Mary C Brinton
Harvard University
IN BRIEF
Japan has seen a significant increase in women's labour force participation over the last 15 years, but the impact of Japan's female workforce on overall productivity and GDP growth remains low due to an ongoing wage gap and under-representation in managerial roles. Adopting reforms at the firm level could help women maximise their workplace potential and transition to managerial roles or from irregular to regular employment.
For many years, women’s labour force participation patterns in Japan and South Korea were distinct from those in other post-industrial economies. Both countries had a so-called M-shaped age curve for female labour force participation, with large numbers of women exiting the labour force upon marriage or childbearing and then returning to paid work once their children entered school. While this pattern has persisted in South Korea, it has undergone considerable change in Japan in the past 15 years. In 2006, just over 60 per cent of Japanese women aged 30–34 were in the paid labour force. By 2023, this had increased to 80 per cent.
Despite this remarkable increase in women’s employment in Japan, the female–male wage gap has barely budged and the percentage of managers who are women remains far below the target set by former prime minister Shinzo Abe. Women’s contribution to Japan’s overall productivity and GDP growth remains stubbornly low.
The increase in women’s employment was one of the central aims of Abe’s now-famous ‘Womenomics’ policy package. Indeed, by 2016 the Japanese government and media were able to tout that the overall female labour force participation rate in Japan exceeded that in the United States.
There are likely two reasons for this increase in labour force participation. First, more and more Japanese women have remained single and childless. Unless they are relying entirely on their parents for income, they are in the labour force. Second, it is highly likely that the expansion of work-life policies at the firm level has helped increase the continuity of married women’s employment throughout the childrearing stage. Among Japanese working mothers whose employment status qualifies them for childcare leave, about 80 per cent take it and then return to the firm once their leave has ended.
It is well-known that the growth of the female labour force in Japan has disproportionately occurred in part-time and non-regular employment. This contributes heavily to the male–female gap in lifetime wages. But women’s representation in regular employment has increased as well, and it is unclear whether managers and firms have become effective in drawing on the abilities and experience of women who — unlike previous cohorts — are staying in the firm as regular employees after marriage and childbirth.
For example, it is yet to be seen whether middle-level managers know how to shape the workload of new mothers who have taken the short work-hour option (jitan) while their children are young. Such women are highly motivated to finish their work within a six-hour workday rather than the conventional workday of eight or more hours.
Learning to work efficiently is not a behaviour that has traditionally been highly valued by Japanese firms. This needs to change, and it can start with managers rewarding mothers who have learned how to work more effectively. The spillover effect to women who are non-mothers and to men could be very positive and might well lead to higher productivity for Japan overall.
An especially important group to target is university-educated women, whose representation in Japan’s labour force relative to male university graduates is much lower than in nearly all other OECD countries. Japan’s low productivity could be boosted if these women were managed more effectively.
Japanese sociologist Kazuo Yamaguchi has demonstrated the productivity-enhancing effects of company adoption of Gender Equality of Opportunity and Work-Life Balance policies. Companies with an equality opportunity policy are those that express a commitment to encourage employees to fulfil their potential regardless of gender, and companies with a work-life balance policy are defined as ones that have a department devoted to work-life balance solutions for employees.
Yamaguchi found that companies with more female university graduates had higher productivity if they had equal opportunity policies. The positive effect on company productivity was even greater if companies had both an equal opportunity and a work-life balance policy.
Looking back at the last decade and a half of change, it is clear that the government’s goal of bringing more women into the labour force and using policy levers — such as extended childcare leave, higher childcare leave benefits and the short work-hour option — to retain them has been successful. Dual-earner couples constitute the majority of households with two adults, and the era of the housewife has passed.
The next hurdle is to utilise female labour more productively, which will help accomplish the as-yet incomplete goal of increasing the proportion of women in management and leadership positions. Helping highly able women transition from irregular to regular employment and helping those who are already regular employees to maximise their potential in the workplace need to be primary goals.
Mary C Brinton is the Reischauer Institute Professor of Sociology at Harvard University.
https://doi.org/10.59425/eabc.1720389600
Harvard University
IN BRIEF
Japan has seen a significant increase in women's labour force participation over the last 15 years, but the impact of Japan's female workforce on overall productivity and GDP growth remains low due to an ongoing wage gap and under-representation in managerial roles. Adopting reforms at the firm level could help women maximise their workplace potential and transition to managerial roles or from irregular to regular employment.
For many years, women’s labour force participation patterns in Japan and South Korea were distinct from those in other post-industrial economies. Both countries had a so-called M-shaped age curve for female labour force participation, with large numbers of women exiting the labour force upon marriage or childbearing and then returning to paid work once their children entered school. While this pattern has persisted in South Korea, it has undergone considerable change in Japan in the past 15 years. In 2006, just over 60 per cent of Japanese women aged 30–34 were in the paid labour force. By 2023, this had increased to 80 per cent.
Despite this remarkable increase in women’s employment in Japan, the female–male wage gap has barely budged and the percentage of managers who are women remains far below the target set by former prime minister Shinzo Abe. Women’s contribution to Japan’s overall productivity and GDP growth remains stubbornly low.
The increase in women’s employment was one of the central aims of Abe’s now-famous ‘Womenomics’ policy package. Indeed, by 2016 the Japanese government and media were able to tout that the overall female labour force participation rate in Japan exceeded that in the United States.
There are likely two reasons for this increase in labour force participation. First, more and more Japanese women have remained single and childless. Unless they are relying entirely on their parents for income, they are in the labour force. Second, it is highly likely that the expansion of work-life policies at the firm level has helped increase the continuity of married women’s employment throughout the childrearing stage. Among Japanese working mothers whose employment status qualifies them for childcare leave, about 80 per cent take it and then return to the firm once their leave has ended.
It is well-known that the growth of the female labour force in Japan has disproportionately occurred in part-time and non-regular employment. This contributes heavily to the male–female gap in lifetime wages. But women’s representation in regular employment has increased as well, and it is unclear whether managers and firms have become effective in drawing on the abilities and experience of women who — unlike previous cohorts — are staying in the firm as regular employees after marriage and childbirth.
For example, it is yet to be seen whether middle-level managers know how to shape the workload of new mothers who have taken the short work-hour option (jitan) while their children are young. Such women are highly motivated to finish their work within a six-hour workday rather than the conventional workday of eight or more hours.
Learning to work efficiently is not a behaviour that has traditionally been highly valued by Japanese firms. This needs to change, and it can start with managers rewarding mothers who have learned how to work more effectively. The spillover effect to women who are non-mothers and to men could be very positive and might well lead to higher productivity for Japan overall.
An especially important group to target is university-educated women, whose representation in Japan’s labour force relative to male university graduates is much lower than in nearly all other OECD countries. Japan’s low productivity could be boosted if these women were managed more effectively.
Japanese sociologist Kazuo Yamaguchi has demonstrated the productivity-enhancing effects of company adoption of Gender Equality of Opportunity and Work-Life Balance policies. Companies with an equality opportunity policy are those that express a commitment to encourage employees to fulfil their potential regardless of gender, and companies with a work-life balance policy are defined as ones that have a department devoted to work-life balance solutions for employees.
Yamaguchi found that companies with more female university graduates had higher productivity if they had equal opportunity policies. The positive effect on company productivity was even greater if companies had both an equal opportunity and a work-life balance policy.
Looking back at the last decade and a half of change, it is clear that the government’s goal of bringing more women into the labour force and using policy levers — such as extended childcare leave, higher childcare leave benefits and the short work-hour option — to retain them has been successful. Dual-earner couples constitute the majority of households with two adults, and the era of the housewife has passed.
The next hurdle is to utilise female labour more productively, which will help accomplish the as-yet incomplete goal of increasing the proportion of women in management and leadership positions. Helping highly able women transition from irregular to regular employment and helping those who are already regular employees to maximise their potential in the workplace need to be primary goals.
Mary C Brinton is the Reischauer Institute Professor of Sociology at Harvard University.
https://doi.org/10.59425/eabc.1720389600
Japan's jobs market on the way to modernisation
Yuri Okina
Japan Research Institute
IN BRIEF
The traditional corporate culture in Japan, anchored on lifetime employment and a seniority-based wage system, is gradually being modernised, influenced by the growth strategies under the administration of Prime Minister Fumio Kishida. Policymakers are focusing on promoting upskilling and labour mobility, while companies are raising wages to retain talent and compete with global firms. The increased dynamism of the Japanese labour market could contribute to the long-term growth of the Japanese economy.
In Japan’s labour market, an increase in people changing jobs is occurring in the middle of a growing labour shortage, and changing traditional features of Japanese corporate culture such as lifetime employment and seniority-based remuneration. Under the administration of Prime Minister Fumio Kishida, labour market reform is a major theme in Japan’s growth strategy with increased government spending on the development of individual skills. This is steadily but surely changing the relationship between Japanese workers and their employers.
According to a 2018 Cabinet Office survey, about 10 per cent of mid-career and younger employees felt that it was beneficial to seek new jobs in order to better utilise their talents or were dissatisfied with their current position. A 2021 survey revealed that over 80 per cent of employees aged 25–44 expressed a desire to develop their careers independently.
By 2022, more than half Japanese companies had implemented systems allowing for side jobs and multiple occupations. According to a 2023 survey, 37 per cent of the working population was considering or planning a job change. More than half of those under 34 expressed a desire to change jobs. These data suggest that Japan’s post-pandemic labour market is becoming much more dynamic.
This change can be explained by three factors — the government’s labour market reforms, labour shortages and changes in the market such as rising wages and digital transformation.
The essence of the government’s labour market reform is expanding ‘job-based’ employment — as distinct from Japan’s traditional ‘membership-based’ system — that offers compensation commensurate with skills while facilitating reskilling and labour mobility. These policies aim to lift productivity and move Japan in what is thought to be the right direction.
But the changes are in fact fundamentally being driven by labour shortage.
Japan’s working-age population is expected to decrease by nearly 15 per cent between 2025 and 2040. As of April 2024, the seasonally adjusted ratio of effective job openings to jobseekers for all occupations was 1.26, but in industries like construction, it exceeds five.
Both large and small businesses have a strong desire to hire, making securing talent a critical issue. Labour shortages are just beginning to bite and are expected to become even more severe. Labour shortages put jobseekers in a better bargaining position.
The changes are also explained by market shifts such as rising wages and an increased need for digital talent. Nominal wages have been rising since 2023 with the advent of inflation driven by rising energy prices and increasing geopolitical risk. Advances in digitalisation have boosted opportunities for higher wages through new technologies and increased competition from global companies for top talent.
These changes are now forcing Japanese companies to transform their business model. Over the past 30 years, most Japanese companies have defended their business by cutting prices, suppressing costs and wages and preserving employment. But companies now need to shift to a business model that raises wages, retains talent, increases added value and expands profits by appropriately increasing mark-up rates.
To secure the funds to invest in wage increases and investment in human capital, companies have to achieve sustainably high profits to bankroll them while also improving productivity. This also means that workers will likely shift towards companies with high productivity. If these changes are successful, they could lead to increased labour productivity on a macroeconomic level and contribute to the long-term growth of the Japanese economy.
The stock prices of Japanese listed companies have finally recovered to levels exceeding those seen 30 years ago. Unlike then, few view this level of stock prices as a bubble — rather, it reflects the expectation that Japanese listed companies can now undertake business model reforms aimed at raising capital returns that exceed long-term capital costs. The CEOs of prime market-listed companies are gradually prioritising long-term investment in intangible assets like human capital in response to requests from the Tokyo Stock Exchange in 2023 to consider stock prices and capital costs in their engagement with institutional investors.
This shift from an era of labour surplus to one of labour shortage requires new policy strategies. Individual reskilling needs support to ensure smooth labour mobility to companies and sectors with high labour productivity. Japan must also support corporate initiatives to adopt job-based employment suited to the new business model.
Creating an environment that facilitates business model reforms and corporate restructuring, including by supporting startups and mergers and acquisitions, is the challenge. Traditional labour market policy that emphasised the protection of long-term corporate employees will have to be replaced by the opposite: ‘active’ labour market policies that encourage higher wages and investment in human capital while making the labour market more dynamic.
Yuri Okina is Chairperson of the Japan Research Institute and Executive Vice President at the Nippon Institute for Research Advancement.
https://doi.org/10.59425/eabc.1720346400
Japan Research Institute
IN BRIEF
The traditional corporate culture in Japan, anchored on lifetime employment and a seniority-based wage system, is gradually being modernised, influenced by the growth strategies under the administration of Prime Minister Fumio Kishida. Policymakers are focusing on promoting upskilling and labour mobility, while companies are raising wages to retain talent and compete with global firms. The increased dynamism of the Japanese labour market could contribute to the long-term growth of the Japanese economy.
In Japan’s labour market, an increase in people changing jobs is occurring in the middle of a growing labour shortage, and changing traditional features of Japanese corporate culture such as lifetime employment and seniority-based remuneration. Under the administration of Prime Minister Fumio Kishida, labour market reform is a major theme in Japan’s growth strategy with increased government spending on the development of individual skills. This is steadily but surely changing the relationship between Japanese workers and their employers.
According to a 2018 Cabinet Office survey, about 10 per cent of mid-career and younger employees felt that it was beneficial to seek new jobs in order to better utilise their talents or were dissatisfied with their current position. A 2021 survey revealed that over 80 per cent of employees aged 25–44 expressed a desire to develop their careers independently.
By 2022, more than half Japanese companies had implemented systems allowing for side jobs and multiple occupations. According to a 2023 survey, 37 per cent of the working population was considering or planning a job change. More than half of those under 34 expressed a desire to change jobs. These data suggest that Japan’s post-pandemic labour market is becoming much more dynamic.
This change can be explained by three factors — the government’s labour market reforms, labour shortages and changes in the market such as rising wages and digital transformation.
The essence of the government’s labour market reform is expanding ‘job-based’ employment — as distinct from Japan’s traditional ‘membership-based’ system — that offers compensation commensurate with skills while facilitating reskilling and labour mobility. These policies aim to lift productivity and move Japan in what is thought to be the right direction.
But the changes are in fact fundamentally being driven by labour shortage.
Japan’s working-age population is expected to decrease by nearly 15 per cent between 2025 and 2040. As of April 2024, the seasonally adjusted ratio of effective job openings to jobseekers for all occupations was 1.26, but in industries like construction, it exceeds five.
Both large and small businesses have a strong desire to hire, making securing talent a critical issue. Labour shortages are just beginning to bite and are expected to become even more severe. Labour shortages put jobseekers in a better bargaining position.
The changes are also explained by market shifts such as rising wages and an increased need for digital talent. Nominal wages have been rising since 2023 with the advent of inflation driven by rising energy prices and increasing geopolitical risk. Advances in digitalisation have boosted opportunities for higher wages through new technologies and increased competition from global companies for top talent.
These changes are now forcing Japanese companies to transform their business model. Over the past 30 years, most Japanese companies have defended their business by cutting prices, suppressing costs and wages and preserving employment. But companies now need to shift to a business model that raises wages, retains talent, increases added value and expands profits by appropriately increasing mark-up rates.
To secure the funds to invest in wage increases and investment in human capital, companies have to achieve sustainably high profits to bankroll them while also improving productivity. This also means that workers will likely shift towards companies with high productivity. If these changes are successful, they could lead to increased labour productivity on a macroeconomic level and contribute to the long-term growth of the Japanese economy.
The stock prices of Japanese listed companies have finally recovered to levels exceeding those seen 30 years ago. Unlike then, few view this level of stock prices as a bubble — rather, it reflects the expectation that Japanese listed companies can now undertake business model reforms aimed at raising capital returns that exceed long-term capital costs. The CEOs of prime market-listed companies are gradually prioritising long-term investment in intangible assets like human capital in response to requests from the Tokyo Stock Exchange in 2023 to consider stock prices and capital costs in their engagement with institutional investors.
This shift from an era of labour surplus to one of labour shortage requires new policy strategies. Individual reskilling needs support to ensure smooth labour mobility to companies and sectors with high labour productivity. Japan must also support corporate initiatives to adopt job-based employment suited to the new business model.
Creating an environment that facilitates business model reforms and corporate restructuring, including by supporting startups and mergers and acquisitions, is the challenge. Traditional labour market policy that emphasised the protection of long-term corporate employees will have to be replaced by the opposite: ‘active’ labour market policies that encourage higher wages and investment in human capital while making the labour market more dynamic.
Yuri Okina is Chairperson of the Japan Research Institute and Executive Vice President at the Nippon Institute for Research Advancement.
https://doi.org/10.59425/eabc.1720346400
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