small- and medium-sized business owners are joining forces in the struggle against large corporations' reckless restructuring. These are some of the recent characteristics.

III. Privatization and Outsourcing are Main Issues

The final point I want to make is government's jobs administration and related recent developments

1) Jobs administration

In Japan, the Public Employment Security Office, better known as the "Hello Work" office, is in the front line of jobs administration, which is a local office of the Health, Labor and Welfare Ministry. "Hello Work" is in charge of job counseling, job placement, payment of unemployment benefits and other employment promotion-related services. Between the ministry and the local employment security office, there is the job security office under each prefectural labor bureau. Their main job is to provide guidance and coordination for "Hello Work" activities.

The number of "Hello Work" in 2002 was 478. There were also 09 branches and 27 branch offices. The number of "Hello Work" employees in the same year was 12,506. In Japan, the 1968 Personnel Strength Law has been used to implement the plan to reduce the number of government employees, including "Hello Work" employees. Between 1968 and 2002, the number of "Hello Work Employees" workers was down 2,000 from 14,553. By contrast, the monthly number of job seekers who visited "Hello Work" offices was 1,350,000 in 1989, but 10 years later it was 2,540,000. During the same period, the number of unemployed eligible to receive unemployment benefits jumped to 1,07,000 from 500,000.

Japan is the lowest of all major countries in the percentage of メHello Workモ workers against the labor force. In fact, workload per employee has increased rapidly and particularly since the late 1990s, "Hello Work" offices throughout the country are crowded with job seekers all day long. It is not exaggeration to say that job "Hello Work" visitors will wait a couple of hours to be called in for an interview that will last a few minutes. Notwithstanding the desperate efforts by these employees, they cannot avoid reducing the quality of administrative services for job seekers.

An All Labor Ministry's Workers Union report calling for an increase in the number of employment security office employees states as follows:

"After taking time to park their cars, job seekers are forced to wait in the lobby for a couple of hours in the overcrowded lobby. They become so stressful that they sometimes use violence or boo against personnel at the counter. It is not rare that visitors become so sick that they need to be taken to the hospital in an ambulance. Personnel at the window are too busy to go to the rest room. Mental and physical stress is greater than ever before."

Under its new plan for personnel cuts, the government will reduce the number of government employees by 10% between 2001 and 2010. Dozens of jobs are being eliminated every year at the employment security offices despite the rapid increase in their workload. The task now is to achieve a major increase in the number of public employment security office personnel in order to prevent the right to workfrom being further eroded.

2) Accelerated moves toward privatization and outsourcing

With its neo-liberal economic policy, the Koizumi Cabinet is focusing on a "small government". The Council on Comprehensive Regulatory Reforms established in the Cabinet office issued its second report in December 2002. Its basic position is that the employment security office work should be undertaken by the private sector as much as possible, and one of the report's main items of reform agenda is the privatization of the employment security office or the outsourcing of its work.

In the past, when major decisions were taken on labor issues, they would be based in principle on agreement of labor-related government panels, made up of representatives of the government, labor, and employers. But after the reorganization of government ministers and agencies in January 2001, the Cabinet Office began to oversee the ministries and agencies. Also, the government Council on Regulatory Reforms' reports had larger influence on labor-related policy making through providing major frameworks This has weakened the existing council on labor relations consisting of government, labor and employers. The 15 members of the Council on Comprehensive Regulatory Reforms are all in favor of deregulation, and its composition is unusual in that it includes two presidents of major manpower-related companies (Recruit Co. and The R), which have greatly benefited from deregulation in the area of employment. This shows clearly that behind the privatization of the public employment security office and the increasing use of outsourcing of work is the strong demand from the large companies in manpower-related business. This has led the government to take greater interest in the privatization of "Hello Work". Prime Minister Koizumi during the extraordinary session of the Diet (parliament) stated: "I would like to include the privatization of 'Hello Work' in the issue to be discussed."

Although the Ministry of Health, Welfare and Labor looks resistant to the reform that calls for the privatization of the public employment security office, it on the ground has begun to outsource the job placement work under the increasing pressure toward privatizing "Hello Work". As part of its "jobs package" of September 2001, the ministry began to give subsidy to companies that hire new workers through private employment agencies. Equally, in its "package for accelerating reforms" in October 2002, the ministry went further to commission job placement work for those who have applied jobs at "Hello Work" to private job placement agencies. It also adopted a policy of increasing the use of outside personnel on the grounds that the existing "Hello Work" staff is not enough to deal with time-consuming counseling for job seekers at the counter. In this way, "Hello Work" personnel's job is to sit at the counter for job counseling and placing, while outside temporary personnel will take time to do job counseling and placement. This is preposterous for a public service agency.

In 1988, a major corruption scandal involving politicians and senior government officials shook Japan. A vice Labor Minister at the time was arrested on charges that he tried to use his position and power to wield influence on legislation that would greatly benefit job information company RECRUIT, which sought its monopoly over jobs information business. Manpower-related business is estimated to be a several-trillion-yen market, and is said likely to become a more than 10-trillion yen market.

In Japan, calls are increasing for the public and private sectors to closely cooperate with each other in the effort to balance supply and demand in the labor market on the grounds that the ILO Convention 181 adopted in 1997. Clearly, this is an argument that accedes to manpower business's intention to expand its market while intentionally ignoring the important aspect of the Convention: protection of workers, for which the government has an important role to play. The major question now is for Japan to choose between two ways: a way to curtail the right to work through privatizing the public employment security office and increasing outsourcing of its jobs, and a way to protect the right to work through improving the public employment security office.

1) The Ministry of Labor in its 2000 White Paper on Labor estimated the number of contingent workers without regular employment, known in Japanese as "freeters", at 1,510,000. This estimation was challenged by the Institute for Science of Labor's Masashige Akahori, who said that the Labor Ministry underestimates the number of "freeters", pointing out that there were already 1.77 "freeters" in 1990, and that the number rose to 3,790,000 in 2000, and 4,090,000 in 2001. - Masashige Akahori "'Freeters' - Aftermath of neo-liberal reforms", February 2002 issue of "Rodo no Kagaku" (Science of Labor). "White Paper on the National Lifestyle 2003" published by the Cabinet Office also states that the number of "freeters" increased to 4,170,000 in 2001 from 1,830,000 in 1990.

The Parliament is now considering the following bills:
Bill to revise the Labor Standards Law
- Freedom to dismiss workers It gives employers freedom to dismiss workers in spite of the law being aimed at protecting the rights of workers. Although it prohibits employers from dismissing workers without justifiable reasons, it is likely that workers have to have the burden of proof. The bill initially included a provision allowing employers to pay workers settlement money to end jobs disputes in case that a court rules that a dismissal is invalid. Due to strong protests from labor, it was finally dropped from the bill.

- Fixed-term contract The bill includes provisions allowing employers to higher workers up to three years instead of the present one year under fixed-term contracts. At the term's expiration, employers may refuse to renew the contract or change terms of contract to lower the working conditions. This could lead to legalizing an early retirement system.

- Discretionary work system The bill relaxes conditions for the use of this category of employment. Under this system, paid working hours are fixed and workers would be forced to work longer hours, oftentimes without pay, resulting in an increase in karoshi, death from overwork.

Bill to revise the Employment Security Law
The bill allows job placement agencies to collect fees from job seekers whose starting pay will be seven or eight million yen or more, instead of the 12 million yen.

Bill to revise the Law on Temporary Workers
- Temps can be hired for up to three years instead of one year under the present law. For categories that require expertise will have no limit. The measure will encourage companies to replace more of their full-time workers with temporary workers.
- The bill allows more categories, including manufacturing jobs, to use temps. This measure will increase the number of temps replacing full-time workers and low paid jobs.

Bill to revise the Employment Insurance Law
- The bill will raise the amount of contribution to the fund for unemployment benefits to 0.2% (taking effect in 2 years).
- It will reduce benefit payments. Basic daily pay- ments will be reduced by 25%. In case of voluntary unemployment, the term of benefits will be reduced to a maximum of 150 days from the present 180 days.

A number of anti-labor bills were introduced to the 156th Ordinary Session of the Diet. Enacted were the bills to amend the Employment Insurance Law (April 25), the Employment Security Law (June 6) and the Law on Temporary Workers (June 6). The bill to revise the Labor Standards Law passed through the House of Representatives on June 5 and is likely to be enacted.

 The bill to revise the Labor Standards Law initially included a provision that allows employers to dismiss workers at their disposal stating, "Employers can dismiss employees. But dismissals will be invalid if they lack rationality and are not recognized as socially acceptable." However, due to strong opposition from the labor movement as well as the opposition parties, this paragraph was amended before passage through the House of Representatives. The amended paragraph states: "Dismissals that lack objective rationality and are not recognized as socially acceptable shall be regarded as abuse of power and invalid." Concerning the provision that sets the upper limit of fixed-contract employment at three years instead of the present one year, additional rules were added for the purpose of avoiding enabling employers to bind workers on contract.: "(Workers) can quit jobs anytime after one year from the first day of contract by asking their employers to do so."

 The Labor Policy Council proposed an outline of the bill that included "use of money for settling disputes over employment", but this drew criticism that it would make it easier for employers to dismiss workers without justifiable reasons. The government was compelled to drop this provision after it was introduced to the Diet. However, the government council on deregulations continues to insist that the use of money for settling disputes should be considered. It admits of no prediction.

1) Urgent Employment Development Program, April 1998
2) Comprehensive Plan for Revitalization of  Employment, November 1998
3) Urgent Employment Measures, June 1996
4) Employment Measures Based on Economic Revitalization Plan, November 1999
5) Urgent Employment Measures to Resolve Mismatches in Employment, May 2000
6) New Development Measures for the Rebirth of Japan, October 2000
7) Urgent Economic Measures, April 2001
8) Comprehensive Employment Measures, September 2001
9) Comprehensive Measures to Accelerate Reforms (Anti-deflation package), October 2002

The writer is
Executive Committee Member of
All Labour Ministry's Workers Union

[1] Increasing Unemployed and Workers on Unstable Jobs (in 10 thousand)
  1985 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Unemployed 156 134 136 142 166 192 210 225 230 279 317 320 340
Discouraged job seekers 374 329 318 321 347 406 386 399 402 410 443 445 420
Non-regular employees 655 881 897 958 986 971 1,001 1,043 1,152 1,173 1,225 1,273 1,360
Total 1,185 1,344 1,351 1,421 1,499 1,569 1,597 1,667 1,784 1,862 1,985 2,038 2,120
Material: Ministry of Public Management, Home Affairs, Posts and Telecommunications

"Annual Report on the Labour Force Survey-Report on the Special Survey of Labour Force"

[2] Numbers of unemployed for more than one year (in 10 thousand)
  1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Unemployed for more than one year 27 24 21 24 32 36 44 48 51 70 82 103
Ratio of Long-term unemployed (moer than a year) to all unemployed(%) 19.0 17.6 15.8 15.1 16.5 18.1 19.6 20.9 20.7 22.4 25.1 28.6
Material: Ministry of Public Management, Home Affairs, Posts and Telecommunications Report on the Special Survey of Labour Force

[3] Ration of government funding for employment measures for young people (%)
  1997 1998 1999 2000 2001
France 0.26 0.33 0.40 0.42 -
Britain 0.12 0.13 0.15 - -
Germany - 0.07 0.08 0.08 0.09
Japan 0.003 0.003 0.003 0.003 0.003
Source: OECD
Figures for Japan and Britain are for fisical year

[4] Average Wage for temporary workers by category of jobs
(10,000 yen)
(10,000 yen)
Total 1255.0 9263.2 18.8 239.5
women 1228.4 8848.4 17.2 208.1
men 1547.7 12215.4 26.2 388.0
registered temporary workers 1284.1 9503.9 19.1 222.9
short-time/short-term employees 1051.8 6309.9 11.2 167.4
full-time workers 1246.3 9420.9 19.7 276.8
software development 2069.3 13628.3 27.6 440.8
machinery desigining 1829.0 15434.3 30.7 428.8
office instruments operations 1203.2 8524.1 17.3 204.7
filing 1241.0 8793.3 16.5 193.7
financial management 1175.7 7999.6 15.3 195.2
business letter writing 1385.8 10190.1 20.7 239.0
reception, information, parking 1171.3 8259.8 19.8 188.7
telemarketing 1200.6 8298.1 15.5 198.2
sales 1475.7 10107.1 23.9 328.6
retail sales 1050.0 7366.7 13.5 161.3
general office work 1207.0 8721.2 17.1 212.1
driving - 9501.0 19.0 315.0
others 1337.3 10549.1 20.3 266.6
Material: Ministry of Health, Labour and Welfare

[5] Changs in Wage Disparrity between Women Full-time Workers and Women Part-time Workers (Full-time workers=100)
1981 1986 1991 1996 2001
70.5 64.6 64.4 58.0 55.5
Material: Health, Labour and Welfare White Paper

[6] International Comparison of Differential between men and women (Men=100)
Japan(2001) 65.3
USA(2001) 76.0
Britain(1999) 80.6
Germany(1998) 74.2
France(1998) 79.8
Source: Japan: Ministry of Health, Labour and Welfare "Statistical Survey of Wage Structure"
USA: Employment and Earnings (2001)
Britain, France, and Germany: ILO Year Book of Labour Statistics (2000)