Annual Report on

The Japanese Economy and Public Finance

2006

- Japanese Economy Heading for New Growth Era

with Conditions for Growth Restored -

Cabinet Office

Government of Japan


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Section 5 Summary

    As an issue of the household sector in which changes have taken place during the current phase of economic recovery, this chapter has given a general outline of issues such as diversification in employment styles like regular and non-regular employment, changes in the employment situation such as the employment problem for young people and the employment problem in various regions, and challenges towards the strengthening of human potential in terms of acquiring vocational skills. Various analysis techniques have been tried to capture the economic disparity from the perspective of the household in detail. Finally, the government's response has been discussed based on the above analyses.

(Consistent policy measures are needed to deal with the diversification in employment styles and the employment problem for young people)
    Regarding the diversification in employment styles, it has been pointed out that non-regular employment has increased due to the pressure to reduce labor costs through corporate restructuring. During the current phase of the economic recovery, various types of non-regular employment other than regular employment (such as dispatched temporary workers and term-contractual workers as well as part-time workers) have increased. Firms' own reports show that they have utilized non-regular employees mainly for the purpose of reducing labor costs. Such a trend has depressed contractual cash earnings and contributed to a decline in the labor distribution rate due to a rising ratio of part-time workers and declining wages of full-time workers including regular employees in 2001. Regarding non-regular employment, while there exist groups, mainly women and elderly people, who want to continue the current employment styles, regular employment, too, has showed signs of recovery as the economy is continuing to recover.
    Non-regular employees have increased among young people. As firms have a low awareness of providing non-regular employees with opportunities of vocational education and training, it has become a concern that non-regular employees cannot accumulate vocational skills particularly in their youth when opportunities of education are considered as necessary. In reality, it has become more difficult to change from non-regular employees such as freeters.
    The above-mentioned ongoing diversification in employment styles and the employment problem for young people should be tackled also by taking account of their impact on the Japanese economy.
    Regarding the employment situation in various regions, the variation coefficient of the unemployment rate has remained almost flat over a long period and no signs of improvement have been seen in the degree of variation. Amid an improving employment situation in Japan as a whole, the employment situation in various regions continues to be an issue to be addressed.

(For the strengthening of human potential, it is important to improve vocational education and training both before and after entry into the workforce)
    Regarding the strengthening of human potential in terms of acquiring vocational skills, it has been pointed out that school education before entry into the workforce and vocational education and training after entry into the workforce are both important. Amid ongoing corporate restructuring, the role of firms as providers of vocational education and training has been changing and individuals instead tend to play a larger role. As a response to these changes, in order to strengthen human potential in the future, it is also important to establish a system that provides young people with opportunities to receive vocational education and training after entering the workforce as well as reinforce education and training at school. To be specific, at the stage of school education before entry into the workforce, it is required that under the current circumstances of there being a high rate of advancement to higher educational institutions such as universities, schools should provide, in addition to their traditional role, diversified educational services to meet various diversified educational needs, so that students can acquire practical special knowledge and skills related to jobs. Regarding vocational education and training after entry into the workforce, in order to adapt to the current circumstances where the change in the role of firms as a provider of vocational education and training is considered to be a concern it will be an important to establish a system that providers youths with opportunities to receive vocational education and training available after initial entry into the workforce. Such measures should be useful for addressing the employment problem for young people such as freeters and NEET.

(It is necessary to respond to changes in the employment environment from the perspective of the economic disparity)
    With the Gini coefficient or other inequality indicators calculated, it has been confirmed that statistically, the income disparity as a whole which can be captured from economic statistical data has been gradually widening. It is shown that this result has been attributed to a great extent to factors such as the change in the household size, i.e. a declining number of household members, and the factor of population movement, i.e., an increase in households consisting of elderly people.
    The trend of total households which include single-member households, has shown that its Gini coefficient declined, albeit slightly, from 1999 to 2004. However, there is a possibility that this may be attributed to the concentration of income distribution amid a declining average income. For low-income groups, the government is making efforts to implement measures to support self-reliance people by providing such as employment support, thus expending all possible means to secure a safety net.
    Seen from the behavior of the Gini coefficient by age bracket, it is confirmed that the income disparity and the disparity in labor income have widened among young people. This trend is reflected by the employment situation for young people such as freeters and NEET. This fact should be addressed from the viewpoint that it may possibly as well lead to a widening disparity in the overall economy in the future. It is also shown that the widening disparity in labor income is possibly related to the increase in non-regular employment. While this change has not directly led to a widening disparity in household income at the current stage, it is necessary to watch the trends in regular and non-regular employment from the perspective of disparity.
    Finally, regarding the trend of disparity, it is s necessary to further improve and enhance economic statistics so that better detailed analyses will be possible.

(The proactive employment policy is important for responding to changes in the employment environment)
    Finally, as policy support to response to the above-mentioned changes in the environment of the household sector, this section has covered policy measures to changes in the employment environment in particular. As a policy to facilitate transfer from non-regular employment to regular employment, it has pointed out the necessity to promote recruitment as regular employment, e.g., encouraging firms to utilize the current mechanism of trial employment in the future, providing opportunities to make a new use of young persons that were in a disadvantageous condition of recruitment when they were new graduates. As a response to the severe employment situation among young people, with the precedents of efforts made by European countries to address the employment problem for young people in mind, Action Plan for Young People's Independence and Challenge was examined. It calls for efforts consisting mainly of proactive employment policies such as measures to encourage employment and detailed employment support for young unemployed people, along with the career formation based on vocational education and vocational experiences from the time of their school education. Periodical review is needed as the government continues to implement these policies.


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