Immigrant-native gaps of unemployment and permanent employment in Japan

Abstract

The Japanese government has made a significant effort to attract foreign talents to live and work in Japan, but did not pass laws to prohibit ethnic discrimination. Since the employment status of permanent immigrants living in Japan is still unclear, this study uses large-scale population census data to examine this issue based on a theoretical model of unemployment. First, as illustrated in our descriptive statistics, compared to Japanese natives, the unemployment rate is generally lower for US and UK immigrants while higher for immigrants from Asian and South American countries. However, after controlling for human capital, individual and household characteristics, and residential region, the results indicate that immigrants across all groups have significantly higher unemployment probabilities than natives. Second, being an immigrant greatly reduces the probability of permanent employment in Japan after controlling for observed factors including industry and occupation. Furthermore, the study finds evidence for assimilation among immigrants from Asian and South American countries, while there is a high probability that immigrants from the US and UK fail to assimilate in terms of obtaining permanent employment during the same sample period. Finally, the results of the nonlinear decomposition analysis indicate different contributions of factors to the group average of native–immigrant gaps among different immigration groups. The results of this study suggest that employment problems and possible ethnic penalties exist widely for immigrants living in Japan, the issues of which should be seriously tackled given the country's rapidly growing immigrant population. This study contributes to the literature by providing empirical evidence from a host country with a very low level of labor mobility.