Labour Mismatch in Japan: An Empirical Analysis

Abstract

This article attempts to examine the increase of unemployment in Japan from the perspective of what we term “the employment mismatch”. Using UV curve analysis, which is derived from a combination of the unemployment rate and the job vacancy rate, our research demonstrates a steady and significant increase in the employment mismatch in the Japanese labour market dating to the late 1990’s. We further attribute a substantial measure of the stagnation of labour productivity in Japan along with the associated increases in labour expense to this problem. As a logical consequence of this severe and growing phenomenon, we expect Japan to encounter serious additional pressures with respect to the creation of new jobs. The regulative reforms since 1997 led to a change in the structure of Japanese labour market. The current mismatch and the increase in temporary work opportunities could be interpreted as a result of corporate efforts to increase personnel flexibility. A national policy recommendation is that an efficient labour market is indispensable to workers and firms to take full advantage of the wider variety of employment styles provided.