1 Demand for Labor and Quality of Employment at Forum on the Restated OECD Jobs Strategy in Tokyo October 30-31, 2006 Junichi Goto Kobe University Japan

2 Outline Outline Good Macroeconomic Policies – key to labor demand Need to reduce demand-supply gap – effective labor demand Pros and Cons to ALMP Quantity and Quality of labor demand Coping with labor market duality –Lessons from female workers in Japan

3 1. Good macroeconomic policies are essential to increase labor demand Expansion of employment cannot be achieved without economic growth. –Economic performances of OECD countries now are generally better than those in early 1990s. –Unemployment rates now are generally lower than those in early 1990s (except for Japan and Germany) Both long-term growth and short-term stabilization are important.

4 2. Erasing demand-supply gap is important: ‘ Effective ’ labor demand In some countries (e.g., Japan and Germany), unemployment rates are higher in spite of better economic performance. Regional disparity Demand – supply gaps in terms of: –Job categories –Type of employments (e.g., full-time vs. part-time) –Skills and education level (e.g., Douglas-Arisawa ’ s low)

5 Disparity between growth and unemployment Blue line: growth rate, pink line: unemployment rate In Japan and Germany, unemployment rate has been increasing without regard to macroeconomic conditions.

6 3. Does intervention reduce labor demand? -- Pros and Cons for ALMP OECD report –ALMP is effective and greatly needed. Chicago school (e.g., Heckman) –ALMP raises cost of labor. –Higher cost of labor discourages employments. How to reconcile? –The market determines the long-run equilibrium. –But, ALMP is important to reduce short-run adjustment cost

7 4. Quantity and Quality of Labor Demand To expand the labor demand is utmost important to workers ’ welfare. The increase in employment may be a necessary condition, but not a sufficient condition for workers ’ welfare. More jobs with lower quality may not be desirable. Both quantity and quality should be taken into account when policies on labor demand are discussed. –An example : part-time workers in Japan

8 Female employment is expanding …..

9 But, only non-regular workers are increaseing

10 And wage gap has been widened

11 5. Coping with labor market duality Decent works for everyone –women –Older workers –Youth, etc. Accommodations for the weak Policies with longer and wider perspectives

12 An example of duality and remedy for it: The case of Japanese female labor Gender wage gap in the egalitarian society –The M-shape due to child bearing and child care. –Mainstream vs. marginal workers: The second challenge is difficult. Deep-rooted duality –Social norm on family responsibility Policies with longer and wider perspective is more important than short-term fix.

13 Gender wage gap in Japan is one of the worst 

14 Gender wage gap is bigger for older workers

15 The M-shape due to child bearing and child care

16 Mainstream vs. marginal workers (fundamental divide in Japan)

17 Flat wage profile for non-standard workers

18 Female managers are (very) few: Gender gaps in promotion, too.

19 Women bear much more family responsibilities than men: Social norm? longer working hours of men?

20 Mentality is also a big factor

21 Conclusions Conclusions Good Macroeconomic Policies are key to the expansion of labor demand To reduce demand-supply gap is also important – ‘ effective ’ labor demand Balanced labor-market interventions are important. -- ALMPs should be administered so that they do not reduce labor demand. Both quantity and quality of labor demand are important. Coping with labor market duality requires a wide range of policy tools (including education) –Lessons from female workers in Japan