Chapter 1: Ageing and Employment in Japan
1. Ageing and employment in Japan Yuji Genda, Hiroshi Teruyama, Souichi Ohta, Ryo Kambayashi and Mamiko Ishihara* 1. INTRODUCTION This chapter uses two basic approaches to examine the eﬀects of ageing on employment to determine the relationship between economic shifts and the labor market. The ﬁrst approach evaluates the impact of labor supply shifts towards the older population at the macro economy level. The unemployment rate in Japan has continued to increase over a long period, and it increased sharply in the 1990s. We examine how the demographic shifts to higher levels of older workers aﬀect the unemployment rate. In a previous study that examined the eﬀect of ageing on unemployment in the United States, it was found that shifts in the labor supply contributed considerably to decreases in the unemployment rate (Katz and Kruger, 1999). We compare the eﬀects in the United States with those in Japan. The second approach, on the other hand, looks at the eﬀects of ageing at the establishment level instead of the macro level. The proportion of older and senior workers steadily increased within ﬁrms in the 1990s; labor costs were also raised because of the seniority wage system which, although slightly transformed, is still largely maintained. During the recession following the burst of the bubble economy, most Japanese ﬁrms continued to avoid hiring young workers and, after the serious ﬁnancial recession of 1997 and 1998, ﬁrms were also forced to undertake signiﬁcant levels of downsizing, which led...
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