1. 1 Employment insurance: Experience from Japan Celine Felix & Valerie Schmitt ILO Decent Work Team, Bangkok Bangkok, December 13, 2010 Decent Work for All ASIAN DECENT WORK DECADE 2006-2015

2. 2 Table of content 1.Characteristics of the scheme: scheme’s description, eligibility criteria. 2.A system with 2 functions : Combination of unemployment insurance and employment services 3.Performance of the scheme 4.Facing current challenges: impact of crisis, temporary workers

3. 3 A Social Insurance system

4. Description of the scheme Originally introduced in 1947 in Japan Unemployment Insurance Law  Employment Insurance Law with the revision in 1974 and several amendments –latest in 2010 Under the Surpervision on the Ministry of health, Labor and Welfare (MHLW) Compulsory to any enterprise which employs more than one 1 worker Voluntary coverage for employees in agricultural, forestry, and fishery establishements with – 5 regular employees Special systems for daily workers, seamen and civil servants 4

5. Eligibility criteria -Employees – 65 - Be capable and willing to work -Insured by the EI for 6 months or + during last year before unemployment - Registered w/ the Public employment Security Off. and report every 4 weeks 5

6. 6 Table of content 1.Characteristics of the scheme: scheme’s description, eligibility criteria. 2.A system with 2 functions : Combination of unemployment insurance and employment services 3.Performance of the scheme 4.Facing current challenges: impact of crisis, temporary workers

7. Function of the scheme Mix of active and passive support for job losers/jobseekers 7 Function 1 provides unemployment benefits to compensate the lost income until the insured person get a job = maintain stability in the worker’s life Function 2 Operates activities for employment stability, skills development and employment welfare = promote re- employment

8. 8 Employment insurance F1: Unemployment benefit (in cash) F2: Services (in kind) 1- benefits paid to unemployed workers seeking employment ( general employees: basic allowance + skill acquirement, lodging, injury and sickness allowances, OAge employees, Short term employee: lump sum, daily labor) 2- benefits for expediting employment: re-employment allowance, outfit allowance, moving expenses 3- benefits for vocational training 4- benefits for securing continuance of employment: OA continuous empl benefit (60-65), Chilcare leave, family care leave 1- benefits paid to unemployed workers seeking employment ( general employees: basic allowance + skill acquirement, lodging, injury and sickness allowances, OAge employees, Short term employee: lump sum, daily labor) 2- benefits for expediting employment: re-employment allowance, outfit allowance, moving expenses 3- benefits for vocational training 4- benefits for securing continuance of employment: OA continuous empl benefit (60-65), Chilcare leave, family care leave 1- Service for employment stabilization, 2- Service for Developing Human resources, 3- Service for Employees’ welfare 1- Service for employment stabilization, 2- Service for Developing Human resources, 3- Service for Employees’ welfare

9. Benefit level and duration -The longer time you have contributed … -The older you are … -The more difficulties you have to get employed (disabled, etc.) … … the longer you get the unemployment benefits 9 Function 1 Basic all.

10. Sources of funds, benefit level and duration Source of fundingBenefit levelDuration Insured employee Employee (0.8%*) Employer (1.15%) Gvt (subsidy as % of the UB cost) Between 50-80% of the insured average daily wage immediately in the 6 months before unemployment (higher % awarded to lower wage earners) -Min and max caped on age. - Special daily allowance to cover cost of vocational training, transportation for job search, moving and lodging -7 day waiting period (or more depending on reason for unemp.) - Paid between 90 and 150 depending on length of coverage, age, reason for unemployment, employment prospects. Poss. Extension if worker from an ind. in recession, illness or undergoing training Agr, forestry, fishery Employee (0.9%*) Employer (1.25%) Gvt (subsidy as % of UB cost) Constructi on worker Employee (0.9%*) Employer (1.35%) Gvt (subsidy as % of UB cost) Daily worker Employee (0.6%*) Employer (0.9%) Gvt (subsidy as % of UB cost) 10 * Of monthly earnings (salary and bonuses before tax)

11. Evolution to respond to the changing job market 2001: some criteria for part time and temporary workers abolished, notably yearly income threshold Incentive to move temporary workers to permanent workers 11 Function 1 Basic all.

12. Obj 2: Active Labor Market policies Objective: Operates activities for employment stability, skills development and employment welfare Hello work: employment councelling and placement counter 12 promote return to employment

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14. 14 Table of content 1.Characteristics of the scheme: eligibility, legal, effective coverage 2.A system with 2 functions : Combination of unemployment insurance and employment services 3.Performance of the scheme 4.Facing current challenges: impact of crisis, temporary workers and youth unemployment 5.Lessons learnt

15. Performance of the scheme In terms of Income protection effects -Coverage (legal, effective) -Benefits (replacement rate, duration)  adequacy -Financial sustainability (demographic ratio, ratio of benefit expenditure to contribution income) Efficiency effects –Job search and post unemployment wages 15

16. 16 Legal coverage

17. 17 Effective coverage

18. 18 Legal and effective coverage Source: statistical annex of ILO’s World Social Security Report 2010 Wide gap >LT enemployed + new entrants to the labour market –”freeters” + non regular employees

19. Adequacy Level of unemployment benefit (benchmark: minimum wage) Level of benefit (benchmark: nominal wage (average) Japan (2007)99.128.4 19 Source: ILO, 2009c, Social Security Inquiry database Average monthly Unemployment benefit levels or basic allowance (Kihon Teate)

20. Financial sustainability of the scheme Demographic ratio (Beneficiaries / # of insured people) = 1.5% (2007)  low burden After crisis Demographic ratio: 2.5% 20

21. Overall performance Income protection effects CoverageConsumption smoothingImpact on income redistribution Formal sector + extension to temporary workers Strong protectionProgressive Efficiency effects Job searchEquilibrium labor market outcomes Restructuring and mobility Moral hazard problem?Increased unemployment? Strongly promotes 21

22. 22 Table of content 1.Characteristics of the scheme: scheme’s description, eligibility criteria. 2.A system with 2 functions : Combination of unemployment insurance and employment services 3.Performance of the scheme 4.Facing current challenges: impact of crisis, temporary workers

23. Impact of crisis 23 Unemployment rate, May 2010 = 5,2% (OECD, Employment Outlook 2010)  + 1.4 prior crisis

24. Facing the crisis: impact on employmt, hours and pdcty 24 Shows Japanese employers greater extent to preserve jobs, despite deterioration of business conditions – work sharing, reduced overtime hours etc.  Gradual decline in unemployment rate in the recovery Source: Employment Outlook 2010- How does Japan compare?

25. EI and the crisis Recognition that such schemes can act as automatic stablizers in times of crises -Basic allowance conditions relaxed: from 12 months to 6 months -Eligibility period extended by up to 60 days upon decision of local public job-placement offices or « Hello Work » -Expansion of the scope of people qualifying to take out insurance to improve coverage of temporary workers (amendment in March 2010) employment prospect: from 6 months to 31 days -Better incentives to get back to work: early reemployment allowance increased. 25

26. EI and the crisis (foll.) Decisive role of of public employment service to provide public employment service (PES) -Increase of PES staffing  Case load fell despite the increased # of job seekers (23.4%)  Increase in the number of placement - One stop service approach developped Key role of PES for job matching, particularly low- wage workers but increase of « non standard » workers, incl. part time workers Source: OECD, Employment Outlook 2010 26

27. Temporary workers: the job card system (from 2008) Obj: create a society where everyone is provided with the opportunity to develop their skills and be capable of displaying their abilities. Fact: vicious cycle where part-timers (Freeters) who had no choice but to have become non regular workers during the “job-finding ice age”, etc  Creation of the Job-Card to provide support for the ability development and stable employment  Involvement of government offering 1) career consultations, 2) practical vocational training in corporating on-the-job training at enterprises, and 3) compilation of Job-Card that include the results of ability from enterprises, evaluations and employment record. 27

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29. The job card system 29

30. Thank you! 30