Long-Term Employment and Job Security Over the Last

Ryo KAMBAYASHI (with Takao KATO) Institute of Economic Research at Hitotsubashi Univ. and OECD, TCER

0. Labor Market Transition in Japan?

Unemployment rate as % civilian labour force (OECD Stats. 1956-2010) 12

0 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 0. Labor Market Transition in Japan?

 Post -Bubble Era (since 1992)  Increasing unemployment rate\ turnover\ non-regular workers  Many evidences suggest a transition of labor markets in Japan.

 SBTC and polarization (Ikenaga and Kambayshi, 2010)/ Globalization/ De-regulation (OECD, IMF, …)  We have several background mechanisms to explain the transition of labor markets.

 However, …

0. Labor Market Transition in Japan?

 Stability of Labor Market in Japan?

 Stable wage inequality  the effect of SBTC has been weakened by  increased supply of university graduates (Kawaguchi and Mori, 2009)  slow but long process of innovation (Ikenaga and Kambayashi, 2010)  Very few nominal wage rigidity (Kambayashi, 2011)  Adjustment mechanism, relying on wage and hour reduction.

0. Labor Market Transition in Japan?

1. Issues and Methodology

 One of the core characteristics of Japanese labor markets is “long-term employment”.  How the long-term employment has evolved since 1980s?  Is it major in the U.S., too?  Two kinds of index  10-year -retention rate  Job loss probability  Comparison by using micro data  Core workers vs. peripheral workers  the U.S. vs. Japan

2. Result (1): 10-year-retention  Figure 1 : All Core Employees

2. Result (1): 10-year-retention  Figure 4 : All Mid-Career Hires

3. Result (2): Job loss prob.  Difficulty  Wording of surveys  ESS (separation due to)  ‘Downsizing,’ ‘Bankruptcy of employer,’ ‘bad business,’ and ‘unstable job’  DWS (separation due to)  ‘company and plant closing and moving,’ ‘insufficient work’ ‘position or shift abolished in the U.S.’

3. Result (2): Job loss prob.  Table 8 Probit Estimates of the Determinants of Job Losses in Japan and the U.S. JPN 1997 ESS 2007ESS Coeff. s.e. M.E. s.e. Coeff. s.e. M.E. s.e. *** *** *** *** ten5to9 -0.464 0.014 -0.025 0.001 -0.383 0.017 -0.022 0.001 *** *** *** *** ten10to14 -0.653 0.021 -0.028 0.001 -0.513 0.022 -0.025 0.001 *** *** *** *** ten15+ -0.968 0.021 -0.048 0.001 -0.862 0.022 -0.047 0.001 *** *** *** *** age 0.092 0.006 0.006 0.000 0.102 0.007 0.007 0.000 *** *** *** *** age2/100 -0.124 0.008 -0.008 0.001 -0.122 0.010 -0.008 0.001 female 0.137 0.014 *** 0.009 0.001 *** 0.040 0.017 ** 0.003 0.001 *** juniorcollege -0.117 0.016 *** -0.007 0.001 *** -0.045 0.024 * -0.003 0.001 * *** *** *** *** university -0.280 0.019 -0.016 0.001 -0.208 0.019 -0.013 0.001 sample size 185325 129066 obs. prob. of job loss 0.042 0.037

3. Result (2): job loss prob.  Table 8 Probit Estimates of the Determinants of Job Losses in Japan and the U.S. the U.S. 1996 CPS Jan. 2006 CPS Feb. Coeff. s.e. M.E. s.e. Coeff. s.e. M.E. s.e. ten5to9 -0.332 0.037 *** -0.031 0.003 *** -0.231 0.040 *** -0.013 0.002 *** ten10to14 -0.468 0.059 *** -0.037 0.003 *** -0.404 0.064 *** -0.019 0.002 *** ten15+ -0.464 0.057 *** -0.037 0.003 *** -0.525 0.058 *** -0.024 0.002 *** age -0.041 0.015 *** -0.004 0.002 *** -0.035 0.015 ** -0.002 0.001 ** *** *** *** *** age2/100 0.055 0.021 0.006 0.002 0.056 0.021 0.004 0.001 0.016 0.032 0.002 0.003 -0.045 0.035 -0.003 0.002 female -0.050 0.049 -0.005 0.005 -0.025 0.050 -0.002 0.003 juniorcollege university -0.072 0.040 * -0.007 0.004 * -0.057 0.041 -0.004 0.003 sample size 22337 28186 obs. prob. of job loss 0.059 0.034

4. Remarks  In spite of the prolonged economic stagnation, the ten-year job retention rates of core employees in Japan were stable. In contrast, in spite of the longest economic expansion, the comparable job retention rates for core employees actually fell in the U.S.  The probit estimates of job losses equations in the two nations also point to the resilience of job security of such core employees in Japan, whereas showing a significant loss of job security of such core employees in the U.S. 5. Additional Discussion

 Stable and changing aspects (Kato and Kambayashi, 2010) Figure 6b: Transition of Share of Retained Regular Workers ALL Regular Employee; by Cohort "Standard" Career Workers who Started at age 20-24 and tenure 0-4

6.0

5.0

1967 when cohort age is 20-24 4.0 1972 1977 3.0 1982 64 Population in each year (%) year each in Population 64

- 1987 1992 2.0 1997

Proportion to 15 to Proportion 1.0

0.0 age 20-24 age 25-29 age 30-34 age 35-39 age 40-44 age 45-49 tenure 0-4 tenure 5-9 tenure 10-14 tenure 15-19 tenure 20-24 tenure 25-29 present 5 yr later 10 yr later 15 yr later 20 yr later 25 yr later 5. Additional Discussion

 Stable and changing aspects (Kato and Kambayashi, 2011b) Share of regular and non-regular workers within population in Japan (1982-2007) age 18-70 100

80 self-employed 70

60 open-end contract with titles of non-regular 50 short-term contract with title of non-regular 40 short-term contract with tiltles of 30 regular open-end contract with tiltes of 20 regular 10

0 1982 1987 1992 1997 2002 2007 5. Additional Discussion

 Not the “core” of employment but the “periphery” of employment is changing?

 Need to expand the view to the whole of society (not within employees) to understand the recent change of Japanese labor markets.