The tightest labor market in decades is showing signs of reversing a long shift toward the hiring of temporary workers.
The number of full-time permanent workers in Japan is rising for the first time since the global financial crisis, outpacing growth in temporary jobs over the past two years.
“The labor shortage has become so bad that companies can’t fill openings only with part-timers,” said Junko Sakuyama, a Tokyo-based senior economist at Dai-ichi Life Research Institute.
The 2.8 percent unemployment rate is the lowest since 1994, but most of the hiring over the past decade or so has been for temporary, often part-time, positions known as nonregular.
A shift back toward permanent hiring could help sluggish consumer spending pick up. Economists say a decadeslong move toward nonregular jobs is partly to blame for weak consumer demand. Nonregular workers now make up more than a third of the workforce. Many work part time, and all on average receive less pay, few benefits, little training and no real job security.
It’s too early to declare a trend reversal, but the number of regular jobs grew by 260,000 in March from a year ago, while part-time, temporary and contract jobs rose by 170,000, the internal affairs ministry reported Friday. Last year, 510,000 permanent jobs and 360,000 nonregular ones were added.
The ratio of nonregular workers in the workforce stood at 37.5 percent in 2016, the highest on record dating to 2002, according to government data. It should decline as more women become regular employees in sectors with severe labor shortages, such as retail and elderly care, Sakuyama said.
The impact on wages and consumer spending may be limited. Those sectors hiring more regular workers offer lower pay and suffer from lower productivity, meaning they have narrower margins to grant raises. A return of inflation this year would limit real wages as well.
Regular workers get paid about 53 percent more than nonregular ones on a comparable monthly basis, according to the labor ministry. But they’ve seen slower pay increases because the unions representing them often favor job security over aggressive bargaining.
Companies are adding regular jobs only grudgingly and are reluctant to give big raises because growth prospects are dim in aging Japan, said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co.
“Businesses tell me that they can’t raise wages a lot in order to compete, which means demand isn’t picking up,” he said. “They can’t hope that domestic demand will grow strongly.”
The job-to-applicant ratio remains much higher for part-time jobs than for regular ones, indicating that employers still want this, but workers are less enthusiastic about this option.
While an increase in regular jobs is good, another challenge for Japan is to ensure equal work for equal pay, so regular workers feel freer to move to growing sectors and get compensated on merit and skills, Sakuyama said.
“It will be right and ideal if it becomes meaningless to track the ratio of nonregular workers,” she said.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.