Population ageing, employment practices, the labour market and government policy in Japan

Abstract

The thesis is concerned with the impact of population ageing on the future trends of male employment and unemployment in Japan, since it is thought that rising unemployment amongst older people will increase the dependency rate, leading to a reduction in capital accumulation and slower economic growth. The study is based on material and data obtained while researching in Japan for one year and draws heavily on Japanese-language sources. First, the role of rapidly falling fertility in stimulating economic growth in Japan is examined, followed by a detailed analysis of employment practices across different sizes of company in Japan that draws on surveys published by government and private institutions. It is found that existing analyses of Japanese employment practices ignore the importance of workforce age structure in internal labour markets. An efficiency age structure hypothesis that stresses labour demand rigidities is formulated: it is hypothesised that large firms with internal labour markets attempt to maintain a given internal age structure to maximise workforce efficiency. This behaviour implies that as the population ages, the unemployment rate of older men will rise. The implications of this hypothesis are examined at a micro level through an analysis of the adjustments firms have made to employment practices; and at the macro level through an analysis of the macro labour market. The absorptive capacity of small companies and self-employment for older men was examined using cohort analysis. Finally the impact of government policy on the labour market for older men is examined and assessed. Government policy is divided into two main categories: labour market intervention and public pension reform. The thesis indicates that raising the pension eligibility age will not reduce dependency unless employment practices that generate unemployment of older people are changed.