Japan is ageing and its working-age population is declining. In fact, the Japanese labour force will decline by about 10 million people to around 50 million workers in 2030 (Chart), and the ratio of working-age people to the elderly will fall from 2.8 nowadays to 1.3 in 2050. Japan needs to make more efficient use of everyone’s skills to address the looming labour shortages: greater gender equality is key to sustaining economic growth. To illustrate the potential gains: if female labour force participation rates of some 63% today were to catch up with male employment rates of 84% over the next 20 years, then the fall in labour supply would be limited. Not only that, the economy would expand by almost 20% over two decades.
Gender differences in labour force participation in Japan are wide at some 21 percentage points compared with almost 17 percentage points across the OECD area. The gender pay gap at median earnings is 27%, the second highest in the OECD. These pay differentials are strongly linked to the substantial differences in terms and conditions of employment between relatively lowly paid non-regular workers–almost 70% of them women who frequently work part-time–and the regular employees–almost 70% men who work full time and have considerable employment-security. Even when young women enter regular employment upon completing university, they generally enter the more routine ippan-shoku career stream, and are unlikely to enter fast-track sougou-shoku career streams in Japanese companies, where workers are groomed for higher management. This helps to explain why fewer than 4% of listed company board members are women–the second lowest in the OECD.
Regular employees receive employer-provided training and benefits, such as spousal and dependents allowances, and their compensation is essentially seniority-based and strongly linked to age and tenure. In return, employees signal their commitment to their employer and career by putting in long hours, including working unpaid overtime and taking less leave than they are entitled to. In such a workplace culture it is very difficult for regular employees to be more fully involved in caring for children or elderly parents: of all men in the OECD, Japanese men spend the least time in unpaid housework, just 59 minutes per day compared with 269 minutes for women. The male-breadwinner model is still firmly embedded in Japanese labour market institutions.
The Japanese social policy model includes some modern policies to help parents reconcile their work and family commitments. For example, it provides for one year of paid leave, which becomes 14 months if both parents take leave. Germany has a similar system although its payment rates are almost twice as high as in Japan: by late 2010 the percentage of fathers taking leave, had increased to 25% in Germany, while this was still less than 3% in Japan in 2011. In addition to pre-schools that cover almost all 4 and 5-year olds, Japan provides income-tested day-care support to help combine parenting and employment when children are very young. However, in 2009 public spending on day-care and pre-school facilities amounted to 0.4% of GDP, around one-third of what Denmark, France or Sweden invest in this. Hence, there are capacity constraints, high fees and long waiting lists for day-care facilities, especially in the Tokyo metropolitan area.
In the end, many Japanese women withdraw from the labour force upon childbirth, rather than taking parental leave. And when mothers return to the labour market as children grow up, they often end up in low-paid non-regular jobs. Anyway, they often cannot return to regular employment positions because many jobs require candidates to be under a given age. Moreover, the Japanese tax/benefit model provides strong financial incentives for spouses to limit their earnings. In 2011 spouses with earnings below one million yen (about 30% of average earnings) were exempt from income tax. If their earnings were below ¥1.3 million they are covered by pension, health and long-term care insurance without having to make contributions.
Gender barriers prevent Japan from reaping the benefits of its investment in education. After all, young women in Japan today are more likely to have a university degree than young men: 59% of women and 52% of men aged 25-34 years, compared with 23% and 32%, respectively, for women and men aged 45-54. Further progress can be made in terms of choice of study as, for example, around 60% of graduates with health and education degrees were women, compared with only around 10% in computing and engineering degrees. These gender gaps do not appear to be related to ability as compared to the large gender gaps in educational choices; gender gaps in reading, maths and science literacy for boys and girls around age 15 are relatively small. Japanese policy should raise awareness among young men and women about the consequences of educational choices for employment and career prospects.
Japan seems to be in a “catch 22”. As long as female workers have limited incentives to pursue a career, they are indeed more likely to withdraw from the labour force, only to return, if household income so requires, in jobs for which they are frequently over-qualified. And as long as women are expected to withdraw from the labour force around childbirth, Japanese employers are likely to perceive women as less committed to their careers and opt for men.
To break this vicious circle, Japanese labour market institutions need to change. Remuneration systems and career progression should be based on performance rather than seniority, while the talent pool of workers can be expanded by facilitating “returning mothers” and part-time workers to get back into regular employment. Importantly, the “long hours” culture should be curtailed so that workplaces become attractive to both parents and facilitate a more equal gender balance in paid and unpaid work. Leadership in workplaces will be key. Senior managers should lead by example, through taking their own holidays, and, for example, demanding middle management ensures that male and female employees use their full parental leave entitlements. Companies should be encouraged to take on young female graduates, returning mothers and part-time workers in regular career streams and to demonstrate this clearly.
Changing workplace practices in this manner will require sustained effort over a long period. But it is worth doing. Workplace cultures that are less overbearing and conducive to the reconciliation of work and family life of both parents will help address the looming labour shortages; and if the evidence of OECD countries like France and Sweden is anything to go by, could also help increase fertility rates. This could help address the ageing issue in the years ahead.
Another version of this article appeared in Nikkei Daily, 26 April 2013
OECD (2012), Closing the Gender Gap: Act Now, OECD Publishing
See also www.oecd.org/japan
©OECD Observer No 298, Q1 2014