Business / Economy

Cabinet OKs reforms to address Japan's labor market woes

Kyodo

The Cabinet of Prime Minister Shinzo Abe approved Friday a suite of labor reforms designed to solve Japan’s demographic challenges while creating conditions to promote job growth, particularly for those struggling to find stable work.

Under the annual economic policy blueprint, the government wants to see 300,000 new jobs created over the next three years for people in their mid-30s to mid-40s who have had difficulty finding stable employment.

The government hopes to help around 1 million people who graduated from high school and university between 1993 and 2004, collectively called the “employment ice age generation” because they began searching for work following the end of Japan’s economic boom.

The government is concerned the social security system, including the public pension system, will falter if the ice age generation is unable to find full-time work and generate sufficient tax revenue, officials said.

It hopes the policies will help them find work to help offset the national labor shortage, the officials said. Toward that end, Japan introduced a new visa system in April to bring in more foreign labor, a policy incorporated in last year’s economic blueprint.

But many in the ice age generation complain the government wants to deploy them into labor-hungry sectors with poor working conditions.

Critics say the reforms will not succeed unless Japanese companies shake up their employment practices, including the hiring of new graduates en masse, promotion by seniority and lifetime employment.

Under the policy blueprint, which will be reflected when the state budget for fiscal 2020 is drafted, the government also encourages the elderly to work longer. It specifically plans to scale back and eventually abolish a system that reduces the pensions of people who still earn at a certain income level.

The government believes the system discourages those of advancing age from continuing to work full time.

“It is necessary to set the stage for the elderly who are willing to work so they can fully exercise their abilities,” the policy guideline said.

In a strategy separately approved Friday by the Cabinet, the government decided it will ask companies to consider keeping employees at work until age 70, with many firms having already raised the retirement age from 60.

To secure funds to cover swelling social security costs, the policy blueprint also confirms the government’s plan to hike the consumption tax from 8 percent to 10 percent in October.

With widespread fear the tax hike could hurt the economy by weakening domestic demand, the government is looking to increase the national average minimum wage to ¥1,000 per hour from the current ¥874 “at an early date,” according to the blueprint.

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