Japanese Labor Market Research Articles

Foreign ownership, human capital, and the structure of wages in Japan

We examine the differences in the structure of wages between domestic and foreign-owned establishments in Japan. We use high-quality datasets from the Japanese government and construct a large employer–employee matched database consisting of 1 million workers in 1998. Our results confirm that foreign-owned establishments in Japan pay higher wages. We estimate that one percentage increase in foreign-ownership share of equity raises wages by 0.3%. We surmise that this foreign-ownership wage premium can be explained, at least in part, by compensating wage differentials. Workers in foreign-owned establishments are not protected by lifetime employment. They receive higher compensation for being exposed to higher risk and forfeiting their employment security. We also find that in foreign-owned establishments, wages are determined more by general skills, and less by firm-specific skills. These effects become more pronounced among establishments with a higher share of foreign ownership. The gender wage gap is considerably smaller among foreign establishments. Given the lack of long-term prospects for women in the Japanese labor market, foreign-owned establishments may be one source of ‘brain drain’ for highly skilled women there.

English skills as human capital in the Japanese labor market: an econometric examination of the effect of English skills on earnings

Abstract 本研究の目的は、日本のビジネス言説にしばしば見られる、「英語ができると収入が増 える」という議論を検証することである。この考え方は、英語力の有無により労働の質・ 量が左右されると想定している点で、人的資本論の枠組みで捉えることが可能であり、 本論文もこの枠組みに基づいた分析を行う。先行研究の諸問題(1.日本全体が視野に 入っていない、2.労働市場が一枚岩として捉えられており、「人的資本」が機能する文 脈/しない文脈の存在の可能性が念頭におかれていない、3.「大学歴」という第三の変 数によって、英語力と賃金が同時に影響を受けることに対する配慮がない)を踏まえ、 日本の労働市場のどの文脈で、英語が「人的資本」として働くかを労働経済学の計量モ デルに基づき検討する。その結果、多くの文脈において、英語力が「人的資本」として 働いているという明確な証拠は得られず、むしろ、両者の関係は、大学歴等による疑似 相関の可能性が高いことが示唆された。最後に、考察では、こうした結果にもかかわら ず、「人的資本としての英語力」言説が流布する背景を議論した。

The Japanese Lost Decade and Beyond: A Chain Reaction Theory Approach

The Japanese lost decade has become an intriguing puzzle for both economists and policy-makers alike, as the unemployment rate climbed to unprecedented levels and the growth rate of productivity decreased considerably. More recent times seem to present with a more optimistic outlook, but this is not yet the last word in the matter. In this paper we estimate two alternative multi-equation structural models descriptive of the Japanese labor market, that are then used to conduct dynamic simulations both for the lost decade period (1990-2002) and beyond (2002-2007). Our results point, primarily, to the damaging effects of the ever-increasing public debt as a major source of labor market inefficiencies. In addition, we find the fall in labor union power to have a significant easing effect on the unemployment rate, but also to be a major driver in the apparently eroding pattern of the labor income share in recent years.

Japanese Working Holiday Makers in Australia and their Relationship to the Japanese Labour Market: Before and After

The Working Holiday is a relatively new but rapidly growing form of transnational mobility. In Australia, Working Holiday Makers (WHMs) form the largest group of Japanese temporary migrants, and their numbers have been increasing. In this paper, I will discuss the experience of returned WHMs in the light of Japanese labour practice. For my interlocutors, the motivations for taking a Working Holiday were frequently related to their dissatisfaction with their status and future prospects as workers. In order to understand this popular but under-researched form of transnational migration, it is therefore important to consider their self-perceptions about their worker status when they re-entered the Japanese workforce, and how they think their life course has changed due to the Working Holiday experience. The employment experience of WHMs upon their return to Japan illuminates their position in the home society in which their migratory decision-making was situated.

Cyclical Behavior of Unemployment and Job Vacancies in Japan

This paper studies whether the Mortensen and Pissarides (MP) search and matching model can explain the observed labor market fluctuations in Japan. To do this, this study firstly establishes a number of key facts about the cyclical properties of the Japanese labor market. Although the standard MP model correctly predicts the observed regularities in the cyclical fluctuations of unemployment and job vacancies, it cannot generate the observed unemployment and vacancy fluctuations in response to productivity shock of reasonable size. This paper extends the matching model by incorporating firm-specific training costs whose role is emphasized in the Japanese labor market. Relative to the standard MP model, the extended model generates larger cyclical fluctuations in unemployment and job vacancies. However, it still falls short of what observed in the Japanese data.

The Organizational Practice of Gendered Employment: Disparate Impact and Gender Segregation in the Japanese Entry-Level Labor Market

This article discusses the supposedly “gender-neutral” Japanese organizational hiring practice of using a track-based employment system. In this system, prospective employees are required to accept nationwide transfers in residence to obtain career-track positions. Women have difficulty fulfilling this requirement because of cultural expectations to settle down and tend to domestic affairs (day care is often hard to access). Using job placement data on graduates from a Japanese university, I found that women are more likely to be hired into firms without this track system, where they are mostly hired for non-career-track positions. Therefore, seemingly gender-neutral bureaucratic rules actually disparately affect women, maintaining gender inequality in the corporate-centered economy of Japan.

Stability and increasing fluidity in the contemporary Japanese social stratification system

We argue that stability and increasing fluidity coexist in the contemporary Japanese social stratification system. It is often argued that the weakening of Japanese employment practices has made the labor market more flexible. While there is evidence to support this argument, it misses an important factor in the labor market, namely social stratification. We suggest that some parts of the labor market have become more fluid, while other parts have been stable. To test this prediction, we examine empirical findings made in the 2005 Social Stratification and Social Mobility Survey Project, covering such topics as education and inequality, increasing fluidity and disparity among young workers, job changes, and income inequality. Our findings on education and inequality show that stratification in the educational system affects the entry of graduates into regular or non-regular employment. Our analysis of young workers shows that while the longterm employment practice persists in large firms and the public sector and thus shows stability, mobility between regular and non-regular employment is difficult and that young female graduates from high schools and junior colleges recently find it difficult to enter the regular employment sector. Our analysis of the effect of education on job changes shows that the income of less educated workers who change jobs has decreased recently. We also find increasing income inequality between professionals and other occupations and examine the intergenerational transmission of income. We conclude that these findings generally support our prediction that stability and increasing fluidity coexist in the contemporary Japanese labor market. We consider the implications of this for the study of social stratification in Japan.

Stability and increasing fluidity in the contemporary Japanese social stratification system

We argue that stability and increasing fluidity coexist in the contemporary Japanese social stratification system. It is often argued that the weakening of Japanese employment practices has made the labor market more flexible. While there is evidence to support this argument, it misses an important factor in the labor market, namely social stratification. We suggest that some parts of the labor market have become more fluid, while other parts have been stable. To test this prediction, we examine empirical findings made in the 2005 Social Stratification and Social Mobility Survey Project, covering such topics as education and inequality, increasing fluidity and disparity among young workers, job changes, and income inequality. Our findings on education and inequality show that stratification in the educational system affects the entry of graduates into regular or non-regular employment. Our analysis of young workers shows that while the longterm employment practice persists in large firms and the public sector and thus shows stability, mobility between regular and non-regular employment is difficult and that young female graduates from high schools and junior colleges recently find it difficult to enter the regular employment sector. Our analysis of the effect of education on job changes shows that the income of less educated workers who change jobs has decreased recently. We also find increasing income inequality between professionals and other occupations and examine the intergenerational transmission of income. We conclude that these findings generally support our prediction that stability and increasing fluidity coexist in the contemporary Japanese labor market. We consider the implications of this for the study of social stratification in Japan.

ON THE INTERGENERATIONAL SHARING OF COHORT-SPECIFIC SHOCKS ON PERMANENT INCOME

This paper investigates the intergenerational sharing of shocks on the permanent income of new entry cohorts when prior-to-entry markets are missing. When Lucas trees are traded among generations, procyclical cohort-specific shocks are shared partially via the movement of asset prices; cohorts with lower endowments may benefit more from asset pricing dynamics than cohorts with higher endowments. Given a reasonable set of parameters concerning the Japanese labor market, the evaluated welfare loss ranges from 1% to 3% in terms of the certainty equivalence consumption level. The first-best outcome may be achieved by either a combination of subsidies and taxes or the introduction of prior-to-entry markets.

Analysis of labor productivity using large-scale data of firm’s financial statements

We investigated labor productivity distribution by analyzing large-scale financial statement data consisting of listed and unlisted Japanese firms to clarify the characteristics of the Japanese labor market. Both high and low productivity sides of the labor productivity distribution follows the power-law distribution. Large inequality in the low productivity side was observed only for the manufacturing sectors in Japan fiscal year (JFY) 1999 and observed for both the manufacturing and non-manufacturing sectors in JFY 2002. The decline in the Japanese GDP in JFY 1999 and JFY 2002 were coincided with the large inequality in the low productivity side of the distribution. A lower peak was found for all non-manufacturing sectors. This might be the origin of the low productivity of the non-manufacturing sectors reported in recent economic studies.

TFP growth slowdown and the Japanese labor market in the 1990s

Unemployment in Japan nearly tripled during the 1990s. Underlying this upsurge lie an increase in the probability of workers to lose their jobs and a decrease in the probability that the unemployed find jobs. This paper analyzes the sources responsible for these labor market changes in Japan in the decade of the 1990s. We build, calibrate, and simulate a neo-classical growth model with search frictions in the labor market. Using actual TFP data, the model is able to reproduce the path of unemployment and the job flows, as well as that of output. We find it to be the decrease in productivity, coupled with the reduction in hours worked, which curtails the profits of firms, inducing a drop in employment and an increase in unemployment.

Flexibility in Japanese internal labour markets: The introduction of performance-related pay

The introduction of performance-related pay by Japanese firms, a development known as seikashugi, stands out as the most important adjustment in their management of regular employees. This paper discusses this development and analyses its implications for the logic of Japanese employment practices. Previous analyses and developments in other countries suggest that it could imply a breakdown of the internal labour market, a key feature of Japanese employment practices. However, drawing on theories of institutional change and two studies among Japanese firms in 2002 and 2007, this paper argues that implications have been modest in spite of the appearance of convergence. Enabled by its flexibility and a continued support for the practice of lifetime employment, the Japanese internal labour market has assimilated performance-related pay and shaped its own transformation.

Labour Mismatch in Japan: An Empirical Analysis

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.

Comment on “Inequality in Japan”

Comment on “Inequality in Japan”

Japanese “Furītā” and German “Generation Internship”: The “precarious post-materialist” as an extension to Inglehart‘s theory of value change

With a period of economic recession, rising numbers of unemployed and an increase in non-regular employment, the situation on the German and the Japanese labour market has undergone a change over the past two decades. At the beginning of the twenty-first century a generation of newcomers entered working life under changed conditions. In this paper, I will analyse whether the individual perception of worsening chances on the labour market will have an effect on the attitudes to and expectations of work prevalent amongst young entrants to the labour market drawing upon Ronald Inglehart’s theory of value change as a theoretical base. An analysis of qualitative interviews with Japanese Furītā and members of the German ‘Generation Internship’ will explore whether patterns of work values can be identified that call for an extension of Inglehart’s value concept of “materialist” versus “post-materialist”, namely suggesting the existence of a ‘precarious post-materialist’. The discussion concludes with a short analysis of quantitative data, to see whether this new value type might also be identified in a broader context.

Transformation and Persistence in Japanese Labor Market Institutions

Transformation and Persistence in Japanese Labor Market Institutions Mary C. Brinton (bio) A Nagging Sense of Job Insecurity: The New Reality Facing Japanese Youth. By Yūji Genda; translated by Jean Connell Hoff. International House of Japan, Tokyo, 2005. xii, 203 pages. ¥1,400. The Changing Japanese Employment System. By Marcus Rebick. Oxford University Press, 2005. xvii, 196 pages. £45.00. A Sociology of Work in Japan. By Ross Mouer and Hirosuke Kawanishi. Cambridge University Press, New York, 2005. xx, 303 pages. $75.00, cloth; $25.99, paper. Social scientists who study Japan may well look back on the postbubble years as one of the most fascinating periods in a long time. The changes in the political, economic, cultural, and social spheres have been breathtaking, puzzling, and, depending on one's point of view, refreshing, frustrating, or downright irritating. One of the areas least effectively explored in recent English-language literature has been the labor market. Instead, economists writing in English have devoted more attention to deregulation (and re-regulation) in the financial sector and to a variety of public policy issues related to the rapid aging of Japan's population. One reason for this may be that much of the data typically used by labor market specialists is unfortunately off limits in Japan to any scholar who is not in a government working group or advisory committee. Thus the statistical analysis of microlevel data (data based on individuals), the bread and butter of labor economists' research in the United States, is restricted to a small number of well-placed Japanese academics. Of the authors whose books I review in this essay, only one—Yūji Genda—has had access to any of the microlevel data generated [End Page 415] by Japanese government surveys. This makes the appearance of an English translation of his 2001 book all the more important for English-reading audiences. Genda's A Nagging Sense of Job Insecurity: The New Reality Facing Japanese Youth is an analysis of what happened to the labor market for Japanese young people during the severe recessionary period of the 1990s, euphemistically referred to by the Japanese media as the "lost decade." The slight awkwardness of the English title is a result of the fact that the book is a translation of the Japanese book of the same name (Shigoto no naka no aimai na fuan: Yureru jakunen no genzai [Chūō Kōronshinsha, 2001]). The Japanese volume earned Genda the Nihon keizai shinbun's prize for the best book in economics published in 2001, and for good reason: it was the first sustained analysis of how the dramatic decline in labor demand occasioned by the recession had affected young people's labor market opportunities. Following on the heels of the more sensational Parasaito shinguru no jidai (The age of parasite singles, by Yamada Masahiro; Chikuma Shobō, 1999), the book responded to the claims by sociologist Yamada and some media observers that the central problem in Japan's youth labor market in the 1990s was that Japanese young people's value system had changed fundamentally from that of prior generations, such that many young Japanese preferred working intermittently rather than committing themselves to full-time work. Yamada placed equal blame on the older generation for youths' unstable work patterns, saying that many Japanese parents indulge their children's preferences by essentially providing free room and board to them throughout their twenties. "Parasite singles" quickly became a phrase that captured the imagination of those government bureaucrats, media gurus, and hyōronka trying to make sense of the swelling ranks of furiitā (young people who prefer to move from job to job, often accepting part-time rather than full-time employment). Yamada's argument was an appealing one for the government and for employers in that it placed the blame squarely on the labor supply side, i.e., Japanese young people (and the parents who indulged them in their supposed lack of seriousness vis-à-vis work and self-support). Genda shifts the focus instead to the demand side of the labor market. He asserts that there are several reasons why popular awareness and government recognition of young people's dire job situation was minimal...

The prospect for gender diversity in Japanese employment

Economic growth during the second half of the twentieth century was not accompanied by an improvement in the position of women in the Japanese labour market. The peripheral position occupied by women was due, in large part, to the substantial barriers created by the internal labour market with its employment practices such as ‘lifetime’ employment, seniority promotion, and on-the-job training. In the past decade, the use of such practices has declined and the corresponding erosion of the internal labour market, coupled with a predicted skill shortage, was seen as an opportunity for women to gain a degree of equality in the workplace. Yet, the changes to the structure of the internal labour market have not been able to overcome the discriminatory work practices are that are embedded in the way work is organized. It is this contest that is explored and analysed in this paper.

Careers in Foreign-Owned Firms in Japan

This article examines how organizational environments affect labor market processes in Japan. I hypothesize that labor market inequality is generated through workers being “positioned” in either domestic or in foreign firms. I apply the concept of social versus economic exchange to distinguish the nature of transactions between domestic and foreign firms. I argue that foreign firms operate under an institutional context that is conducive to the economic mode of exchange, which has enormous consequences for their personnel practices and reward systems. Using a dataset of Japanese workers collected in 2000, I examine the extent to which employment practices in foreign firms deviate from the benchmark features observed in the Japanese labor market. My results confirm that employment in foreign firms significantly affects career outcomes. The highcommitment culture commonly associated with the Japanese workforce is an outcome of the organizational environment. I find little evidence of Japanese employment practices (e.g., seniority and lifetime employment) operating within foreign firms. I also find that workers in foreign firms trust their employers less and have a higher propensity to quit their jobs. My findings suggest that workers in domestic and foreign firms are subject to vastly different sets of institutional constraints.

The Japanese Employment System: Adapting to a New Economic Environment

Innumerable kinds of ‘markets’ exist, but none is as difficult to grasp as the labor market. One reason for this is that the quality and volume of labor services provided by markets can vary greatly in response to the plans and actions of the workers who provide those services. Businesses that try to ensure quality labor services must therefore maintain certain wage levels while also motivating their employees and increasing their productivity by designing appropriate training programs. However, it is impossible for individual labor markets to respond to the demands of each firm. As a result, many businesses have formed separate ‘internal labor markets’, cut off from the ‘external labor markets,’ in order to allocate and price their employees. The emergence of such multiplicity has been a notable trend, and it has increased the challenge of understanding the labor market. Markets comprise numerous institutions and practices, and thus it is no easy matter to grasp adequately how they function. Even among industrialized nations, the Japanese labor market, with its well-developed internal labor market and its countless institutions and practices, is considered one of the most complex.

Trends in Worker Displacement Penalties in Japan: 1991-2005

We examine the period from 1991 to 2002 to document the effects of a changing Japanese labor market on trends in the cost of job change. Evidence is also found of a diminishing specificity in human capital (in firm-size and industry) for job changers in the Japanese labor market.