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Japan – Companies turning to ’non-regular’ workers

16 April 2014

Since Prime Minister Shinzo Abe returned to power in December 2012, vowing to overturn deflation through all manner of stimulus, unemployment has dropped from 4.3% to 3.6%, matching the lowest rate in 17 years. Across the country, the job vacancy-to-applicants ratio has been above one for the past three months, meaning that there are more jobs than people looking to fill them, reports ft.com.

However, the strong headline data provides no information about the jobs themselves. Companies have mostly responded to the upturn not by hiring more permanent staff, but by increasing the number of part-timers.

In the fourth quarter last year Japanese companies cut 470,000 so-called “regular” roles, while adding more than 1.2 million “non-regular” positions, according to government data. In February, non-regular workers; including various forms of part-time, temporary and contract workers, accounted for a record-high 37% share of all non-executive employees.

The shift away from regular workers began during the country’s economic downturn in the 1990s. Companies hung on to existing employees but stopped hiring new ones, creating an entire generation with little opportunity to enter full-time employment.

The trend has accelerated since Mr Abe returned to power, which is partly a function of demographics, as baby-boomers step off the ladder after years of steady service. It also reflects a return to the labour force for women, whose participation rate last year saw its sharpest increase since the early 1990s.

A more important factor, however, say economists, is Japan’s rigid labour laws, which make it difficult for companies to cut more expensive full-timers. In spite of the improvement in output and outlook over the past year and a half, most companies are still “cautious about the sustainability of growth” and thus reluctant to increase permanent payrolls, advised economist Harumi Taguchi.

According to the ft.com, last year companies paid JPY 166 trillion (USD 1.6 trillion) in labour costs, which was -3% less than the year before, and -7% less than at its peak in 2000.