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Ageing and the Labor Market in Japan

Problems and Policies

Edited by Koichi Hamada and Hiromi Kato

This book is a concerted attempt by economists to investigate and offer remedies for some of the difficulties associated with an ageing labor market.
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Chapter 1: Ageing and Employment in Japan

Yuji Genda, Hiroshi Teruyama, Souichi Ohta, Mamiko Ishihara and Ryo Kambayashi


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 to the retrenchment of existing senior...

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