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Saving Japan: promoting women’s role in the workforce would help

by Jeff Kingston

Special To The Japan Times

Christine Lagarde, director of the International Monetary Fund, believes women can save Japan. Some would argue they already are, taking on as they do all sorts of responsibilities ranging from mother, wife and caregiver for elderly relatives to employee, volunteer and household finance minister.

The IMF’s focus is on how the aging population and shrinking labor force is depressing Japan’s potential growth rate. In a recent IMF report titled “Can Women Save Japan?,” it’s argued that increasing women’s participation in the labor force, especially in career-track jobs, could boost economic growth. However, this requires overcoming two significant hurdles.

First, relatively few women land career-track jobs, constituting only 12 percent of such new hires in 2010. Secondly, many drop out of the workforce after giving birth and don’t resume working as they get inadequate support to do so, and also because inflexible employment policies mean their careers have been derailed.

Thus, many women are marginalized in the workforce and the skills and potential contributions of those who exit are squandered. Resumption of work after giving birth is usually on a part-time basis, meaning relatively low income. Women therefore have less money to spend and pay lower taxes — both significant factors contributing to deflation and fiscal deficits.

Japan’s 1987 Equal Employment Opportunity Law has had little impact, as the gender wage gap remains high and women constitute three-quarters of nonregular workers — even though on average women have a higher level of educational attainment than men.

It is emblematic that full-time female workers earn 27 percent less than male counterparts, a wage gap almost double the 14 percent OECD average. In most Japanese households both parents work because they need the income, but since women are shunted off to the relatively poorly paid employment periphery, many couples are struggling to make ends meet.

On April 19, Prime Minister Shinzo Abe announced plans to extend childcare leave and expand public daycare facilities; a sensible response to some of the more glaring obstacles to women’s integration into the workforce. This is a growth strategy with clear benefits to the economy and to those women who seek a career and sense of fulfillment it offers.

In other advanced industrialized nations, government and corporate family-friendly policies do more to tap women’s potential by making it easier for them to achieve a work-life balance. In Japan, career and raising a family is too much of an either/or situation — and society as a whole pays a penalty.

Japanese women’s labor-force participation rate is 25 percent below men’s, a gap that is about twice as high as in Germany and the United Kingdom, representing a significant reservoir of women power.

Kathy Matsui, a Tokyo-based Goldman Sachs analyst known for her “Womenomics” reports, argues that this ongoing waste of women’s human capital is shortsighted and is depressing the economy’s growth potential. And, she maintains, it is unsustainable because, ” … given the limited alternatives, Japan has no choice but to tap its most underutilized resource. It’s hard to run a marathon with just one leg.”

But Japanese companies are still trying to do that — and they’re losing out.

A 2012 report by consulting firm McKinsey & Co., titled “Women Matter,” found that women are underrepresented in Japanese boardrooms, filling only 2 percent of such positions — making the country second-to-last in Asia, just above South Korea. This compares with 17 percent in the European Union and 15 percent in the United States. The lack of gender diversity is also evident in the low percentage of female managers — only 11 percent compared with 43 percent in the U.S.

Companies hurt themselves by not making use of the best talent available, as evident in the positive correlation between corporate performance in Japan and greater representation of women in top echelons. Thus it is clear that if Japan seeks a better future (in terms of economic growth as well as social equity) it also needs to ensure that women are given opportunities for leadership.

Gender diversity spurs innovation, more “thinking outside the box,” and opens up new opportunities ranging from marketing and sales to design and improved brand reputation. However, McKinsey finds that promoting gender diversity is not a priority in Japanese companies, as only 32 percent expect to accelerate such measures, compared with 66 percent of their South Korean counterparts.

So, while Japan’s “women deficit” at the decision-making level is recognized as a significant handicap, not much is being done to rectify this human-resource folly. Male senior executives expect that women will leave the company to give birth and raise children, and otherwise prioritize their families. Thus women are seldom promoted, and this creates a glass ceiling that discourages them from aspiring to managerial careers.

With few women in a position to act as mentors, the glass ceiling remains a stark reality for female workers. As a result, women see limited prospects for a good career and have few incentives to keep working.

For example, 74 percent of college-educated women quit their jobs voluntarily — more than double the rate in the U.S. (31 percent) and Germany (35 percent). The percentage of women who drop out of the workforce in their 30s is also much higher than in the U.S. and E.U., where women’s labor-force participation rates remain relatively steady even during child-rearing years.

This loss of women’s potential is due to discouraging corporate practices and an absence of effective gender-diversity initiatives.

Japan Inc.’s talent-squandering policies toward women are the equivalent of an own-goal. The costs of recruiting and training workers are significant, so the absence of effective retention policies targeting women workers who want to have children represents a huge waste.

What is the point of sidelining women’s dynamism in an economy desperate for an infusion of talented and creative workers?

Government tax policies are also problematic, as they push married women into part-time work because households stand to lose exemptions if their annual income exceeds ¥1.03 million.

In addition, long waiting lists for public child-care facilities in cities, along with a widespread shortage of caregivers for the elderly, means that many women who want to work full-time are unable to do so because they assume these responsibilities.

Recently, an assemblyman in the Suginami Ward of central Tokyo lambasted women over their “shameless” demands for more public nursery schools, suggesting that child-rearing is their responsibility. In Suginami, more than half the women seeking public day care were turned down because facilities are full, demonstrating an inexcusably shortsighted negligence towards working women and the next generation of taxpayers.

Jeff Kingston is Director of Asian Studies, Temple University Japan.