Why Has the Fraction of Nonstandard Workers Increased? A Case Study of Japan

Abstract

This paper explains the secular increase of nonstandard workers in Japan, whose share of employment increased from 17 to 34% between 1986 and 2008. Changes in labor force and industrial compositions account for one quarter of the increase of nonstandard workers. Product‐demand fluctuation and the introduction of information and communication technologies increased firms' usage of nonstandard workers, but its quantitative effects are limited. The increase of nonstandard workers was concentrated among new entrants to the labor market, male workers of younger cohorts, and female workers of all cohorts, suggesting that the declining importance of the long‐term employment relationship is a major cause for the increase of nonstandard workers.

Firm-level labor demand for and macroeconomic increases in non-regular workers in Japan

“…Sev eral reasons related to both labor supply and demand have been suggested. The increase in female labor-force participation, uncertainty surrounding product demand, and the introduction of information and communication technologies have all contributed to firms' increased usage of non-regular workers, although their respective quantitative contributions are still a matter of empirical debate (Asano et al, 2013). However, it is less well known that the overall increase in the use of non-regular workers is not evenly distributed across all firms or establishments.…”

“…Ono and Sullivan (2013) examine the relation between US firms' use of temporary workers and the output growth uncertainty they face. From a similar viewpoint, Morikawa (2010) and Asano et al (2013) investigate how firm-level demand uncertainty, measured by the standard deviation of unexpected sales growth, influences the non-regular worker ratio in Japan. They commonly find positive correlations between the level of uncertainty and the scale of non-regular worker use.…”

“…They conclude that the factors that they examine explain about one quarter of the increase in non-regular workers. Asano et al (2013) highlight the importance of individual factors for the growth in non-regular employment. In consideration of their remarkable finding, this study focuses on individual firms' demand for non-regular workers and pushes their study further, although we use a different method.…”

“…13 The log real sales variable (deviations from its sub-sample mean) is an individ ual factor affecting the short-run non-regular ratio variation. Many empirical studies of non-regular labor adjustment, such as, for example, Benito and Her nando (2008), Caggese and Cuñat (2008), Morikawa (2010), Asano et al (2013), and Hosono et al (2015), use sales fluctuations as a proxy variable reflecting exogenous demand shocks in various contexts.…”

“…1 Despite the increasing social interest in this issue, comprehensive studies on the source of the growth in non-regular employment are scarce. An exception is the informative empirical research by Asano et al (2013). First, consider ing the potential importance of the growth in the female labor supply and the service industry sector to the non-regular employment expansion, they exam ine the compositional effects of the demographic and industrial structure using micro-data from government labor surveys.…”