/ 22 April 2010

Japan may suffer second ‘Lost Generation’

Japanese college student Hiroki was keen to graduate last month and start his first full-time job, but despite applying to 40 firms, from IT ventures to big media companies, nary an offer was in sight.

So Hiroki did what a growing number of students are doing to avoid joining what some experts fear will become a “Lost Generation” of young Japanese trapped in unstable, low-pay jobs. He stayed at university and kept looking.

“If you’re a ‘freeter’, there’s no security,” said the slender, 23-year-old Hiroki, who declined to give his full name, referring to youth who flit from part-time job to part-time job after leaving school.

Japan already has one “Lost Generation” of youth stuck in insecure jobs as part-timers, contract workers and temps after failing to find steady employment when they graduated from high school or college during a hiring “Ice Age” from 1994 to 2004.

Now the country’s leaders worry that a still-fragile recovery from Japan’s worst recession in 60 years and cautious corporate hiring plans are putting a second batch of youth at risk, raising prospects of a further waste of human resources the country can ill afford as it struggles with an ageing, shrinking population.

Experts share the concern, but critics charge that efforts by Prime Minister Yukio Hatoyama’s government to fix the problem, including planned new limits on employing temporary workers, fall short at best, or, at worst, aggravate the problem.

“What they should be doing is redressing the protection and security of the permanent workers, making it easier to change jobs, improving pension mobility, and making the differences [between regular and non-regular workers] narrower,” said Richard Jerram, chief economist at Macquarie Securities.

“If you do the opposite, all that happens is that you reduce overall enthusiasm to hire. They are going about it in exactly the wrong way.”

‘One chance in a lifetime’
That an economic downturn and sluggish recovery spell a tough job market is hardly surprising and indeed, at 4,9%, Japan’s jobless rate is still the envy of many other countries.

Even at the depth of Japan’s employment “Ice Age”, about 90% of university graduates had jobs when they left school.

But a system in which companies hire masses of new graduates each April, often after making offers a year earlier, means the chances of stable, career track jobs narrow sharply for those left out.

“There are some people who become regular employees after working as temps, but not many,” said Shin Hasegawa, vice-president of Tokyo’s Aoyama Gakuin University, where students can now opt for a fifth year for half tuition.

“You could say it’s one chance in a lifetime.”

The system, cemented during Japan’s era of rapid economic growth after World War II, provided a steady source of cheap and malleable workers for companies’ life-time employment systems, where firms provided training and salaries rose steadily with age.

While life-time employment has unravelled during decades of economic stagnation, the recruitment system remains much the same. That means the burden falls mainly on new graduates and non-regular workers, now about one-third of Japan’s labour force, when companies cut back on hiring to save costs.

“To protect the high wages of senior workers, they are sacrificing opportunities for youth,” said Naohiro Yashiro, an economics professor at the International Christian University (ICU) in Tokyo. “Companies put all the adjustment onto non-regular workers and new graduates, who are the weakest.”

Government efforts to address the problem are focusing on career counselling, job training and urging companies to hire more full-timers, on the one hand, while putting new limits on employing temps on the other.

“If students don’t get job offers before they graduate, they often become ‘freeters’ or other non-regular workers with low salaries and no benefits, so we want to help them as much as possible to find stable employment before they graduate,” said Masayo Murayama at the Tokyo Metropolitan Government, which has set up a special counselling service for unemployed new grads.

Labour market adjustment
Hatoyama’s Cabinet last month approved a Bill that would prohibit worker dispatch firms from sending short-term temps to manufacturers, with the ban to take effect in three years.

The move by the Democratic Party-led government, which took power last year pledging to pay more heed to worker and consumer rights than companies, would reverse deregulation implemented by the business-friendly Liberal Democratic Party in 2004.

Experts say counselling and training may help at the edges, in part by getting students to widen their job search beyond the “brand name” firms that many target in hopes of job security.

But critics argue restrictions on temporary workers will make the situation worse longer-term by forcing companies to flee abroad in search of cheaper, more flexible sources of labour.

“The labour market needs to be more flexible, accepting a variety of workers including temporary workers,” said Yashiro, who advocates revamping the seniority-based wage system, for example by adopting equal pay for equal work.

“It’s a choice between being unemployed and having an unstable job. But the government attitude is, stable or nothing.”

Such changes, however, would be tough for the Democratic Party-led ruling coalition to push at present, given the importance of labour unions to the party’s electoral base and a slide in government voter ratings due to doubts about Hatoyama’s ability to make tough policy decisions.

“It’s very difficult for a left of centre government to have a growth plan that involves lots of labour market adjustment. They have a lot of labour money,” said Macquarie’s Jerram.

“It’s too difficult if there is no political leadership to push the things that are necessary, but unpopular.”

In the meantime, for students like Hiroki, who has applied to about 10 firms this time round, prospects are murky.

“Fewer of the places where I want to work are hiring this year,” he said. “I don’t really know what my chances are.” – Reuters