• Compiled From Kyodo, Bloomberg

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The government adopted legislation Friday to ban in principle temporary workers in manufacturing jobs and registered workers in temporary employment to help stabilize employment.

The legislation marks a breakaway from past deregulation to increase temp workers that benefited employers under the rule of the Liberal Democratic Party, and comes after the Democratic Party of Japan ousted the LDP from power in last year’s Lower House election.

“This kind of legislation would not have emerged without a government change,” Health, Labor and Welfare Minister Akira Nagatsuma told a press conference after a Cabinet meeting, where the bill was decided on for submission to the Diet.

“The revision may help stave off” unstable employment, he said. The DPJ government plans to have the bill enacted by the Diet during its current ordinary session, which is scheduled to end in June.

The bill to revise the worker dispatch law would prohibit staffing agencies from dispatching workers to manufacturing jobs for short-term employment.

It would ban registered workers, who are employed only when jobs for them are available. But older workers and 26 categories of professional workers, including secretaries and interpreters, would be excluded from the ban.

The ban on temp workers in manufacturing jobs and registered workers in temporary employment would take effect within three years after the revised law is promulgated.

The legislation would also require staffing agencies to disclose the gaps in their revenues from staffing services and wage payments to dispatch workers.

The original draft of the bill included a measure to allow companies to interview candidates that staffing agencies dispatch to these firms.

But the measure has been dropped because of requests by the DPJ’s coalition partners, the Social Democratic Party and Kokumin Shinto (People’s New Party), which are concerned such interviews would disadvantage workers.

More than 147,000 temporary workers have been laid off since October 2008 during the height of the global financial crisis.

Revising the hiring law may force manufacturers to cut wages, said Naoki Iizuka, senior economist at Mizuho Securities Co. in Tokyo.

“This is a socialistic policy ignoring economic mechanisms,” Iizuka said. “Tightening rules may invite worsening conditions of full-time workers.”

DPJ lawmakers say companies need to focus more on the well-being of their employees and less on earnings to boost economic consumption.

“The main cause of the current economic slump is that companies kept cutting wages even when they had record-high profits to give more dividends to shareholders,” Deputy Chief Cabinet Secretary Yorihisa Matsuno said in an interview Wednesday.

“After firms cut wages to raise profits, domestic demand was negatively affected.”

Hajime Kitano, Tokyo-based strategist at JPMorgan Chase & Co., said the revision may have a positive impact on the economy by addressing “discrimination” against irregular workers even if it hurts corporate profits.

“The DPJ government wants to change how companies divide their profits among stakeholders in the backdrop of increasing shareholders’ power,” Kitano said.

“The government should now address overprotection of regular workers to seek equal pay for equal work regardless of employment style.”

Japan had 2 million temporary workers as of 2008, out of a total workforce of 56 million, according to government statistics. The unemployment rate fell to a 10-month low of 4.9 percent in January, while wages fell for the 20th straight month.

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