New sub-class of poorly paid workers in Japan

Huge changes in Japan's labour market are creating a dangerous divide between well paid, well trained workers in permanent employment and a sub-class of poorly paid workers with low skills and fragile job security, the Organisation for Economic Co-operation and Development has warned.
The report, which continues to argue in favour of the need to tackle deflation and assert fiscal control, branched off into an unusually gloomy chapter about the downsides of what would normally be considered the positive effects of greater labour market flexibility.
"Employment flexibility is being achieved through increased hiring of non-regular workers," whose numbers had sky-rocketed from 19 per cent to 29 per cent of the total workforce in a decade, it said. Temporary staff earned about 40 per cent as much as regular workers. "The" increasing dualism is creating a group, concentrated among young people, with short-term employment experience and low human capital."
The OECD concern chimes with growing anxiousness within the Japanese government that the postwar employment model is dying but has not been replaced by a tenable alternative.
One government official said the number of suicides had not fallen since Japan's economic recovery began three years ago, a phenomenon he attributed to greater despair caused by the collapse of the old labour market system.
The Bank of Japan recently put out an influential report on labour market changes, which it said were partly responsible for the tenacity of deflation, now into its seventh year.
Wages have continued to fall in spite of three years of economic recovery, interrupting a transmission mechanism by which greater economic activity normally feeds through into higher prices.
This weekend, the government produced a draft of *
the 21st Century, in which one of the main recommendations was to change pension and other laws to make it easier for workers to move between jobs.
It also recommended making it easier for women to work full-time and for people to work until 75.
One of the OECD's main concerns, said Randall Jones, the OECD's chief economist for Japan and South Korea, was that labour flexibility was being introduced in only one part of the market, creating an unbridgeable divide between workers in non-regular and regular employment.
"The equity concern is magnified by the lack of movement between the two segments of the workforce, trapping a significant portion of the labour force in a low-wage category from which it is difficult to escape," the report said.
Mr Jones contrasted the situation with that of Australia, where it was fairly easy to move between the two categories of employment.
Because Japanese training largely took place within companies that offered lifetime jobs, those outside the walls of permanent employment could fall further and further behind.
The burden falls disproportionately on the young because many companies, which have sought to slash costs since the late 1990s, have preserved the jobs of existing employers by freezing the hiring of graduates.
The youth unemployment rate is about twice the national average at 10 per cent.
The OECD said it did not favour putting a brake on the creation of non-permanent employment - a remedy favoured by Japanese unions, many academics and even some government officials.

Financial Times