Monday, July 27, 2009

How do you solve a problem like the freeters?

One policy area that could see cooperation between a DPJ-led government and the JCP (and the SDPJ) is the treatment of non-regular workers (mentioned here).

The JCP's position on dispatch workers and other non-regular workers is clear: the party wants to ban the employment of temporary workers in manufacturing work, making an exception only for "specialized work." The DPJ's position is a bit more vague, as the party has called for a fundamental revision of the Temporary Staffing Services Law, more support for jobseekers, and a higher minimum wage, but it is unclear how far the party will go in limiting a practice that Kan Naoto argued has contributed to a decline in Japan's international competitiveness.

I'm not sure either party has the answer to the problem of non-regular employees. It is a problem — the latest economic and fiscal white paper not surprisingly concluded that gap between regular and non-regular employees is growing — but banning or heavily restricting the use of non-regular workers is no more than a temporary fix, a foolish attempt to restore Japanese capitalism to the way things once were, with companies bearing the burden of providing for the welfare of their workers. But arguably there is no going back to how things once were. The JCP seems to think that since Japanese companies are sitting on hordes of cash, the power of law can do what market incentives have failed to do. As Ikeda Nobuo suggests, if the government were to ban the employment of non-regular workers, companies would simply lay them off, raising Japan's unemployment rate to twenty-five percent or so. Ikeda criticizes the DPJ for its opportunism and crass populism, more befitting of a "perpetual opposition party" than an incipient government party.

I cannot disagree with his conclusion. The emergence of a underclass consigned to non-regular employment over the past decade was perhaps unavoidable: the problem is that all too little has been done by the LDP-Komeito coalition to not only provide a national safety net, extending full social protection to non-regular employees, but also reforming the education system and labor markets to ensure that failing to secure regular employment upon finishing school does not consign a young person to a lifetime of non-regular employment. Abe Shinzo spoke of a society in which people could "challenge again and again," but of course his heart wasn't really in reform — there were more important pieces of his Beautiful Japan than ensuring equality of opportunity.

But transforming the Japanese labor market will take more than legislation — decisions made by private actors, companies and universities especially, will play a critical role in shaping the future of the Japanese workforce. The government can help in providing adequate social protection so that young people take risk, but ultimately businesses will have to change how they hire and train young workers, universities and other educational institutions will have to provide a "portable" education to students, and ultimately young Japanese themselves will have to demand more freedom and flexibility in how they transition into the workforce. The DPJ ought to be more sensitive to the complex nature of the problem and resist the urge to declare that the problem can be fixed simply through legislation.

The non-regular worker problem is illustrative of the broader challenge facing a possible DPJ government. Many of the problems plaguing Japanese society are often multiple problems in one, requiring complex solutions that involve public and private sector actors and are often affected by the government's fiscal situation and broader macroeconomic conditions. The question is often phrased as whether the DPJ is up to the challenge of governing, but perhaps the more appropriate question is whether any political actor — politicians or bureaucrats — is capable of unwinding the Gordian knot of problems vexing Japanese society. And it seems to me one could pose the same question about most advanced industrial democracies. None of this is to say that a DPJ victory will be meaningless, but simply that it will be significant for reasons other than the DPJ's ability to unwind the knot. But that said, the DPJ will have to do better than using the blunt tool of a legislative ban.


Janne Morén said...

Major reasons for the pervasiveness of temp work is not so much the temporary nature but that the workers work under separate laws.

So equalize them. Require all paid work - no matter what the nature of employment - to have salaries set according to the same norms, to require payment of pension and social benefits, to grant sick leave and so on. The cost of an hour of work for the employer should not change depending on the legal nature of the employment contract.

The other necessary side to change is the laws around the social benefits. Basically, they should again not differentiate by the nature of work but only by what you're paying. And it should all count from the first yen paid. None of this nonsense where you need to work for a set number of years before you're eligible to receive the pension benefits you've been paying for, for instance.

Those two changes would go a fair way towards removing incentives to use temporary labour on one hand, and remove the personal downsides of being a temp worker on the other. Not completely, of course, since temp staff is much easier to lay off. But with the improvements in social security for the staffers that no longer needs to be such a bad thing.

Noah said...

Janne Moren is 100% right about what should be done policy-wise. Sadly, I see little chance of the two-tier employment system being abolished, since the main result would be to decrease benefits, security, and compensation for those who currently enjoy the privileged status of "full-time workers" - i.e., Baby Boomers - rather than to increase benefits, security, and compensation for the young workers who are now largely part-time. It's the interests of the old vs. the interests of the young, and Japan has an awful lot of the old, and they vote.

Ikeda Nobuo is also right that banning the lower tier of employment will simply cause unemployment to explode. And I hope Tobias is right when he says that this is why no Japanese government will try this tactic. But you never know; Europe has taken similar self-destructive steps with its own labor markets in recent decades, leading to double-digit employment among the young in some countries. There's little reason to believe that Japan is collectively any wiser.

But the whole problem is on its way to being (mostly) solved; when the Baby Boomers retire in a decade, the work force will be mostly "part-timers". The government can then safely require some benefits for part-timers (less than what is currently given to "full-timers", of course), which will then become the de facto universal standard for compensation.

Anonymous said...

Japan has had a two-track labor market since well before the war. The difference between regular and irregular workers hasn't changed much since the 1950s; it is the size of the irregular workforce and the links between regular and irregular workers within the family that has substantially changed. In the 1950s 出向 was used in a similar way to dispatch workers, for example.

There is just no good way to stop the contraction of the regular workforce. The only solutions to increasing inequality that make policy sense are French style welfare transfers through a high minimum wage and large cash transfers, or something akin to Danish flexicurity, which no one, I think, can successfully replicate in a large economy. (Denmark's population is 5.5 million. That is about the size of Hyogo prefecture.)

What the parties of the left are arguing for more than an elimination of something like temp work is 'equal pay for equal work', a phrase the communists were using in the 1950s.

But all of this misses a more important point. The employment/welfare system in Japan won't be abolishing the benefits regular workers enjoy any time soon: lifetime employment, increasing wages, access to better pensions and health care. But the families that benefit from these policies has to shrink because the sort of firms that can offer these benefits are on the decline. Temp work happens (in absolute numbers) far more in service industries than in manufacturing anyway, and service sector jobs have never been very employee (or union) friendly. And service sector employment is only going to increase.

I could go on but I guess I'll put an end to it there.

[Definitional side note: the title of the blog post references freeters, which are an conceptually distinct category of worker to dispatch worker. They are of course not mutually exclusive though. Freeters are young people who work or want to work as パート or アルバイト and who aren't in school.]


Tobias Harris said...


On the title, just a bit of poetic license. I am aware of the categorical differences, but I liked the "Sound of Music" reference.

Anyway, much obliged. Hope to see your contributions here more often.

Noah said...

The employment/welfare system in Japan won't be abolishing the benefits regular workers enjoy any time soon: lifetime employment, increasing wages, access to better pensions and health care. But the families that benefit from these policies has to shrink because the sort of firms that can offer these benefits are on the decline.


What this will do, essentially, is split the middle class into two tiers. That is potentially far more dangerous, socially and politically, than American-style inequality (where a few super-rich soar above everyone else). The upper-middle-class and lower-middle-class will do generally similar jobs and come from generally similar backgrounds, but will experience massive and visible differences in lifestyle, security, and status. What's more, these two groups, who are often divided along purely arbitrary lines (e.g. the state of the labor market in the year one graduates from college), will be working and living in close proximity to each other. Something tells me this state of affairs is going to annoy a lot of Japanese people...