Business Talk


The Problem with Irregulars

(Statistics courtesy of the Asahi Shinbun)

Version 3

Japan boasts one of the world’s lowest unemployment rates, at just around 2%. This should make it the envy of social welfare planners the world over, right? Compared to Europe’s unemployment rate (10%), Japan’s is phenomenally low. Surely its workers are delighted to be in such high demand.

Well, no, they’re not at all.  Beginning with a few additional statistics, here’s why:

The average annual salary for a Japanese worker was ¥4.22 million yen in 2016, not quite what it was at the time of the “Lehman Shock” in 2007 (when it was ¥4.37 million.) So a tight labor market isn’t having an inflationary effect on wages, as one might expect.  And there is good reason.

About twelve years ago, Japan initiated a system of “irregular” staffing (hiseiki shain), a categorization that includes contract, temporary and part-time workers. These irregulars, who are included in the employment count, averaged just ¥1.72 million in paid salaries last year, compared to ¥4.87 for “regular” staff.  And the number of irregulars in Japan is now at a staggering 20.23 million, out of a total workforce of 53.91 million.

In regards to the income difference, everywhere in Japan you will hear discussion of the kakusa mondai, literally “disparity problem.” Basically, with 40% of the labor force taking home well under half the wages of its peers, the Japanese see dark clouds on the horizon – as well they should.  How are these impoverished irregulars going to grow families, and save for the future?  The answer is they can’t, and won’t.

Recall that in decades after WWII Japanese workers enjoyed some of the most secure employment conditions in the world.  Although it could be criticized for many things, Japan had a unique tradition of equal treatment, collective teamwork and shared destiny.  Now, rather suddenly, all of that has disappeared.

You might think, well, then it’s a great place for businesses to hire cheap, well-educated labor.  It’s likely that corporate Japan was thinking the same when it embraced this radical change.  But irregular workers – and you will meet them in every business sector, everywhere you go in Japan – are miserable, and increasingly upset with their lot.  And the Japanese government now struggles with a looming problem that was once unthinkable – how it will manage a large population living in poverty.