New World of Work: Japan’s lost generation struggles to catch up

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You get exactly one chance at success in the Japanese labour market, and as the world economy started to turn downwards in 2007, an 18-year-old Mr Takeda missed his.

His technical high school poured effort into matching its pupils with employers, but as a shy teenager in that year’s weak market, he was left without a job — and no way back. Mr Takeda, who does not want his full name published, describes what followed as six years of “black”.

“If you don’t get recruited first time around it’s extremely difficult,” says Mr Takeda, who couldn’t even get a part-time position. “I didn’t have any work experience. Once you have a blank period on your CV it’s extremely hard to get a job.”

Mr Takeda fell victim to the poisonous combination of a deflationary economy and Japan’s lifetime employment system. Lucky school and university leavers get a secure job for the rest of their career. Those who miss out enter a precarious limbo of temporary contracts and part-time work.

With this kind of work increasingly on the rise in developed countries, Japan is an advanced case study in what happens when a large group of workers is marginalised in this way.

Those who missed out on lifetime jobs in the aftermath of Japan’s 1990 stock market crash are now in their forties.

“There are many men who couldn’t find work when they were young, gave up, and they’re now in middle age,” says Yuji Genda, a professor at the University of Tokyo.

There are now around 340,000 Japanese men of prime working age, between 35 and 44 who are out of the labour force — double the level of 20 years ago. “It’s become a big social problem,” he says.

Mr Genda’s research highlights the extremity of what happens to Japanese students who graduate in a bad job market. In the US, if the unemployment rate is one percentage point higher at the time of graduation, a high school graduate earns 3 per cent less on average.

That disadvantage fades out after a few years. But in Japan, graduating in similar conditions means a 7 per cent wage hit on average, and more than a decade later students in that cohort will still be earning 5 to 7 per cent less. The brunt of that wage loss is borne by those who did not secure a regular job.

The polarisation of Japan’s labour market not only causes hardship for those on the wrong side of the lifetime system — it is also a significant economic problem.

The productivity of temporary staff is lower, the IMF argues, because they are less motivated and companies do not train them.

The fund has urged Shinzo Abe, the prime minister, to prioritise overhauling the jobs market as part of the “third arrow” of Abenomics, his package of structural reforms designed to tackle deflation and boost growth.

The Diet, or parliament, is considering modest reforms, such as letting companies pay professional staff by results instead of hours worked, but nothing that would break down what has become a two-tier market, economists said.

Masahiro Abe, an economics professor at Chuo university, says that rather than there being a lack of opportunities for part-time workers the real problem may be the reverse: “that conditions are too good for permanent workers”.

But he notes the political unpopularity of anything that would threaten the position of these workers. The chasm between those who succeed and those who fail is still vast, and fixing it remains a missing element in Mr Abe’s reforms.

Still, there are some signs of change.

Factors such as an ageing population, increasing demand and a deindustrialisation that is eroding the lifetime system are easing things for workers trying to get on the ladder.

With fewer young people entering the workforce — 1.25m in 2015 against 2m in the mid-1990s — this year a near-record 96.7 per cent of Japan’s new university graduates have found jobs.

“I think this persistent disadvantage is gradually changing,” says Mr Genda, pointing to companies such as the clothing retailer Uniqlo which are hiring mid-career workers, and the legal changes that have allowed big manufacturers to shed permanent staff.

“This negative side of the lifetime employment system — that if you fail once it hurts you for life — is gradually changing.”

Mr Takeda’s story has also taken a turn for the better. After training with a non-profit called Sodateage-Net, he got a contract job with an IT company, and hopes it will one day be permanent.

He is reflective about what might have been if he had got a job on leaving school.

“If I’d gone through the induction for new employees, I might have become like I am now much sooner,” he says. But he has also learned from the experience. “If the work is a bit tough, there are people who think it’s better to quit. I’m the opposite: it’s much scarier not to have work to do.”

Read more
The seriesCaught in a trap?Risk and opportunity

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The ‘gig’ economy that signals the end of lifetime careers

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