The 2006 white paper on labor and the economy focuses on the rising number of irregularly employed workers, such as part-timers and temporary workers from agencies, and the widening gap in income between regularly and irregularly employed workers. If this gap grows and becomes fixed, society as a whole will suffer, as the number of low-income people relying on welfare will inevitably increase.

The deregulation of the labor market and enterprises’ efforts to decrease production costs and improve competitiveness in a harsh economic environment have led to the increase in the number of irregular employees. In 1996, about one-fifth of the total workforce was irregular. But in 2005, these employees accounted for about one-third of the total workforce — 15.9 million of 49.2 million. Their number reached 16.6 million in 2006.

Some workers welcome the spread of irregular employment because it has allowed them to pursue lifestyles different from those of regular employees. It also has helped women and elderly people to land jobs. But many irregular employees consist of those who were unable to get desired work during the recessionary economy that lasted from the early 1990s to the early 2000s. They suffer not only from low salaries but also from unstable employment conditions.

In the past, irregular employees were mainly found in service industries such as retail and wholesale. These days, competitive pressures from globalization are forcing manufacturers to use more irregular workers, too.

Among people aged 20 to 24, the portion of employees classified as irregulars nearly tripled to about 32 percent from 1992 to 2002. The corresponding figure for people aged 25 to 29 nearly doubled to 23 percent in the same period. For people aged 30 to 34, it was slightly above 20 percent in 2002.

This trend is apparently working to push down employee income in general. Among people in their 20s, for example, the percentage of people with annual income of between 1 million yen and 1.49 million yen has increased from around 7.5 percent in 1992 to around 10 percent in 2002. By contrast, the percentage of people in their 20s whose annual income is 1.5 million yen to 4.99 million yen has declined, as the number of those in the same age bracket who earn more than 4.99 million yen has increased slightly.

Meanwhile, about 2 million people aged 15 to 34 are “freeters,” working as part-timers. An additional 640,000 people in the same age bracket are NEETs (not in employment, education or training).

The white paper shows that irregular employment is encouraging people to give up the idea of marriage. Among men in their early 30s, 59 percent of regular employees are married; among irregular employees, the marriage rate is about 30 percent.

The white paper says if young people continue to fall short of finding stable employment, the nationwide trend toward fewer births may accelerate. The prospect of stable employment is also important from the viewpoint of strengthening the social fabric of Japanese society. Expanded use of irregular workers has enabled enterprises to decrease production costs and to make flexible use of labor resources.

This flexibility surely was necessary to cope with the increasing speed of technical innovation and the development of new products amid difficulty in predicting the future form of production processes. But employers must pay attention to the overall social costs incurred by the spread of irregular employment.

From a purely economic viewpoint, an increase in the number of irregular employees is not desirable. It would be difficult to expect irregular employees to have the same degree of diligence and creativity as regulars. In some industries, the entire production process is delegated to contract workers from outside. If this practice spreads, it will become difficult for manufacturing firms to hand down their accumulated knowledge and technological skills, intangible assets that are the source of a company’s strength, to future generations.

In the long run, relying on irregular workers only because they are cheap could undermine the foundation of not only individual enterprises but also the nation’s economy as a whole.

To achieve high labor productivity and give full play to workers’ potential, the white paper suggests introducing programs to develop the career paths of both mid-career recruits and irregular workers, as well as systems that enable irregular workers — including those who work less than 40 hours per week — to move to regular-employment status, among other things. The government needs to flesh out these proposals and be ready to offer monetary or tax incentives to willing enterprises.

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