Slump exposes holes in safety net

Unemployment benefits are inadequate for growing ranks of nonregular workers

by and

The recent massive layoffs of temporary employees by blue-chip firms have shocked and scared workers in a nation long known for accommodative labor relations and lifetime employment.

Experts warn this year will see more layoffs that will push the unemployment rate higher, and more regular workers will be targeted.

“The unemployment rate is likely to exceed 5.5 percent, the worst level in history, within a year,” said Taro Saito, senior economist at Nippon Life Insurance Research Institute.

Monday’s announcement of October-December economic growth, which saw the sharpest drop in 35 years, will only worsen prospects for job seekers, Saito said.

“The unemployment rate will keep increasing until early next year,” partly because there will be more layoffs of regular workers, he said.

According to the latest estimate by the Japan Manufacturing Outsourcing Association and the Japan Production Skill Labor Association, 400,000 temporary and contract workers in the manufacturing industry alone have been or will be fired between last October and next month.

The Health, Labor and Welfare Ministry predicts that during the same period, 6,528 regular workers will be idled, double its December estimate.

The average monthly jobless rate was 4.0 percent in 2008, up 0.1 points from the previous year. In December, the monthly figure reached 4.4 percent, according to government statistics.

After hitting a record high 5.3 percent in 2002 — the year when companies suffered huge losses with the collapse of the IT bubble — the jobless rate stabilized and starting in 2003 began to improve from 5.2 percent to a low of 3.9 percent in 2007.

But behind this apparent improvement was the increase in nonregular jobs, the fate of which are dependent on the whims of companies, said Takeo Kinoshita, a sociology professor at Showa Women’s University in Tokyo.

“In fact, hiring more nonregular workers can help lower the unemployment rate,” he said.

The number of nonregular workers went up from 14.5 million in 2002 to 17.3 million in 2007, according to the internal affairs ministry.

At the same time, the ratio of temp workers in the entire workforce rose from 29.4 percent to 33.5 percent, which means one in every three employees is now nonregular staff.

Because nonregular workers are paid less and receive fewer benefits, employers in some cases can hire two nonregular workers for the cost of one regular worker, Kinoshita said.

“It’s not that the number of unemployed dropped. More people couldn’t find a job as a regular worker, so they had to be employed as a nonregular worker,” he said.

By increasing nonregular workers, particularly in manufacturing, companies had the luxury of a disposable workforce.

This, however, created an unstable employment situation, with nonregular workers in a precarious state as the first to get the ax if conditions turn sour.

Compared with advanced countries in Europe, unemployed people in Japan are likely to suffer more because the support system for them is lacking, according to Hisashi Yamada, a senior economist at Japan Research Institute Ltd., a private think tank.

“Japan’s unemployment rate (is being) greatly affected by the decline in exports, but the support system for the jobless is not as strong as in European countries, notably Germany, another country active in exports,” he said.

European countries, including Germany, have safety nets that provide support for an unlimited period after unemployment insurance runs out, Yamada said, while Japan lacks this mechanism.

In addition, unemployment benefits are available for a shorter time in Japan, he said.

In Japan, a person can receive benefits for a maximum 360 days. In Germany, the period can be up to two years, he said.

Faced with public demand for a wider safety net to save the jobless in the deepening recession, the government has finally started to act, although measures taken to date are insufficient, Saito of NLI Research Institute said.

The labor ministry’s employment bureau, known as Hello Work, also began offering reasonable public housing subsidized by the ministry to temp workers who lost their housing when they were laid off.

The ministry plans to shorten the time from one year to six months that workers must pay into the system before they are eligible for unemployment benefits.

But many temp workers will not be eligible because their single-company contracts are less than six months, according to Saito.

Unlike European countries and the U.S., Japan has yet to plan large-scale economic stimulus measures that create jobs via public works projects, Saito also pointed out.