Ryo Kambayashi

The Japanese Employment System after the Bubble Burst: New Evidence

Taking advantage of our first access to micro data from the 2002 Employment Status Survey (ESS) as well as previous years of the ESS, we provide new evidence on changes in the “lifetime employment” practice which serves as a foundation for the Japanese employment system. Overall, we find evidence for the resilience of the Japanese employment system. Job stability of regular employees did not fall much during the first five years of Japan’s Great Recession following the bubble. Our cohort analysis of narrowly-defined “lifetime employment” workers (new school graduate hires) also points to the stability of the size of the “lifetime employment” pool over time. To be consistent with the enduring nature of the ‘lifetime employment” system, we also find some evidence for the buoyancy of other complementary elements of the Japanese employment system. This, however, does not mean the complete rigidity of the Japanese employment system. Apparently the Japanese employment system has evolved in response to Japan’s prolonged stagnation. First, job stability of regular employees eventually fell during the final years of the Great Recession. It took years yet the magnitude of the fall turned out to be notable and for some groups of workers it was large. Second, the burden of downsizing during Japan’s prolonged stagnation fell disproportionately on women as opposed to men and on highschool graduates as opposed to college graduates. The largest fall in job stability was found for female regular employees who were mid-career hires and working for large firms. We interpret our findings as a largely rational response of Japanese firms that were in dire need for downward employment adjustment yet were concerned about the cost of reneging on their implicit longterm employment contracts. *We benefitted greatly from comments from the Editorial Committee, Joe Altonji, Till von Wachter, and other participants at the ESRI Workshop on Japan’s Bubble, Deflation and Longterm Stagnation, March 21 - 22, 2008, Columbia University.

Wage and Productivity Differentials in Japan: The Role of Labor Market Mechanisms

This paper aims at explaining two stylized facts of the Lost Decade in Japan: rising wage inequalities and increasing firm-level productivity differentials. We build a model where firms can choose between efficiency wages with endogenous effort and competitive wages, and show that it can replicate those facts. Using Japanese microeconomic data, we find support for the existence of efficiency wages in one group of firms and competitive wages in the other group. Based on those results, a simulation shows that the share of firms using efficiency wages has declined, within sectors, during the Lost Decade, as predicted by the model.

Long-Term Employment and Job Security over the Past 25 Years

The authors document and contrast changes (or lack thereof) in job stability over the past 25 years between Japan and the United States. Prime-age male workers with at least five years of tenure in Japan continued to enjoy much higher job stability than did their U.S. counterparts. Most remarkably, Japan’s “Lost Decade” had little discernible adverse effect on the job stability of this group of Japanese employees. By contrast, job stability for mid-career hires and youth workers deteriorated in Japan. The authors’ cross-national regression analysis of job loss confirms the consistently more important role that seniority plays in protecting workers from job loss in Japan than in the United States and reveals that this gap in seniority’s influence on job stability between the two countries widened. Overall, it is the U.S. economy with the longest economic expansion, not the Japanese economy with the longest economic stagnation, that experienced deteriorating job stability, pointing to the absence of convergence of the Japanese and U.S. systems.

Trends in Long-term Employment and Job Security in Japan and the United States: The Last Twenty-Five Years

Abstract Taking advantage of a recent relaxation of Japanese government’s data release policy, we conduct a cross-national analysis of micro data from Japan’s Employment Status Survey and its U.S. counterpart, Current Population Survey. Our focus is to document and contrast changes in long-term employment and job security over the last twenty five years between the two largest advanced economies. We find that in spite of the prolonged economic stagnation, the ten-year job retention rates of core employees (employees of prime age of 30-44 who have already accumulated at least five years of tenure) in Japan were remarkably stable at around 70 percent over the last twenty-five years, and there is little evidence that Japan’s Great Recession of the 1990s had a deleterious effect on job stability of such employees. In contrast, notwithstanding its longest economic expansion in history, the comparable job retention rates for core employees in the U.S. actually fell from over 50 percent to below 40 percent over the same time period. The probit estimates of job loss models in the two nations also point to the resilience of job security of core employees in Japan, whereas showing a significant loss of job security for similar employees in the U.S. Though core employees in Japan turned out to have weathered their Great Recession well, we find that mid-career hires and young new job market entrants were less fortunate, with their employment stability deteriorating significantly. We interpret the findings, based on the theory of institutional complementarity, and derive lessons for policy makers around the world who are currently facing their own Great Recessions and developing effective policy responses. (JEL: J63, J64, J41)

Task Polarization in the Japanese Labor Market: Evidence of a Long-Term Trend

By quantifying the various skills required for different occupations, we examine the long-term trend in labor-market polarization in Japan in terms of tasks from 1960 to 2005. We find that the input share of nonroutine tasks has consistently and gradually increased, while that of routine tasks has decreased. With regard to nonroutine tasks, we observe an increase in the input shares of both high-skilled analytical and interactive tasks and low-skilled manual tasks. While we also find that the polarization depends on the introduction of technology, the progress of polarization is slower and smaller in Japan than in other countries.

Crowding-Out Effect of Subsidized Childcare

We estimate the causal effects of childcare availability on the maternal employment rate using prefecture panel data constructed from the Japanese quinquennial census 1990-2010. We find that childcare availability did not increase maternal employment due to the crowding-out effects. Namely, families substituted accredited childcare for informal care by grandparents. We also find evidence that more and more families do not live with grandparents who used to take care of grandchildren, as the availability of accredited childcare increases.We estimate the causal effects of childcare availability on the maternal employment rate using prefecture panel data constructed from the Japanese quinquennial census 1990-2010. We find that childcare availability did not increase maternal employment, because the expansion of accredited childcare crowded out informal childcare provided by grandparents. However, as more and more families do not live with grandparents who used to take care of grandchildren, this crowding effect became weaker in the 2000s.

Good Jobs and Bad Jobs in Japan: 1982-2007

Abstract Previous studies on the Japanese labor market stress as a source of inequality labor market segmentation--the primary (good job) segment characterized by high wage/benefit, job security, and opportunity for training and development and the secondary (bad job) segment characterized by the lack of such attributes. This paper provides novel evidence on changes (or lack thereof) in the nature and scope of labor market segmentation in Japan over the last three decades. Specifically we take advantage of the Japanese government’s recent relaxation of the data release policy, and analyze micro data from the Employment Status Survey (ESS) over 1982-2007. First, the literature often defines the primary and secondary segments, using information on whether or not a worker is on a fixed-term contract or on an indefinite contract. We provide new evidence that such a de jure definition of labor market segmentation is less useful than an alternative de fact definition—whether a worker is termed as a standard employee (seishain) in the place of her employment. Second, using our preferred de facto definition, we confirm that the size of the good job segment relative to the bad job segment has been indeed falling steadily over the last three decades. However, when we take into consideration transition from self-employment to employment, the most significant compositional shift of the Japanese labor market over the last decades is found to be a steady and substantive shift from selfemployment to the bad job segment. Such a shift is found to be particularly notable for women, dwarfing any transition from the good job segment to the bad job segment. We further find evidence that such a compositional change from self-employment to the bad job segment is likely to be a shift from one type of bad jobs to another type of bad jobs rather than from good jobs to bad jobs. As such, our findings cast doubt on the popular narrative of the steady deterioration of job quality. However, for one particular group of Japanese workers—youth, we find compelling evidence in support of the popular narrative. Especially all progresses that young women made in enhancing their share of standard employment during Japan’s high growth decade in the 1980s are found to be entirely undone during the Lost Decade. (JEL: J63, J64, J41)

How Does Early Childcare Enrollment Affect Children, Parents, and Their Interactions?*

We estimate the effects of childcare enrollment on child outcomes by exploiting a staggered childcare expansion across regions in Japan. We find that childcare improves language development among boys and reduces aggression and the symptoms of ADHD among the children of low-education mothers. Estimates show that the improved child behavior is strongly associated with better parenting quality and maternal wellbeing. Evidence also suggests that promoting positive parenting practices is an important element of an effective childcare program. Our estimates for marginal treatment effects indicate that children who would benefit most from childcare are less likely to attend, implying inefficient allocation.

Incidence of Strict Quality Standards: Protection of Consumers or Windfall for Professionals?

This paper examines the effects of upgrading product quality standards on product and professional labor market equilibriums when both markets are regulated. The Japanese government revised the Building Standards Act in June 2007, requiring a stricter review process for approving the plans of large-scale buildings. This regulatory change increased the wages of certified architects in Tokyo by 30 percent but did not increase their total hours worked because of an inelastic labor supply. The stricter quality standards created a quasi rent for certified architects and owners of condominiums at a cost to consumers. Evidence suggests that the new standards increased the transaction price of existing condominiums by 15 percent in the Tokyo metropolitan area.

Ageing and Employment in Japan

This book is a concerted attempt by economists to investigate and offer remedies for some of the difficulties associated with an ageing labor market.