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Behind Japan’s Low Unemployment Rate: An Analysis of Labor Market Trends

In terms of the data performance of the unemployment rate, Japan can be called a “top student”. According to the comprehensive statistics of the unemployment rate of various countries by the Organization for Economic Cooperation and Development (OECD), Japan’s unemployment rate did not exceed 3% during the three-year period of the epidemic. In the post-war history, Japan’s unemployment rate has only exceeded 5% in two periods – the period of continuous impact after the bursting of the bubble economy, and the period of impact of the Lehman crisis.

Japan’s unemployment rate has been low, outperforming many developed countries, but this seemingly attractive result is composed of many factors.

The statistics of the unemployment rate in various countries are based on the benchmarks and concepts of the International Labor Organization (ILO), but the caliber varies slightly from country to country. In Japan, the word “complete” is added to this set of indicators to distinguish them. “Completely unemployed” refers to those who are able to work and are in the process of job hunting among the working-age population over the age of 15, but currently have no job opportunities. This data has risen slightly during the three years of the epidemic, but has generally been on a downward trend over the past 10 years. In Japan, there will be an average of 1.79 million completely unemployed in 2022, which is also the “numerator” part of the statistical complete unemployment rate, and the “denominator” is the labor force population, which will be about 69.02 million in 2022.

In the definition of the International Labor Organization, the unemployment rate indicator does not count those who have no willingness to work or those who are unwilling to go out to work. This group of people is called “non-labor force population” in Japan. During the epidemic, many former part-time workers were reluctant to go out to work for fear of infection or to protect their families, so Japan’s non-labor force population briefly rose in 2020. Although the number of this population is in a downward trend in Japan, there will still be an average of 41.28 million people in 2022. Among them, even in the past 10 years, the average annual number of unemployed people aged 15 to 44 in Japan who did not go to school and did not take care of housework exceeded 900,000. They are often regarded as unemployed in terms of life perception, but they will not be included in the statistics of complete unemployment. category.

It should be noted that once some of the non-labor force regain their “willingness to work” and start looking for a job, they may be counted as “completely unemployed” again, thereby further increasing the fragile complete unemployment rate indicator.

Another metric to consider is the out-of-work population—people who are employed but not working. During the epidemic, Japan’s retail, manufacturing, logistics, service and other industries were greatly impacted, and some companies or stores had to temporarily suspend business. The number of closed businesses in 2020 increased by 810,000 compared with the previous year. These people are also not counted in the unemployed population. As the epidemic eases, this value will return to a relatively stable state in 2021 and 2022.

The “employment adjustment subsidy” system is an important reason why companies do not lay off workers during the epidemic. The Japanese government allows business owners who are out of business during the epidemic to apply to the government for a capped financial subsidy under certain conditions to maintain the employment relationship. During the application period, various business owners submitted more than 7.91 million applications, and the Japanese government spent about 6.35 trillion yen (about 322.574 billion yuan) in employment adjustment subsidies, and the fund pool mainly came from the employment borne by companies. insurance.

Since then, various Japanese government departments have submitted research reports in order to evaluate the effectiveness of this policy. The Ministry of Health, Labor and Welfare estimates that during the period from April to October 2020, the “employment adjustment subsidy” system will suppress the unemployment rate by about 2.1% (that is, without this system, the complete unemployment rate will be 2.1% higher than the current actual figure. ); the Cabinet Office conducted further research on this data, and estimated that the unemployment rate suppression effect of this policy during April to June 2020 is about 3%.

However, some scholars pointed out that the comparison basis of this calculation is “assuming that the company will immediately fire employees if there is no such policy”-in fact, not all companies may do this, so there is suspicion of exaggerating the effect. It suppresses the emergence of a large number of unemployed people in the short term, but the expenditure of huge funds is likely to cause concerns about whether the fiscal supply can be sustained. Once the balance is unbalanced, the goal of suppressing the unemployment rate will also be affected.

The unemployment rate can thus easily become a “mathematical game” – control the flow of data, and you can get a more decent result. Japan’s Daiwa Securities Chief Economist Sue Hirotoru wrote in the online edition of the business magazine “Toyo Keizai” that Japan divides people into three categories according to their employment status: “employed people”, “unemployed people” and “non-labor force groups”. It is to curb the flow of employed to unemployed.

He believes that in the change of the number of unemployed, the flow of unemployed to employed reflects the difficulty of employment. After studying data from the Ministry of Internal Affairs and Communications, he found that since October 2019, the conversion rate of unemployed people to employed people has been declining, saying that this shows that re-employment is not so easy. On the contrary, although the “conversion rate of employed people to unemployed people” has been curbed through policies, because the overall unemployment rate has not changed much, it proves that the decline in the re-employment conversion rate has not been alleviated, and “the labor market is in a very fragile state.” .

On the other hand, even with special measures during the epidemic, Japan has maintained relatively stable unemployment data over a long period of time, which is indeed based on a solid employment base. The number of full-time employees in Japan has not been affected by the three-year epidemic. After the emergency declarations were issued in April 2020, the number of full-time employees is still the highest record since 2013 for three consecutive years.

Different from the competence supremacy prevailing in European and American workplaces, in the Japanese employment relationship, lifelong employment, seniority sequence, and industrial unions are three key words that cannot be escaped. During periods of rapid economic growth, these strategies helped companies retain talent and also played a role in salary negotiations. After the bubble economy burst in the 1990s, the economy was in a long-term recession. Companies demanded that they could hire more cost-effective non-regular employees. Industry restrictions on dispatched employees were gradually relaxed, and social security laws and regulations related to non-regular employees were also gradually revised. Japanese companies are finally ushering in more flexible ways of working.

But in fact, even in the era of economic downturn and shrinking total social population, the total labor force population of Japan is relatively stable. Because during these years, Japan’s retirement age has gradually increased from 55 to 65, and more women are willing to stay in the workplace to earn money to increase family income. Therefore, between 1993 and 2014, most of the Japanese labor market was in an oversupply The state of the buyer’s market, while wages have not changed much—even during the 30 years from 1992 to 2021, the average annual income of Japanese people has been stable at more than 4 million yen, and the average annual income in 2021 is 4.43 million yen, which is higher than that in 1992. The annual 4.55 million yen is even lower.

Before the epidemic, Japan’s labor market once returned to a state of understaffing. Just looking at the average value of the supply-demand ratio may give some false impressions. The actual situation is that the construction, nursing care and other fields are extremely understaffed, and the administration, accounting, design and other industries are still in the stage of oversupply. At this time, the Japanese labor market is already very different from the period of rapid economic development supported by a large number of regular employees. According to data released by the Ministry of Internal Affairs and Communications of Japan, 40% of Japanese company employees will be non-regular employees in 2022. Women, the elderly, and non-regular employees have lower salaries. When they enrich the job market, they will also objectively prevent the salary income of formal employees from increasing, and their own labor rights also face many problems and need to be protected.

This also constitutes a unique phenomenon in the Japanese labor market: insufficient manpower but no increase in salary, fierce competition in flexible employment methods, and the number of regular employees remains strong. Under the beautiful data of low unemployment rate, there are deeper social governance problems behind it.

The changes in working methods brought about by the variable of the epidemic may also affect various statistics in Japan in the future. During the epidemic, “telecommuting” has been accepted by many companies. At present, 40% of companies have introduced a remote office system. After the end of the new crown pandemic, 89% of companies plan to maintain this system. Some companies have even adopted a more flexible recruitment method on this basis, retiring some offices, saving office costs, and allowing employees to choose to live in other places. These new work plans may make more people willing to stay in the company, or allow some people who were not willing to work or unable to go out to work to enter the workplace, and eventually stabilize the unemployment rate.

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