Shuhei Takebe graduated from a prestigious university in Japan. It qualified him to become a day laborer.

After three years of part-time work at rock concerts and baseball games, Takebe, 25, is attending a job training program in an attempt to land full-time employment. He’s fallen on the wrong side of a growing schism in Japan: Those with a traditional job-for-life, with health care, pension and regular promotions; and those in temporary or contract work with no benefits or job security.

“I’ve been going nowhere after college,” Takebe said. “I want to do something, but it’s hard to figure out how.”

Takebe’s dead end is also Japan’s. The country’s rigid labor system — forged in the heydays of the 1960s when production-line jobs were plentiful, is now the bane of the economy. Rather than hire full-time employees who are hard to fire, many companies opt for cheaper, more flexible temporary staff. Those nonregular positions now make up almost 4 out of 10 workers and get paid about 40 percent less on a comparable basis, government data show.

“No matter how hard you work, no matter how much potential you have, they look at you only as a nonregular worker,” said Chika Hanajima, 35, who has never held a full-time position. “Even if you’re really competent, they can sign a document, and you’re gone.”

Aging workforce

With a shrinking and aging population, high wage costs and one of the world’s most advanced levels of technology, Japan’s future lies in an educated, skilled and, above all, adaptable workforce. That’s not what it has.

“The Japanese working style is the root of all evils,” said Takao Komine, Tokyo-based professor of economics at Hosei University. “All the problems stem from it.”

Traditionally, the top companies, like the big keiretsu conglomerates, hired the best college graduates in a mass recruitment each spring. They trained them for a particular role, and then basically promoted them as they reached certain age milestones, until they retired. The company controlled their lives, telling them where they needed to live, often away from their families, sometimes abroad.

Security and benefits are buttressed by powerful company-based unions that helped set up the system in alliance with the keiretsu and government after World War II. It worked well for a booming economy based on manufacturing and heavy industry. But when Japan’s bubble burst at the end of the 1980s, employers found themselves lumbered with surplus staff they couldn’t fire and a rigid hierarchy that discouraged change.

Ice age

What followed is known in Japan’s labor market as “the ice age.”

That’s when Hanajima graduated from college, in 2003. Unable to get a full-time job, she taught English in a high school and then worked as a receptionist at a university career center. Her hourly pay of ¥1,000 (about $8) didn’t change during a three-year contract.

Like many part-time and contract workers, she lives with her parents, unable to afford her own place. She’s taking public job training classes in the hope of getting permanent employment.

“This is my last chance,” she said. “There’s a huge gap between me and regular workers. I’ve got to learn something to narrow that gap.”

It’s a system that economists say has to change if Japan is going to dig itself out of two decades of economic malaise. But it’s also a political hot potato. No government wants to threaten people’s jobs at a time when the economy is still struggling.

“Nobody is going to be serious about reforms, because people will hate you if you try,” Komine said. “Almost every economist agrees that it’s better to boost mobility. As the working-age population declines, we have to make a better use of workers.”

Missing piece

Labor reform is the missing piece from Prime Minister Shinzo Abe’s blueprint for economic recovery, dubbed Abenomics. Initial hints at major change after he took power in December 2012 have resulted so far only in small tweaks to rules for nonregular workers, such as banning the employment of some temporary workers for more than three years.

Yet with more work going to lower-paid temporary staff, Abe’s ambition to revive the economy with a burst of consumer spending looks like a distant dream. Household spending dropped in all but two months through October this year, following a 2.9 percent decline last year.

In October, the job-to-applicant ratio was 0.77 for regular jobs — more applicants than jobs. Add temporary, contracting and part-time positions, and the ratio rises to 1.24 — more jobs than applicants. So, while the regular workforce hasn’t changed much from 33.3 million since the last quarter of 2012, the nonregular pool has grown by 1.28 million to 19.7 million.

Labor unions are paying attention. At telecoms company KDDI Corp., about 40 percent of the workforce are nonregular. The KDDI Workers Union won bigger raises in 2014 and 2015 for contract workers such as clerical assistants than regular employees, said Toru Harukawa, the union’s secretary-general.

Vanishing jobs

The changing attitude is a recognition that Japan faces increasing overseas competition and jobs will ultimately vanish abroad if the system doesn’t become more flexible.

“The company is operating globally and technology is a fast-changing industry,” said Harukawa, 42, who lives in Tokyo, away from his wife and two daughters. “A large chunk of our employees are 40 to 45 years old. In 10 years, they will be in their 50s. I’m not sure if those people can compete globally.”

The company dropped seniority-based raises for managers in 2013, though it still values lifetime employment for regular employees, said Toru Shiroiwa, 51, general manager of human resources.

Hitachi Ltd. made a similar move in 2000, but the old system of long hours and personal bonding with managers still play a role in deciding performance, said HR Manager Seigo Akihara. He said those Japanese customs will have to go, and Hitachi has set a new, results-based standard to evaluate managers.

“We have to change to make the company global,” said Akihara, 45. “When women have to take a career break, we’re not going to make it work against them.”

Last child

Yoko Shirakawa, 47, a manager in Hitachi’s social innovation business promotion division, used to work late to move up the ranks, before rushing to the child care center, where her son would be the last one waiting.

“Overwork is the reason women can’t stick with companies,” Shirakawa said. “The new policy says you don’t need to work long hours.”

Those changes won’t help graduates like Takebe, who didn’t make the cut for regular jobs at the annual hiring fair.

Companies should hire the best candidates, including experienced workers, throughout the year, said Sakie T. Fukushima, head of the employment and labor markets committee at Keizai Doyukai, a business lobby group.

Change the mindset

“They need to change their mindset fundamentally and create various ways to work rather than saying regular jobs are good and nonregular ones are bad,” said Fukushima, 66, who is also president of consulting firm G&S Global Advisors Inc. “It’s hard, but if you keep saying it’s hard, 20 lost years will suddenly become 30 lost years.”

Ironically, one area of the labor market can’t find enough workers. Traditional manual jobs in areas like construction are crying out for staff because of strict immigration laws and the reluctance of most educated young Japanese to do the work.

At construction company Suzuki Group Corp., Manager Shinichiro Takano, 64, travels the country trying to find high school students to become scaffolding specialists. There are about seven jobs per applicant.

To lure staff, the company has abandoned the industry norm of daily pay and treats the position as a regular job with seniority-based raises and benefits, Takano said.

One of his recruits is Yuto Kimura, 19, who joined in Tokyo in April from Aomori.

‘Want to marry’

“I want to succeed,” said Kimura, who earns about ¥100,000 a month at the company’s training school after insurance, pension payments, food and rent. “I want to earn enough money to get financial freedom. Eventually, I want to marry.”

His teacher, Wataru Sudo, 33, joined the company in 2000, is married with three daughters and owns an apartment in Tokyo.

For Takebe, who saw many of his friends get regular jobs, that kind of work is undesirable. “I felt a massive gap when I heard my friends getting married, promoted or receiving raises and bonuses,” he said.

By the end of March, he hopes to land a full-time position at a clothing company. His family’s garment retail business away from Tokyo still pays for his rent and essentials.

“I can picture myself in one or two years, but I can’t see beyond that,” he said.

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