Labor Market Fluidity, Productivity, and Wages (KUDOH Noritaka, MIYAMOTO Hiroaki)
The Macroeconomic Impact of Dismissal Regulations (KATAGIRI Mitsuru)
Life Cycle and Worker Flows: Regional Characteristics in Japan (FUJIMOTO Junichi, Julen Esteban-Pretel)
Why Is the Labor Union Membership Rate Declining in Government Statistics but Rising in Individual Surveys? (NAKAMURA Akie, KUWAHARA Susumu, KAMBAYASHI Ryo, Alex Bryson, Jacques Wels)
Why Do Income Thresholds Persist? (KODAMA Naomi, MOMODA Shohei)
Changes and Regional Differences in Japanese Child-Rearing Households: Evidence from the 1980 and 2020 Population Censuses (FUKAI Taiyo)
The Labor Market for Those Aged 70 and Over: Focus on Continued Employment from Age 65 (GENDA Yuji)
| By KUDOH Noritaka MIYAMOTO Hiroaki |
(Professor, Department of Economics, Nagoya University) (Chief Economist, Policy Research Institute, Ministry of Finance) |
This paper explores the effects of labor market fluidity on productivity, wages, and employment. Cross-country evidence indicates that economies with more fluid labor markets tend to exhibit higher productivity and faster wage growth. To uncover the underlying mechanisms, we develop a quantitative search-and-matching model with dismissal restrictions, calibrated to the Japanese economy. The model shows that relaxing dismissal restrictions increases labor market fluidity, which subsequently raises labor productivity. Higher productivity, in the long run, expands employment and boosts wages. Interestingly, while looser dismissal regulations raise job separations, the higher matching between firms and job seekers mitigates the rise in unemployment, rendering the overall impact on the unemployment rate quantitatively modest.
Keywords: labor market fluidity, dismissal restrictions, employment, wages, productivity, search-and-matching model
JEL Classification:E24, J63, J64
| By KATAGIRI Mitsuru | (Associate Professor, School of Commerce, Waseda University) |
This paper examines the macroeconomic effects of dismissal regulations. It begins by reviewing existing research on the macroeconomic impact of such regulations, organizing the discussion into four main themes: (1) the allocation of labor across firms, (2) the proportion of non-regular employment, (3) the formation of workers’ human capital, and (4) innovation and economic growth. Next, several quantitative analyses were conducted using a standard dynamic macroeconomic model, with parameters calibrated to the Japanese economy. Policy analysis with this model found that easing dismissal regulations not only improves the efficiency of labor allocation among firms but also reduces the proportion of non-regular employment, thus enhancing overall labor productivity and increasing wages, output, and social welfare. Furthermore, the results suggest that if a “partial labor market reform” is implemented, thereby promoting the expansion of non-regular employment while retaining dismissal regulations for regular employees, firms may rely on non-regular workers to a greater extent than is socially optimal, potentially resulting in undesirable outcomes from the perspective of social welfare.
Keywords: dismissal regulations, non-regular employment, labor productivity
JEL Classification: E24, J63, M51
| By FUJIMOTO Junichi Julen Esteban-Pretel |
(Professor, National Graduate Institute for Policy Studies) (Professor, Queens College, City University of New York) |
Worker flows, which describe how workers transition in the labor market between such states as employment, unemployment, and inactivity, vary considerably by worker characteristics. This paper extends the analysis of Esteban-Pretel and Fujimoto (2020), who examine the age profiles of worker flows in Japan by gender, educational attainment, and marital status using data through 2018, by incorporating data through 2022 and newly analyzing regional differences. The results indicate that while the age profiles of worker flows are generally similar in shape across regions, the levels of certain flows differ markedly. In particular, the ease of transitioning from non-regular to regular employment varies significantly between regions, especially for individuals in their forties and fifties. These findings highlight the importance of accounting for regional factors in labor market analysis.
Keywords: employment, unemployment, non-regular employment, Japan
JEL Classification:E24, J63, J64
| By YAMADA Hisashi | (Professor, Graduate School of Business Administration and Faculty of Sustainability Studies, Hosei University) |
From the late 1990s to the end of the 2010s, nominal wages in Japan generally remained stagnant. A closer examination reveals that this period can be divided into three phases (Phase 1: 1997–2002, Phase 2: 2003–2012, Phase 3: 2013–2019), with different causes of wage stagnation in each. In other words, the prolonged stagnation of wages followed a path-dependent trajectory. Notably, in Phase 2, despite an improvement in labor supply and demand conditions, wage growth remained sluggish. This was triggered by a downward shift in the global cost structure due to China’s rise. Additionally, the specific features of the Japanese employment system, including (i) the dual structure of regular and non-regular employment, (ii) the dual structure between large and small or medium-sized enterprises, and (iii) the practice of prioritizing employment retention in core segments, had a decisive impact.
In Phase 3, as the labor force approached its supply ceiling, the Japanese employment system was forced to change. Consequently, the ability to respond through cost reduction declined. This, combined with the upward shift in the global cost structure since the 2020s, appears to have ended the long period of stagnation in nominal wages. On the other hand, real wages cannot be said to have fully escaped their long-term stagnation, and the deteriorating trend in terms of trade is a factor that cannot be overlooked. Underlying this are a decline in the non-price competitiveness of exports and an excessive reliance on fossil fuel imports, both of which reflect a delayed transformation of Japan’s industrial and energy structures.
Raising labor productivity is essential for real wage growth. In this context, labor market fluidity policies are attracting attention, but the advantages of employment retention cannot be ignored. It is necessary to approach this issue on a case-by-case basis, reducing unproductive employment retention while increasing productive labor market fluidity. The effect of union voice also warrants attention, and policy support to strengthen the bargaining power of labor unions with respect to wages is important.
Keywords: Phillips Curve, labor share, Japanese-style employment system, norm, terms of trade, labor market fluidity, effect of labor union voice
JEL Classification: J3, J5
| By NAKAMURA Akie KUWAHARA Susumu KAMBAYASHI Ryo Alex Bryson Jacques Wels |
(Senior Researcher, JTUC Research Institute For Advancement Of Living Standards) (Professor, Faculty of Economics and Business Administration, Reitaku University) (Professor, Faculty of Economics, Musashi University) (Professor, University College London Social Research Institute) (Professor, Université libre de Bruxelles Health & Society Research Unit) |
According to the Ministry of Health, Labour and Welfare’s Basic Survey on Labor Unions (BSLU), the unionization rate has continued to decline and now stands at 16 percent. However, two independent social surveys of individuals, namely the Osaka University of Commerce’s Japanese General Social Survey (JGSS) and the Rengo-RIAL’s Survey on the Work and Life of Workers (SWLW), have found that, since the late 2000s, the percentage of workers who are union members has increased, reaching nearly double the figure reported in the BSLU in recent years. Why does the “official” unionization rate, which is supposed to be based on a complete enumeration survey of unions, show a decline, while individual surveys indicate a rising trend, leading to a significant gap in both levels and trends? This study qualitatively explores the reasons from the perspectives of three actors: (1) administrative agencies (the Ministry of Health, Labour and Welfare and local labor consultation offices), (2) labor unions, and (3) workers. The findings indicate that the number of union members and the unionization rate in the BSLU may be unreliable, potentially understating the level of unionization. This is partly because the BSLU’s survey targets are excessively fragmented by region, and unions are not obligated to respond. On the other hand, the higher union membership rates observed in social surveys are likely inflated due to respondents’ misperceptions, which stem from an increase in free riders resulting from the blurred boundaries of union activities. The overall results suggest the need to reconsider the scope of union influence using new frameworks and to update the approach to union statistics.
Keywords:labor unions, unionization rate, collective agreement, free rider, collective labor-management relations
JEL Classification:J51, J58, C18
| By KODAMA Naomi MOMODA Shohei |
(Professor, Faculty of Economics, Meijigakuin University) (Assistant Professor, School of Economics, Hiroshima University) |
Many previous studies have demonstrated the existence of “income thresholds,” which are said to lead to working hours adjustment among women in Japan’s labor supply. This paper develops a simulation model for married women’s labor supply and conducts sensitivity analyses of the effects of potential policy changes including spousal tax deductions, social insurance premiums deduction for dependents, and the basic deduction for income tax. We also assess the quantitative impacts of these policies by comparing them with the effects of shifts in social norms and demographic trends. The simulation is based on the income-targeting hypothesis, which assumes that secondary earners, who face severe time constraints and whose income constitutes a minority share of household income, choose the amount of their labor supply to supplement the household’s required income. This approach produces an income distribution close to the observed data and results in a pronounced threshold around one million yen. Our results suggest that the so-called 1.03 million yen income threshold is not primarily driven by the income tax liability threshold or the spousal tax deduction. Instead, it appears to stem from social norms regarding employment based on income target, as well as conservative reductions in labor supply to avoid exceeding the 1.30 million yen threshold for social insurance premiums deduction.
Keywords: women, labor supply, income threshold, working hours adjustment, simulation
JEL Classification: J12, J22, H24
| By FUKAI Taiyo | (Associate Professor, Faculty of Economics, Gakushuin University) |
This study aims to descriptively examine changes in the structure of child-rearing households and their regional differences in Japan, using data from the 1980 and 2020 Population Censuses. The analysis focuses on households in which the eldest child is aged 10 to 12. Based on 18 household characteristics, including parental employment type and educational attainment, housing conditions, and three-generation co-residence, households were classified using a combination of the dimensionality reduction technique UMAP (Uniform Manifold Approximation and Projection) and clustering methods. The analysis revealed three main findings. First, there was simultaneous growth in diverse household types, such as those with mothers working full time and households with non-employed mothers who hold a university degree (typically with two children and high homeownership). Second, the proportion of households with non-working mothers who do not own their homes and of suburban homeowner households with non-working mothers declined. Third, some household types, such as those with mothers working full time and co-residing with grandparents, showed little change in their prevalence over forty years, and regional differences persisted, especially between Hokuriku/Tohoku and the capital and Keihanshin regions. Although this study is descriptive in nature, it provides foundational information for policy discussions on issues such as declining birth rates and support for working women by systematically capturing the diversity, changes, and regional persistence of household structures.
Keywords: child-rearing households, family structure, regional differences, maternal employment, declining birth rate
JEL Classification: J12, J13, J16, R23
| By GENDA Yuji | (Professor, Institute of Social Science, The University of Tokyo) |
This paper clarifies basic facts about the labor market for those aged 70 and over, a sector expected to continue expanding and to compensate for the decline in the working-age population, thereby inevitably affecting the entire economy. Using a special tabulation from the 2022 Employment Status Survey (Statistics Bureau, Ministry of Internal Affairs and Communications), the analysis reveals that about 70 percent of workers aged 70 and over, and a majority of non-agricultural, forestry, and fishery employees, were continuing in employment from age 65. Compared with those newly hired after age 66, these continued employees, regardless of educational background or gender, are more likely to remain full-time workers at the request of business owners mainly in secondary industries or small-sized firms, and tend to have higher annual incomes and more working days. These results align with the ongoing influence of Japan’s traditional employment system, such as the use of firm-specific skills and the mitigation of information asymmetry between labor and management. Given the persistence of low wages for the so-called employment ice age generation and subsequent cohorts, the future revision of the Act on Stabilization of Employment of Elderly Persons, which mandates employment opportunities up to age 70, may contribute to improving the living standards of older workers.
Keywords: elderly employment, Act on Stabilization of Employment of Elderly Persons, Japanese-style employment system, intellectual skills
JEL Classification: J2, J4, J6
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