Annual Report on

The Japanese Economy and Public Finance


- Japanese Economy Heading for New Growth Era

with Conditions for Growth Restored -

Cabinet Office

Government of Japan

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Section 4 Changes in environment of the household sector and policy responses

    Although the economic recovery has been spreading from the corporate sector to the household sector, as mentioned above, there are difficult conditions and changes in the household sector, such as the diversification in employment styles, increasing number of freeters and NEET among young generation, thus, in some cases, certain support should be provided accordingly. In particular, as changes in the employment environment have an impact on the overall economy, there are also strong expectations that the situation will be improved through policy support from the government. However, in this case, it is often difficult to solve the problem merely by improving the safety net as a protection of the weak. The important key to a solution is proactive employment policies in the form of supporting workers' efforts toward a better employment state.

1. Response to the diversification in employment styles

(The role played by the government to enable non-regular employees to transfer to regular employees)
    Section 1 has covered firms' movement to start increasing regular employment amid the prolonged economic recovery. On the other hand, though there have been increasing non-regular employees among the young generation who want to become regular employees, the condition continues to be difficult to be overcome. There have been strong expectations of policy support as well.
    As for the currently implemented system in which applicants are registered to become full-time workers as regular employment, there are trial employments(51) and Temp to Perm(52). Regarding trial employment, seen from the actual results of young people, there were 35,000 people transferring to full-time workers in fiscal 2005, with the rate of transfer reaching 80%. Regarding Temp to Perm, according to the aggregation results in the labor dispatch business report prepared by the Ministry of Health, Labor and Welfare, in fiscal 2004 there were about 10,000 workers who finally transferred to direct employment via job placement in the form of Temp to Perm. It is considered as important to continue promoting regular employment for the future, e.g., to encourage firms to utilize the mechanism of trial employment and Temp to Perm.
    In the Action Plan for Young People's Independence and Challenge revised in January 2006, it is hoped to increase the number of firms promoting regular employment of freeters by pushing forward model projects in cooperation with business groups.
    In addition, regarding job placement through public employment security office, in order to enable job applicants to realize their wishes to become a regular employee, efforts have been made to push forward the development of focusing on securing regular employment job offers. At the same time, for those unfilled vacancies as non-regular employees, proactive approaches have been made to change the conditions of job offers into regular employment as much as possible. Furthermore, it is expected that a strong tendency will arise, along with the economic recovery, so that those initially recruited as non-regular employees will transfer to regular employee if their performance is recognized positively.
    Future policies included in Interim Report released in May this year by "Council on Promotion of Society with Diversified Opportunities" are expected to be enforced. Traditionally, hiring new graduates constitutes the core of the employment practice in Japan. Consequently, those who were once new graduated when non-regular employment was increasing, are seen to have been in a disadvantageous position as far as the recruitment of regular employees is concerned. In order to iron out these advantages and disadvantages between such young people, the government is supported to provide firms with information and make approaches to influence them at the same time, improving the mechanism thereby to enable non-regular employees to be hired as regular employee. It is also supported to provide aid for firms which adopt the mechanism to improve employees' careers by developing necessary practical capability.

2. Response to the severe employment situation among young people

(European countries in the 1990s eased the problem of unemployment for young people by shifting to a proactive employment policies)
    As a precedent case of efforts made to tackle the employment problem for young people, the proactive employment policies in Europe serve as a useful reference. In European countries, the employment situation was eased in the second half of the 1990s as a result of shifting the employment policies for young people from "passive employment policies" (53) such as providing traditional unemployment benefits to "proactive employment policies" such as providing vocational education and training.
    The unemployment rates among European young rose in the 1980s and then leveled off and dropped around 1990, and after that, it rose toward the middle of the 1990s (Figure 3-4-1). The background of the employment situation in Europe was said to be policies that overemphasized social security. This view was generally accepted. In other words, substantial social security such as generous unemployment benefits that the EU members had so far provided were regarded as having had a causal relationship with an increase in the unemployment rate and long-term unemployment(54).
Figure 3-4-1 Changes in Unemployment Rates among Youth in European Countries and Japan
    European countries took these criticisms very seriously and at "EU Luxemburg Employment Summit" held in November 1997, they clearly put forward the concept to cooperate each other on joint employment policies. In Guideline on Employment (formulated in 1998), measures to deal with unemployment among young people were regarded as one of the key agenda of the problem to be addressed. The Guideline asked governments to provide at least 20% of long-term unemployed youths who became unemployed within six months with vocational education and training, retraining, workshop practice, job placement and other measures to enhance their employability along with individual career coaching and counseling.
    Later, major European countries made it clear that without significantly reducing the level of unemployment benefits, they combined unemployment insurance benefits with re-employment activities and encouraged unemployed youths to fulfill their duty to complete re-employment activities as well as guaranteeing their right to receive unemployment benefits. With these policies implemented the unemployment rates among young people were found to have declined from the second half of the 1990s to early 2000s.

(Content of Europe's employment policy)
    The employment policy for young people in European countries(55) can be classified into the following three features (Table 3-4-2).
Table 3-4-2 Employment Measures for Young People in European Countries
    The first feature is to place emphasis on vocational education and training for young people at the stage of school education. This aims to have young people to prepare for entering the labor market in the future by nurturing their vocational skills and job consciousness at school. This has been implemented in many European countries, with a dual system in Germany being a typical case. Some European countries have also implemented measures to enable students to have workshop and employment experiences in school education courses.
    The second is the method to encourage young unemployed or jobless people to have employment experiences before the duration of their being unemployed becomes prolonged. First, for those young unemployed people receiving unemployment benefits, there is the method to reduce or stop benefits if they fail to participate in certain employment programs. Britain's new deal policy was a typical one. In addition, there were also measures implemented in some European countries to enhance the added value of employment experiences by combining them with vocational education and training, thus encouraging youths to pursue active job hunting.
    The third policy arranges counselors for individual young people and makes a detailed response to each specific case. Counselors presented young people with the menu which catered to the necessity of each case and worked out the program of vocational education and training and their career plan. This policy was adopted in many European countries.

(Japan's employment policy for young people: pushing forward detailed measures for specific cases)
    For Japan facing employment problems regarding young people, the experiences of European countries are considered to be useful as a valuable reference. It is considered as effective to take measures to carry out vocational education and training not only at the time young people have become unemployed but also from the time of school education, and also to give order-made employment counseling and guidance for each specific case.
    The summary of the Action Plan for Young People's Independence and Challenge is as follows, according to the types of measures adopted by European countries.
    First is as to career formation from an early age. Public employment security offices are cooperating with schools and the industrial community to carry out projects to provide support for the formation of job consciousness for elementary, junior and senior high school students, such as the career-searching program and junior internship. Efforts have been made to disseminate and establish "Practical Type Human Resource Development System" which combines classroom lectures with a certain period of practical training as "The third Option," a program which has the elements of both employment and school education. Furthermore, the government is encouraging close cooperation between universities (university students), and the industrial community so as to promote the development of advanced and specialist personnel, thus having students and firms' talented young people practically apply their theoretical knowledge and capability to their work.
    Second is the promotion of employment. The government is implementing "Japanese Version of Dual System," a program of vocational education and training which combines corporate internship and classroom lectures, and trial employment. Measures are being implemented also for NEETs, such as detailed support for the purpose of enhancing their desire to work and their capability, as well as creation of opportunities to "learn again."
    The third is support for individual cases of employment. Prefectural governments, with the cooperation of firms and schools in the respective regions, are providing employment support through the job cafe, an activity providing employment-related services in the one-stop style, and also arranges youth-oriented job supporters in the public employment security office, thereby reinforcing employment support for young people such as new graduates. In some regions, the regional counseling system is to be reinforced as well, such as by setting up "Regional Support Station for the Youth" which provides professional consulting services according to the specific conditions of young people.
    As for the employment measures for young people, it is necessary to continue implementing the above-mentioned measures. It is also a must to continue following up foreign countries' employment measures as well as periodically examining the effectiveness of the measures that have been implemented.

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