The revelation that the Health, Labor and Welfare Ministry has long been using improper methods to collect wage and other data in the Monthly Labor Survey has shaken public trust in official statistics released by the government, which serve as a guide for its policy formulation and various economic activities.
The inadequately collected data made the average wage appear lower than it actually was, resulting in the underpayment of unemployment insurance benefits — calculated on the basis of the wage level in the labor report — by more than ¥50 billion to roughly 19 million people. That has forced the government to rework its fiscal 2019 budget to include expenses to retroactively compensate for the past underpayment of benefits, a massive task given the huge number of people affected. The government is also said to be considering revising downward its data on inflation-adjusted net growth in people’s wages after recalculating the data to reflect the findings.
But the labor data fiasco does not appear to end there. A “third party” probe by a committee of lawyers and statisticians of the fiasco, which wrapped up in just about a week after the revelation last month, concluded that there was no organized attempts by the ministry to cover up the improper data collection, while punishing 22 senior ministry officials, including some who had already retired, over the fiasco. It later turned out, however, that the hearings of the ministry officials involved in the data collection by the committee were also attended by the ministry’s senior bureaucrats, who questioned the officials during the hearings. All in all, roughly 70 percent of the hearings of the ministry officials involved were reportedly conducted by their fellow ministry bureaucrats alone — casting doubts on the independence of the committee’s probe.
It has also surfaced that the draft of the committee’s report on its investigation had in fact been created by labor ministry officials. Labor minister Takumi Nemoto has acknowledged that the involvement of the senior ministry bureaucrats in the probe — which the bureaucrats themselves said was only natural — raised questions about the “third party” nature of the committee’s probe. In an unusual move, the ministry was eventually cornered into redoing the probe into the labor data fiasco.
The monthly survey covers jobs, wages and work-hour data on businesses across the country, and serves as a key indicator of the nation’s employment conditions. The survey is also used in the government’s economic estimates such as the gross domestic product and its monthly economic report. While it is a rule to survey all companies with 500 or more employees, the labor ministry since 2004 has in fact collected data from only about one-third of the roughly 1,400 firms in Tokyo that meet the criteria. Since the survey excluded many of the big companies located in Tokyo, where wages tend to be higher, the average wage quoted in the statistics was calculated lower than it would have been had the survey covered all relevant firms.
The committee’s probe concluded that the ministry officials in charge changed the data collection method due to complaints from the businesses that respond to the survey and in view of requests from local governments that carry out the survey on behalf of the labor ministry. However, the probe did not examine if there had indeed been complaints or requests from the businesses and local governments.
That change was never publicly disclosed. According to the probe, the officials in charge changed the method without consulting with or gaining approval from their superiors, and senior officials in a position to supervise their work neglected to grasp what was happening or to take action to correct the improper data collection. But while the probe concluded that there was no organized attempt to cover up the inadequate practice, the ministry is found to have started using in January 2018 software that adjusts the data to make it closer to what would have been obtained if all the relevant businesses were covered in the survey — again without disclosing it.
The probe into the labor data scandal was supposed to identify how and why the data was collected in improper ways and establish measures to ensure that such irregularities would not be repeated, thereby rebuilding public trust in statistics compiled by the government. But if the independent nature of the probe was compromised by the ministry’s interests to minimize damage from the issue and protect itself, the ministry cannot evade criticism that it is indeed engaged in an organized cover-up attempt, fueling more distrust in administrative services. In redoing the probe into the fiasco, the labor ministry’s governance as an organization should be scrutinized.