Commentary / Japan

The ratio of regular workers is on the rise

by Masaharu Takenaka

The rising percentage of nonregular employees in Japan’s workforce, or conversely, the falling ratio of regular employees to the total, has long been a topic of discussion in this country.

According to the Health, Labor and Welfare Ministry data, the share of nonregular workers in all employees (excluding self-employed people) increased from 16.4 percent in 1985 to 20.9 percent in 1995 and 32.6 percent in 2005. It has been roughly flat since 2014 but remains at 37 to 38 percent. Generally speaking, nonregular employees get lower wages and other benefits than their regular full-time counterparts, and are also believed to face disadvantages in on-the-job education and training. This situation is deemed to cause a declining quality of employment.

References to “regular” or “nonregular” employees are peculiar to Japan and are not necessarily clearly defined. In general, regular employees are full-time workers whose employment is not limited in duration except for the mandatory retirement age. On the other hand, the duration of employment for nonregular workers is limited — either for a short term or an intermediate term. They can work either part time or full time. These terms came into common parlance relatively recently — it is believed they first became widely used in the 1980s.

Now here is the question. Has the number of regular employees been on the decline? In fact, it has not changed much and its trend over the past decades has been rather stable. According to the Internal Affairs and Communications Ministry’s labor force survey, regular employees numbered 33.43 million in 1985, 37.79 million in 1995, 33.75 million in 2005 and 35.13 million in the April-June period of this year. While the number of regular employees has stood relatively steady at around 35 million, the ratio of nonregular employees has gone up. Why is this?

The answer lies in the breakdown of all job holders, including self-employed people. The chart shows the ratio of various categories of job holders — regular employees (not including executives), executive officers, nonregular employees and self-employed people — in the 25 to 64 age bracket. Since 2002, data was taken every quarter of the year. Before that, data was taken once or twice a year.

It clearly shows that the ratio of self-employed workers has fallen while that of nonregular employees has increased. In other words, the rise in the share of nonregular employees matches the fall in that of the “self-employed and other” category workers, rather than a decline in regular employees. Behind these developments is believed to be the decline in the number of farmers (especially farmers who hold side jobs), and owners of traditional retail shops and their family members/coworkers becoming part-time employees at supermarkets and convenience stores.

In fact, as the chart shows, the ratio of regular employees to all workers from 25 to 64 hit bottom at 56.6 percent (when they numbered 29.38 million) in the January-March period of 2014, and has recovered to 59.1 percent (30.94 million) in the April-June quarter of this year. This upward trend in the ratio of regular employees becomes blurred, however, if elderly workers 65 and older are included in the data, because the number of people 65 or older on payrolls has surged by 2.1 million since the January-March period of 2014 — and three out of four such elderly workers are hired for nonregular positions.

In summation, the rise in the ratio of nonregular employees since the 1980s has primarily corresponded to the decline in the number of people in the self-employed and other employment categories. The high ratio of nonregular employees to the total over the past several years owes a lot to the increase in such workers 65 and older. As a consequence, the ratio of regular employees to the total workforce in the 25 to 64 age bracket has been rising.

Lately there is talk of extending the retirement age to 70. But there won’t be a strong need to provide full-time employment to people 65 and older. Unlike their younger counterparts, people in that age bracket usually are no longer paying for their children’s education and have finished paying off their housing loans. While circumstances will differ for each individual, there must be large numbers of elderly people who do not want to work full-time jobs five days a week.

There are people who graduated from school during the so-called employment ice age from the late 1990s to the early 2000s — who had no choice but to work nonregular jobs and are still unable to find full-time employment today. We need to help those people get regular jobs. But overall the macro-environment in Japan’s labor market has improved significantly amid the economic recovery that has taken place over the past several years.

At the same time, the nation’s industrial structure and the work required are changing fast due to rapid progress in innovation such as the greater use of artificial intelligence and automation. What’s needed of businesses, educational institutions, the government and workers themselves is not just measures for the unemployed, but re-training and re-educating all layers of the workforce, including young employees, so they can actively adapt to the changes.

Masaharu Takenaka is a professor of economics at Ryukoku University in Kyoto.