By Hussain Khan
- The paradox of increasing unemployment and labor
shortage is haunting Japan's labor market. While
unemployment is growing, an aging population and the
falling birthrate will push down economic growth unless
the shrinking labor force is counterbalanced by higher
productivity, by allowing more immigrant workers and by
an increased number of female and older workers.
The Annual Report on the Japanese Economy and
Public Finance for fiscal 2003 says there is the
possibility of allowing more immigrant workers into the
country, but adds that an inflow of immigrants on a
scale that would make up for the declining working
population would have a "major impact" on a nation that
has always exhibited distrust and xenophobia towards
In fact, the government just in
recent weeks has mounted an intensive campaign to roust
overstayers and deport them. Foreigners, known as
gaijin, are often regarded as culturally
inferior. Under the Tokugawa Shogunate, Japan remained a
sakoku, a closed country. For centuries, no
foreigners were allowed to enter Japan, and Japanese
were forbidden from going out until US Commodore Matthew
Perry famously forced open the borders in 1853 (see Japan ousts overstayers, November
"The aging and declining population
alone has negative effects on macroeconomic growth,"
says the economic report, which is designed to provide
an analysis of economic conditions for the Council on
Economic and Fiscal Policy, a key policy-setting panel
chaired by Prime Minister Junichiro Koizumi.
report is yet another reminder of the list of challenges
that Japan faces - especially as its fertility rate set
a new record low of 1.32 in 2002 from 1.33 a year
earlier. The nation's population is also aging at a
rapid pace. The percentage of those over 65 years old
stood at 18.5 percent as of October 2002 and is expected
to rise to 28.7 percent in 2025. The report warned that
the changing demographics will impact the social
security system, and called for reforms aimed at
creating sustainable public pension and health-care
"Maintaining the current system would
pose an excessive burden on the future generation, and
the possibility is high that it would contribute to the
lowering of economic vitality," the report indicates.
Japan's aging population and declining fertility
rate threaten to destabilize a nation already hit by an
unprecedented deflation. The population would shrink to
8,700 in 2700, to two in 3300 and finally to zero in
3387, according to a hypothetical estimate based on
current birth and death rates by the National Institute
of Population and Social Security Research, if steps are
not taken to correct the situation.
politicians' hesitation in creating a population policy
stems from a skeleton in the closet. The cabinet
approved a policy in 1941 that restricted women from
working and imposed higher taxes on singles in a bid to
boost the then-population of 72 million to 100 million
in 20 years. This was part of Japan's goal of building
its "Greater East Asian Co-Prosperity Sphere" through
the colonization of neighboring Asian nations. That
mistake haunts politicians today.
birthrates are creating acute labor shortages, the young
generation is not ready to accept "3K" jobs. A Japan
Times report emphasizes the need in the following words:
"Everybody talks about recession and unemployment now,"
according to Hiroaki Miyoshi, a senior economist at the
Economic and Social Research Center of Mitsui Knowledge
Industry Co Research Institute. "But demand for skilled
foreign workers is as high as ever in the field of IT
[information technology], as well as in the '3K' kinds
of work in the field of manufacturing."
"3K" stands for kitsui (difficult),
kitanai (dirty) and kiken (dangerous). The
term came into vogue around 1990, when foreign workers
from the Third World found themselves in great demand at
construction sites and factories during the go-go days
of the bubble economy while Japanese workers showed an
increasing preference for white-collar jobs.
While unemployment is prevalent in Japan, the
United States, Europe and other countries as
manufacturing jobs are increasingly outsourced,
paradoxically labor shortages are feared at the same
time as birthrates fall. This contradictory phenomenon
is expected to strengthen in coming decades.
Probably the only way to deal with the problem,
says Steve Duscha, a labor specialist and partner in a
California consulting firm who has studied labor
problems internationally in Hong Kong and other global
population centers, is to retrain low-level workers for
jobs that exist.
"It is a significant and
difficult undertaking, but it is the only solution,"
Duscha told Asia Times Online. "The training is for
people who are already working in lower-level positions
in industry, for the jobs that are in shortage. That
training has to be in close cooperation with employers."
California labor unions and manufacturers,
Duscha said, have retrained some 600,000 workers in the
past 20 years as the state's labor market, one of the
most fluid in the world, undergoes continuing, rapid and
Stratified labor conditions
such as Duscha describes, and wages higher than those
prevalent in Europe, drove emigrants overseas to the
United States, often to join the idle people at tens of
thousands of factory gates every morning of the year, or
lounging at employment offices. No records yet compiled
have ever found the unemployed reduced to zero.
Employers have lacked people and at the very same time
people have lacked work.
An explanation of this
paradox is fundamental to intelligent discussion of
conditions in the labor market. It is certainly true
that surplus and deficit cannot steadily coexist in the
commodity market of the whole nation. There cannot be
both surplus and deficit wheat at the same time. How,
then, was it possible to have deficit and surplus
co-existent in the labor market?
From 1 million
to 6 million workers were idle in the United States at
all times between 1902 and 1917, exclusive of farm
laborers, according to sociologist Hornell Hart. The
least unemployment occurred in 1906-07 and in 1916-17,
while the most occurred in 1908 and in 1914-15. The
average number unemployed has been 2.5 million workers,
or hardly 10 percent of the active supply. In 1907 and
1917, the demand for labor exceeded the normal supply,
and additional workers were called in, as indicated by
the bumps in the supply line in these years.
Urban industries require a working labor-margin
of at least 4 or 5 percent, or 1 million to 1.5 million
workers. These are the men and women who, though
normally employed, are temporarily not working because
of sickness, seasonal fluctuations in their trades,
changing from one position to another, strikes, shortage
of material or transportation facilities, and so forth.
Hence there is the paradox of a million and a quarter
unemployed at the same time with an unprecedented demand
Even during World War I, according to
weekly reports of the Ohio Free Labor Exchange, which
has maintained public employment offices in 22 cities,
workers were idle at all times in 1917 and 1918 despite
the withdrawal of men for military service, net
immigration reduced to a fraction of the prewar period,
and the strong demands of war industries for workers.
Even in the months just before the armistice, when tens
of thousands of workmen were needed, there was a labor
The total for 1918 shows that employers
called for 779,972 people, that 443,782 workers applied
for employment, and that 283,640 were actually placed.
This leaves a surplus of 160,142 applicants who could
not find work despite the fact that employers requested
about 500,000 more men and women from the offices than
they obtained. The figures for 1917 and 1916 show a
slight surplus of offers for employment over the number
of applicants seeking employment. But in each year the
number of persons placed in employment was considerably
smaller than the number who applied for work.
These facts show that no matter how strong the
demand for workers, some are nevertheless out of work.
Some are out of touch with employment opportunities,
some are continually passing through jobs rather than
into them. Even when employers were calling for many
more men than were seeking employment, there were more
persons in some occupations seeking work than there were
openings for them.
One more reason for
persistent labor surpluses was the decentralized
character of the US labor reserve. Typically, the US
labor supply has not had one reserve but thousands of
them, a decentralized labor supply. Each city has had a
multitude of groups of laborers.
It is not
strange that a policy of dependence on an ever-present
labor reserve should have developed in the United
States. Immigration provided a supply of people to
replenish local labor reserves continually, and
employers found it easier to attract plenty of labor to
each locality so that they could have it when they
needed it than to provide labor market machinery that
would find labor when it was needed.
has played an important part in this matter by providing
human material for the labor reserves. But these
surpluses are not entirely due to immigration. It is
debatable whether immigration can be held chiefly
responsible. Reserves have developed in England as well
as in America. They are largely due to the unorganized
labor market and to fluctuations of production.
"An excess of labor over demand appears to be a
normal condition in the skilled and organized trades,"
says the economist William Henry Beveridge, the leading
British authority on employment. "It is hardly necessary
to argue at length that the same condition is found in
the unskilled and unorganized occupations. The glut of
labor in them is notorious. Has there ever, in the big
towns at least, been a time when employers could not get
practically at a moment's notice all the laborers they
Hussain Khan holds a
master's degree in economics from Tokyo University and
has worked in Japan as an equities analyst. He is an
independent Tokyo-based analyst on current affairs and
economic issues for various newspapers and magazines.
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