Section 2 Utilization of top-class human resources at home and abroad

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1 Section 2 Utilization of top-class human resources at home and abroad <Section 2 Key points> 1. Encouraging the elderly and women to enter the workforce People in the older generations are still eager to work, and their knowledge and skills are highly valued. With the baby-boom generation reaching retirement age, there are expectations that places will be provided where they can make the best use of their abilities. In spite of their advanced knowledge, there are women who have difficulties in joining the workforce due to childbirth and child care. The creation of an environment which enables women to stay in jobs for a long time contributes to improving the quality of labor. 2. Introduction of European programs to promote employment of the aged population and women Under the support of all relevant parties, Finland implemented the Finnish National Programme for Ageing Workers in respect to central and local governments, private companies, and individuals. It has helped to increase the number of elderly workers in the workforce. The Netherlands has approved various forms of employment through development as well as active adoption and assessment of a system for part-time workers which has been credited with promoting employment of women and has served to put brakes on the trend of a declining birthrate. Sweden implemented active measures to support families, enabling the nation to reverse the trend of low birthrates, while maintaining the high rate of workforce participation by women. 3. Foreigners with various statuses of residence It is possible that Japan will face a decline in its labor force population in the long-run despite maximizing the employment of women and the elderly if measures against the declining birthrate do not generate any positive effect. Furthermore, amid intensifying worldwide competition for highly-skilled human resources, there are arguments that Japan should actively accept highly-skilled foreign human resources who will contribute to maintaining and further enhancing its economic power. Under such circumstance, there is an urgent need to consider its modality of accepting foreign human resources. If Japan were to attempt to compensate for the decline in its labor force population by importing foreign workers, it would have to accept hundreds of thousands of such workers a year (In 2003, Japan accepted 23,000 foreign workers), which is simply unrealistic. Upon accepting human resources from abroad in the future, importance shall be attached to actively accepting highly-skilled foreign human resources and promising foreign students as their next candidates, amidst the worldwide competition for highly-skilled human resources which has already begun. On the other hand, in order to accept foreign workers into Japan in an appropriate manner in the future, there is a possibility that the current framework for resident status as part of the conventional policy for the

2 acceptance of foreigners may not function sufficiently. Going forward, Japan must definitely consider accepting workers in areas that have not been perceived as specialized or technical areas in the past, with the assumption that the labor force population will decline. At the same time, the positive and negative effects of accepting foreign workers into Japanese industries, as well as the lives of the Japanese people, must be steadily taken into account. In addition, if we turn our eyes to aspects other than economic activities in regions already accepting foreign workers, we notice the emergence of large strains in the work and living environments and friction between foreign workers and regional communities. Therefore, it is not appropriate to further expand the number of foreign workers accepted into Japan without fully tackling these issues first. In the previous section we discussed the need for Japan to utilize its intellectual assets, as well as improve the quality of the workers which are the sources of knowledge in order for Japan to continue enjoying its economic affluence amidst the changing economic environment that is being brought on by the declining birthrate and aging population which will ultimately lead to a population decline. On the other hand, there exists in Japan elderly people that are not employed despite their strong will to work, as well as women who are leaving behind their career and exiting the labor market due to childbirth and child care. As a country, Japan cannot be said to be utilizing the human resources it is endowed with to their full potential. Therefore, promotion of the employment of these people becomes vital in the future Japanese society which will face a decline in population. However, as will be discussed later, there remains the possibility that Japan will face a decline in its labor force population in the long-run despite maximizing the employment of women and the elderly if such an approach does not generate any positive effect for measures against the declining birthrate. Furthermore, amid intensifying worldwide competition for highly-skilled human resources, there are arguments that Japan should actively accept highly-skilled foreign human resources who will contribute to maintain and further enhance its economic power. Under such circumstance, there is an urgent need to consider its modality of accepting foreign human resources. Therefore, this section will cover the topics of encouraging employment of the elderly and women, as well as the modality of a desirable measure in accepting foreign workers into Japan as the society faces a population decline in the future. 1. Encouraging the elderly and women to enter the workforce (1) Current employment status of the elderly and their eagerness to work The employment of the elderly in Japan is exhibiting a decreasing trend. When compared to the U.S. and European countries, 1 Japan s workforce participation rate of those aged 60 or older remains at a high level; 1 The workforce participation rates of those between ages 60 and 64 in 2003 were: Japan 54.8%, U.S. 51.0%, Germany 26.3%, and Sweden 60.1% (LABORSTA, ILO)

3 however, a decreasing trend is also detectable (Figure 3.2.1). It is thought that this is due to an increase in the proportion of employers within the entire workforce 2 and the fact that many of these people are employed at companies that practice the age retirement system. The retirement age is 60 at 90.5% of the companies that practice the uniform age retirement system. 3 When studied by age group, the rate of those switching or leaving their jobs increases drastically among those between ages 60 and 64. (%) 80 Figure Trends in the labor force participation rate by age group years old years old 65 years old or older (Year) Notes: 1. The values used are monthly averages within the year. 2. The labor force participation rate by age group is the percentage of the labor population among the total population for a specific age group. Source: Labour Force Survey (Ministry of Internal Affairs and Communications). On the other hand, it is often thought that older generation Japanese people are very eager to work. An international comparison of awareness surveys of both genders aged 60 or older reveals that the retirement age believed to be desirable by the elderly in Japan is higher than that in the U.S. and Europe and thus, the conclusion has been drawn that the older generation Japanese people are eager to work. 4 Likewise, in the domestic survey for 2004, 5 50% to 60% of the respondents from each age group chose the appropriate retirement age to be either or (Table 3.2.2). Furthermore, Japan boasts the highest healthy life 2 The proportion of employers to the overall workforce was 84.6% (Labour Force Survey, Ministry of Internal Affairs and Communications; average of 2004). 3 Survey on Employment Management (2004), Ministry of Health, Labour and Welfare. 4 Cabinet Office (2003a). The percentage of Japanese elderly who responded that age 70 or so is the desirable retirement age amounted to 31.3%, and age 65 or so was 45.3%, which together comprises 76.6% of the whole. This number was 60.8% in the U.S., and 44.4% in Germany. 5 Cabinet Office (2004d)

4 expectancy 6 in the world with 72.3 years old for men and 77.7 years old for women, suggesting that people in Japan remain active for a relatively long period (Figure 3.2.3). It is speculated that the ideal retirement age will be further pushed back due to financial reasons such as the age at which people may start receiving pension benefits being raised and issues of living expenses arising from the pension benefit standards being reviewed, as well as psychological reasons such as maintenance of a connection with society and more. Respondents By about years old Table Appropriate retirement age By about years old By about years old By about years old By about years old 80 years old or older (Unit: %) It is better to work as long as you No response Total are healthy (people) regardless of age Over 75 years old years old years old s s s s Total ,941 Male ,862 Female ,079 Notes: The survey was conducted with interviews by examiners and mail surveys (February to March, 2004). Of the 6,000 people contacted, there were 3,941 valid respondents. Source: Overview of the Result of the Survey on Attitudes towards Age and Aging (Cabinet Office, 2004). 80 (Age) Figure Healthy life expectancies of each country (2002) Male Female Japan France Germany Italy UK US Korea China Source: The World Health Report 2004 (WHO). 6 The healthy life expectancy was announced by the World Health Organization (WHO) in 2000 as an index number which is calculated by subtracting the time expected to suffer from an illness from the predicted average life expectancy

5 On the other hand, companies also highly assess the occupational skills possessed by the people of the older generation. According to a survey implemented by the Japan Institute of Labour (JIL), 7 the results show that while attributes like physical strength deteriorate with age, technical proficiency and skills, teaching and training skills, and workplace management ability among others do not change after reaching a certain age. 8 Furthermore, the survey conducted in 2003 targeting companies 9 showed that the companies assessed the knowledge and skills possessed by the older people highly, with positive responses for employing them like: to ensure specialized human resources such as knowledge in certain areas, etc. and to pass down the skills and techniques outnumbering those responses dealing with cost control or social request and responsibility. These were also the top two reasons why the companies implemented the continued employment system for older people after their retirement (Table 3.2.4). Table Reasons for implementing continued employment system of older people (%) No response 0.5 Because it was requested by labor unions 9.8 To make up for labor shortage 18.9 Because older people may be employed for comparatively cheap wages 36.2 To secure skilled human resources with expertise in specialized areas, etc Because it was requested by employees 9.5 Because of inability to secure young workers 7.4 In order for employees to have stable lifestyles 26.0 Because developing older people costs less than developing entry-level employee 17.6 To cope with rise in eligibility age for receiving public pension payments 30.8 To hand down expertise and skills 49.3 Because enterprises have a social responsibility to secure employees 27.6 Because development of management-level employees is still inadequate 1.7 Other 1.5 Notes: 1. Approximately 5,000 enterprises were randomly selected from a database of private enterprises nationwide, and the survey was conducted by mail (The survey was sent out on October 31, 2003 and the deadline for accepting responses was November 14.). Number of surveys distributed: 5,060; Number of surveys collected: 1,447; Collection rate: 28.6% 2. When selecting samples, consideration was given to maintain the following distributions of enterprise size and industry type: Enterprise size: Over 1,000 people: 40%; people: 30%; people: 20%; below 100 people: 10% Industry type: Building, manufacturing, electricity/gas/heat supply/water works and transport/communication industries: 50%; other industries: 50% Source: Standards for People Eligible for Continued Employment System and Survey on Situation of Continued Employment by Enterprise Groups (MHLW). According to the OECD (2004), the proportion of people with high educational background among workers in Japan in the age range of 50 to 64 years old was estimated at 22.1% in 2000 and 46.8% in 2025 (Figure 3.2.5). Moreover, the baby-boom generation which supported the economic growth of the post-war period will be reaching their retirement age one after another starting in In particular, the rate of increase of the ratio of older people in the manufacturing industry is progressing much faster than the average of all other industries, making people uneasy over the fact that the techniques which have been accumulated over a 7 Japan Institute of Labour (1999). 8 Ministry of Health, Labour and Welfare (2000). 9 Ministry of Health, Labour and Welfare (2004b). Out of all the companies that responded, 99.7% of them have adopted the uniform retirement age system. Approximately 80% of companies with 5,000 employees or more and approximately 70% of the companies with 1,000-4,999 employees have established the employment extension system or the re-employment system, of which 43.9% of these companies have determined that age 65 or older is the maximum employment age

6 long period of time are not being sufficiently passed down due to the aging of the human resources. 10 There are concerns over such cases where the highly-qualified older people who have acquired their skills through many years of practice may be employed at workplaces where they are unable to apply their skills. It is also thought that retiring from the labor market as a whole not only causes a great loss in terms of labor power, but also in terms of the knowledge such as skills and know-how possessed by these people. 100% Figure Rise in the educational background of aged workers % (2000) (2025) (2000) (2025) (2000) (2025) (2000) (2025) (2000) (2025) Japan France Germany South Korea US Higher education Secondary education Did not reach secondary education Notes: 1. The values for 2000 are OECD data for 50 to 64 year olds. 2. The 2025 values are estimated based on the data for 25 to 39 year olds. Source: Ageing and Employment Policies (OECD). The Law Concerning the Stabilization of Employment of Older Persons has been amended so that, starting in December 2004, companies that set an age limit of 64 and younger due to an imperative reason are now required to inform the applicants of this reason. Furthermore, starting in April 2006, employers are scheduled to be held responsible for raising the retirement age to 65 in response to the gradual rise in the age when the payment of the employees pension benefits will start, as well as the implementation of measures to ensure the employment of older people through the introduction of the continued employment system and the like. Of course, freedom to choose not to be employed should not be impeded, but it is important to provide a workplace in which the older people who are eager to work may utilize their skills and knowledge sufficiently. 10 According to the Ministry of Health, Labour and Welfare (2004e), 62.9% of the companies feel a sense of unease concerning the (lack of) skills in manufacturing being passed down, and 42.5% of these companies raised growth in the number of older people in the manufacturing industry as its reason

7 (2) Current status of employment of women and their eagerness to work The rate of workforce participation by women in Japan has hit a plateau. However, the rate of workforce participation by women with a high educational background tends to fall behind other countries. 11 A tendency similar to that of the elderly can be spotted in women s work patterns. While the number of self-employed and those working for their own family business are marking a decline, the proportion of employers to the whole workforce has increased, 12 causing the proportion of women within the total number of employers to be 41.1%. 13 Figure Thoughts on the concept of women holding jobs November, Women should not have a job Women should work until they are married July, Women should work until they have children February, Women should continue working even after having children July, Women should stop work after having children and return to work when the children have grown up Others Do not know November, % 20% 40% 60% 80% 100% 資 Source: Public Opinion Survey on a Gender-Equal Society (2004 survey) (Cabinet Office). Although social awareness towards women s participation in society is changing (Figure 3.2.6), there are still women who have difficulties in joining the workforce due to family circumstances in spite of their advanced knowledge. The labor force of Japanese women can be described as being M-shaped with age group at the lowest due to the typical working pattern of Japanese women who exit the labor market once upon marriage or childbirth and then return after a few years. The recent trend shows that the lowest point (bottom) 11 The rates of workforce participation by women who graduated from college or graduate school who were between ages 25 and 64 in 2002 were: Japan 69.9%, U.S. 80.9%, Germany 83.4%, and Sweden 90.3%. (OECD (2004b)). 12 The proportion of employers to the workforce in 2003 was 84.2%. (Labour Force Survey, Ministry of Internal Affairs and Communications; average of 2004). 13 Labour Force Survey, Ministry of Internal Affairs and Communications; average of

8 has shifted to the right and the slope does not go as far down. Nevertheless, it still remains to form an M-shape when compared to other advanced countries. As for the forms of employment, decreases in full-time employees and increases in the part-time worker ratio have become apparent in the age groups to the right side of the lowest point (bottom) (between ages 40 and 49) (Figure 3.2.7). When taking a look at the potential workforce participation rates 14 and the participation rates 15 by educational background and age group, the potential workforce participation rates are at relatively high levels in all educational background categories and age groups. To the contrary, participation rates have a different trend, where the participation rates of women with higher educational background decreases at a sharper angle to the left of the lowest point (bottom) (between ages 20 and 24), but their recovery on the right side of the lowest point (bottom) is low (Figure 3.2.8). This indicates that there are many women who give up on trying to reenter the labor market or change their form of employment. (%) Figure Labor force participation rate and employment patterns for women Trends in the labor force participation rate by age group Note: The percentage of the labor force population of the total population is in labor force participation rate by age group. Source: Labour Force Survey (MIC) (Years old) (10,000 people) Number of female workers with regular employment, part time jobs, and working as temporary employees Temporary workers Side-job workers Part time workers Full-time employees and workers Source: 2002 Basic Survey on Employment Structure (MIC). (Years old) 14 (Number of those employed + number of those unemployed wishing to work)/population aged 15 and older (excludes those in school ). 15 Number of those employed /Population aged 15 and older (excludes those in school )

9 (%) 100 Figure Participation rates and potential labor force participation rates of women by education background and age group Graduated from high schools (potential labor force participation rate) Graduated from junior colleges and advanced vocational schools (potential labor force participation rate) Graduated from undergraduate and graduate schools (potential labor force participation rate) Graduated from high schools (participation rate) Graduated from junior colleges and advanced vocational schools (participation rate) Graduated from undergraduate and graduate schools (participation rate) (Age) Notes: 1. Participation rate refers to the ratio of persons engaged in work to the population classified by age group. 2. Potential labor force participation rate refers to the ratio of the sum of persons engaged in work and persons not engaged in work who are seeking work to the population classified by age group. Source: 2002 Employment Status Survey (MIC). The ratio of women among newly recruited employees is increasing, as well as the number of female executive members at companies, although only slightly in the latter (Table 3.2.9). However, reasons raised for having only a few or no female management level employees in the Basic Survey on Employment Management of Working Women of 2003 includes, lack of female employees with necessary knowledge, experience, decision making power, etc. (48.4%), the length (years) of service of women is short and they resign before reaching management level positions (30.6%), and there are female employees likely to assume a management level position in the future, but who currently do not have enough years of service to qualify them for such a position (27.6%), among others. There are arguments that gender discrimination will occur as long as the companies pursue efficiency in its operation regardless of prejudice against the women s ability to work. 16 Development of an environment which will allow women to stay in the labor market over a long period of time will lead to an increase in the number of female management level employees among female workers, who constitute roughly 40% of the entire labor force, and will promote women to exert their 16 This kind of issue is called the Theory of statistical discrimination. What is here referred to as the statistical discrimination is the type of discrimination which occurs when companies determine and differentiate the treatment of people by classifying them into groups based on information that may be gathered at low cost, such as age, gender, qualifications, educational backgrounds, etc., and prioritizing the average value of each group as a decision making factor. The problem with this method is that in spite of their skills and willingness to work, female employees are only given low assessments and positioned to be in a group with low average productivity because women do not stay at companies as much due to childbirth, child care, etc. For example, Koike (2005) and Wakisaka (1993)

10 skills to the best of their abilities. Table Trends in the percentage of female corporate officers (Unit: %) Division chief Section chief Assistant manager Note: Industries covered, corporate size of more than 100 employees, total for all academic backgrounds. Source: Actual Situation of Working Women in 2004 (MHLW). Original source: Basic Survey on Wage Structure (MHLW). The Law Concerning the Welfare of Workers who Take Care of Children or other Family Members Including Child Care and Family Care Leave was partially amended and, starting April 2005, measures have been implemented to assist people in balancing their work and child care by expanding the areas to be covered under the Child Care Leave Law and extending the child care leave period 17 among other measures. However, what is becoming a more critical issue on top of these efforts are measures which will facilitate the return of women to the workforce as soon as possible and in a smooth manner such as shifting the work pattern to short work hours. Furthermore, there have recently been more men who wish to balance both their work life and family or other lifestyles they lead; 18 therefore, employment based on the circumstance of the individual is 17 There are conditions to be considered such as the employment period before taking a leave, contract for labor period after taking a leave and so on. 18 Makita, Ida (1999)

11 becoming an issue to be dealt with, regardless of gender. Column: Issue of unemployment among the younger generation As has been introduced in last year s White Paper on International Economy and Trade, concerns are being raised that the issue of unemployment among the younger generation will become an obstruction 19 to improving the quality of the future labor force, which has become a concern shared by all countries. In Japan, the overall unemployment rate for those in the age group in 2004 was 9.0% and 11.7% in the age group, which are both at a high level. Furthermore, those unemployed without any desire to work or long-term plans and are referred to as the so-called NEET 20 have increased in number by 130,000 people over a five-year period starting in 1995, amounting to approximately 850,000 people 21 as of Moreover, although it is not included in the issue of unemployment, those among the younger generation that wish to work as part-time employees and side-job workers or in similar forms of employment (often referred to as freeters in Japan) are increasing (approximately 2.17 million people 22 as of 2003) and there are concerns over the aging of this group as well. As already discussed in the section on the elderly, expectations are growing for the younger generation to work given that the baby-boom generation will soon reach their retirement age. However, it is difficult to develop the occupational skills of the NEET who do not belong to a school or a company and do not become easy targets of human resource development, as well as the freeters who repeat short-term employment and hardly gain enough opportunities for occupational skills development. It is thought that increases in the number of human resources where occupational skills have not been accumulated may become a factor that will suppress productivity and even an obstruction to Japan s economic growth. The Youth Independence and Challenge Plan was compiled two years ago under the cooperation of the Minister of Health, Labour and Welfare; the Minister of Education, Culture, Sports, Science and Technology; the Minister of Economy, Trade and Industry; and the Minister of State for Economic and Fiscal Policy. The one-stop service center for youth (the so-called job café ) is one of the measures under the Plan which 19 According to Takahashi (1998), intelligence (intelligence: positioned as the second level of competency; cogitation and action) necessary to acquire the knowledge (knowledge: positioned as the third level of competency; knowledge and skills people acquire through learning) necessary under a new environment must be trained by the early 30s. 20 NEET: Abbreviation for Not in Employment, Education, or Training. 21 Based on the mid-term announcement of the Study Group on the Employment of Youths (2004) by the Cabinet Office. Special calculation of data from the Employment Status Survey by the Statistics Bureau, Ministry of Internal Affairs and Communications. Total number of those not searching for a job while wishing to work and those that have not expressed their wish to work out of those unemployed among the young generation in the age group (excludes students and those with spouses). 22 Ministry of Health, Labour and Welfare (2004d). Special calculation of the number of short-term employees aged (includes those searching for a job and wishing to take on short-term jobs), excluding students and housewives, based on the data from the Labour Force Survey ( Detailed Tabulation) by the Statistics Bureau, Ministry of Internal Affairs and Communications. According to the Cabinet Office (2003b), this was approximately 4.17 million people as of 2001, including the category those wishing to become full-time employees in the above definition

12 provides information and counseling services related to finding a job, as well as job search assistance through training and workplace experience. These job cafés have been established across the nation since In particular, METI has been implementing projects that actively utilize the vitality of the private sector in 15 model regions. Moreover, MHLW is outsourcing projects related to developing the occupational awareness of the younger generation (locally coordinated programs for young people) and job placement services by establishing public employment security offices in the one-stop service centers upon request of the prefectures when the prefectures are building a one-step service center (established in 43 prefectures as of the end of FY2004). By the end of March 2005, approximately 50,000 youths (28,000 of which were in the model regions) found a job. Furthermore, career education such as experience in manufacturing products and more are to be promoted at the primary, lower secondary, and upper secondary school years by taking advantage of the capacity of the private sector in order to cultivate occupational awareness from an early age. In addition, efforts will be given to develop a system that will provide the grassroots e-learning programs, where people may acquire skills that will help them when looking for a job and at work by utilizing the job cafés as well as the commerce and industry associations. 2. Introduction of European programs to promote employment of the elderly and women As can be seen above, the quality of women and the elderly as a resource is improving in Japan. Therefore, the promotion of employment of women and the elderly that are eager to work is expected from the perspective of enhancing Japan s competitiveness as well. Examples of European countries 23 that, like Japan, are facing issues of declining birthrates and an aging society and are aiming to create a society wherein the elderly and women can take part in the labor market will be introduced below. These examples shall be used as guidelines for the direction to be taken by Japan. Introduced below are: (1) the Finnish National Programme for Ageing Workers (FINPAW) implemented as a new measure to improve the employment situation of aging workers; (2) the example of the adoption of a work sharing system in the Netherlands that enabled the social participation of women through a flexible employment form as well as housework by men, which in turn resulted in the increase of the workforce participation rate and birthrate of women in recent years; and (3) the families support measures implemented in Sweden, which maintains a high total fertility rate and female employment rate. (1) Finnish National Programme for Ageing Workers (FINPAW) In Europe, the so-called early retirement system has been implemented since the 1970s when the unemployment rate skyrocketed due to the deteriorating employment situation. This resulted in 23 In Europe, there was a target established called full employment at the Lisbon Special European Council in The council s concept of full employment differs from the idealized, high-profile concept of full employment. It is a policy concept of advancing social integration through work by giving various job opportunities to the elderly, women, people that are socially vulnerable, and others that have fallen out the labor force so that they may join the labor market

13 countermeasures for unemployment for the younger generation, cost reduction through retirement of the older workers for the employers, and an increase in pension assets for the elderly. The system includes provisions for a reduced amount of pension benefits from a certain age, early retirement due to being certified as unable to work (disability pension), a pension system for long-term unemployed individuals, 24 and provision of partial pension benefits under the condition of reduction in work hours, among other details. 25 However, in the 1990s various problems surfaced regarding early retirement of the older workers, such as the need to control the social security expenditure (in particular the amount spent on pension as no improvement was seen in the unemployment rate among the younger generation), the emergence of age discrimination, loss of experience and know how, and others. Therefore, the EU formulated a resolution on the employment of older workers at the European Council meeting in 1995, redirected the early retirement policy it had been following until then and drafted the active aging policies in the Employment Guidelines of Moreover, a heated debate took place at the European Council meeting in Stockholm in 2001 regarding the promotion of employment of the elderly and targets, such as increasing the average employment rate of the aged population (ages 55-64, total of male and female) in the EU to 50% by Against such a backdrop, we will introduce in this section the FINPAW: Finnish National Program for Ageing Workers 27 of Finland that has been assessed to have achieved a certain level of results, such as recording an increase in the employment rate of the aged population by 13.4 points 28 between the years 1998 and 2003 through conducting comprehensive measures to improve the said rate (Figure ). The story behind how the FINPAW came into practice may be attributed to the progress in the aging of society as well as the burden of pensions due to changes such as the anticipated decline in the labor force population experienced by the other EU countries. Finland, influenced by the change in the direction of the employment strategy practiced in the EU, aimed at creating an environment in which people could work as many years as possible through implementation of active labor policies and improvements made in its employment services, as well as placing emphasis on policies which value improvement of the workplace environment and lifelong learning. 29 Therefore, the Finnish government established the FINPAW as a comprehensive measure for the Five Year Plan on the employment of the elderly in Guarantee of income until the age when people start receiving their pension benefits by extending the period of unemployment insurance for the elderly. 25 Suzuki (2003). 26 Walker, A. (2002). 27 Labour Force Statistics (OECD). 28 According to the European Commission (2003), The comprehensive measure for the employment of the elderly in Finland is thought to have achieved a certain level of results. 29 Ministry of Social Affairs and Health (2003a)

14 Employment rate (%) 70 Figure Trends in employment rates of older people (55-64) in major countries (male and female) Sweden Japan US UK Finland Netherlands Germany France Italy (Year) Source: Labour Force Statistics (OECD). FINPAW is a comprehensive program focused mainly on people between ages 45 and 64 who are employed or unemployed, with 4.2 million euros (approximately 500 million yen) having been allocated for this program over the course of five years between 1998 and While the Ministry of Social Affairs and Health, the Ministry of Labour, and the Ministry of Education are conducting the major policies, the representatives of the Ministry of Finance, the Ministry of Trade and Industry, labor market organizations, local organizations, the Finnish Institute of Occupational Health, the Federation of Unemployment Funds, the Federation of Finnish Enterprises, the Federation of Agricultural Producers and others are involved in a wide range of areas. The main details of the FINPAW include: (1) the endeavor to promote the health and maintain the capability to work of the elderly in their workplaces through provision of training programs and information to the personnel in charge of health and safety at the workplaces, the local occupational safety committee, personnel in charge of labor management, and the workplace and individual, as well as to raise awareness on aging; (2) implementation of detailed health promotion activities for older workers, study on the employment issues and development of a public employment service; (3) development of a support system for lifelong learning by the aged population; and (4) reform of disability and unemployment insurances, among others. 30 Under the FINPAW, 40 activities have been implemented, with examples of the main policies given below. 30 Ministry of Social Affairs and Health (2002)

15 First, the laws and systems were amended and consideration for aging was added to both the Co-determination in Enterprises Act and the Occupational Safety Act. Furthermore, in response to early retirement, the Ministry of Social Affairs and Health raised the age at which people may receive pension benefits from age 58 to 60 in order to encourage the elderly to remain working as long as possible, and also amended the systems related to pensions by cutting down the unemployment insurance benefits, etc. Moreover, the occupational safety and health inspectors visit 30,000 workplaces every year and lecture on how to prevent injuries of the elderly and improve their mental health. The Ministry of Education places emphasis on lifelong education and provides financial support for vocational education according to the characteristics of each individual. Furthermore, given the fact that many of the middle and elderly people lack the skills in information and communications technology, the Ministry of Education implemented a program called the Information society skills for all! In addition, as there are 2.3 million people suffering from disabilities, the Ministry provided a physical education program through local education centers for adults, and other facilities to help prevent people from temporarily not being able to work due to injury or sickness. The Ministry of Labor conducted a dissemination of information, development of a cooperative system among the enterprises and other entities, and training sessions for employees with a focus on boosting entrepreneurial spirit, improving the quality of training, and preventing age discrimination, among other areas. In particular, examples of optimal practices regarding measures for older workers were introduced at the seminars. In addition, the Ministry of Labor provided a training program to its employees, including those at employment security offices, to encourage each employee to help solve employment problems of the older workers according to their individual characteristics in an effort to prevent discrimination. Other efforts included the implementation of a course that encourages older people to start their own businesses and training sessions for the older people to acquire ICT (Information and Communication Technology) skills. With regard to policies related to the promotion of employment of the elderly, the FINPAW was succeeded by two new programs called the VETO 31 (national program designed to develop the work skills of each individual) and Nosto (vocational training program for people between ages 30 and 54 who have low educational backgrounds) See Ministry of Social Affairs and Health (2003b) for more details. 32 According to Magoshi (2003), VETO is to be implemented from 2003 to 2007 with the aim of encouraging people to work as long as possible with full participation of people in their work life, while at the same time making work more appealing from all aspects. An annual budget of one million euros (approximately 120 million yen) is scheduled to be invested in this program. In particular, dissemination of information is positioned as the main focus of this program, and thus seminars for executive officials and personnel in charge of work safety of enterprises are being conducted in each region of Finland. On the other hand, Nosto is to be implemented from 2003 to 2007 with the aim of applying lifelong learning to actual activities and improving the productivity of the members of society through education and training in order to provide vocational training opportunities to people with low educational backgrounds. In particular, 16,000 to 24,000 training locations will be established every year over the course of five years and a total of 10 million euros (approximately 1.2 billion yen) is scheduled to be invested in this program

16 (2) Work sharing practiced in the Netherlands In the Netherlands, the workforce participation rate of women has shot up significantly since the 1980s, and by 2003 it became 68.3% of the whole. This marks a drastic increase of 12.0 points over a decade. 33 When studying the workforce participation rate by age group, an increase in the participation rate is prominent among those aged 30 and above, indicating that there is a growing tendency for women to continue working after childbirth (Figure ). The reasons for this increase in the rate of workforce participation by women may be drawn back to the fact that the traditional mindset that married women should stay at home and concentrate on housework and raising children is fading while the education standard of women has improved and the number of highly-skilled workers is increasing. In addition, it has been analyzed that the government s policy to promote part-time labor and temporary employment through the practice of work sharing 34 based on the Wassenaar Agreement established in 1982 has contributed to this development. 35 (%) 90 Figure Trends in the female labor force participation rate in the Netherlands (Years old) Source: Laborstat (ILO). Under the Wassenaar Agreement, the workers agree to wage control in exchange for the promise of their employers to reduce their work hours in a cost-neutral manner. The reduction in income caused by this wage 33 Labour Force Statistics (OECD). 34 According to the Ministry of Health, Labour and Welfare (2001), work sharing means sharing a certain amount of work by as many workers as possible through altering the combination of the three factors: employment opportunity, working hours, and wage. 35 Kenjoh, et al. (2003)

17 control is partially compensated for through tax cuts. The reduction in the work hours in a cost-neutral manner here refers to compensating for the amount of work hours reduced for full-time workers by increases in productivity or by reductions in the weekly wage. The aim of this system is to realize reduction in work hours while keeping the hourly wage cost constant. 35 One of the reasons why the Netherlands has a noticeably part-time economy compared to other countries is because part-time labor is protected under the law. In the Netherlands, the law on adjusting the labor hours, or De deeltijdwet, which entered into force in July 2000 outlines that workers at companies with 10 employees or more have the right to reduce or extend their work hours as long as they fulfill certain conditions. At the same time, however, the hourly wage of these workers is to remain at the same level as before changes were made to the weekly labor hours under this law. 36 Furthermore, it is under the law and labor contract in the Netherlands for the employers to treat part-time and full-time workers equally based on their labor hours. There is also the minimum wage law that must be applied to all workers. In addition, workers are given the right to request a reduction in their work hours. As a result, the practice of part-time employment is spreading among some high-wage jobs, allowing the part-time workers to not concentrate in areas with extremely low paying jobs. Furthermore, the pension system of the Netherlands is designed in such a way that the period that the workers took on part-time jobs or the period when they were unemployed due to working under temporary contracts will not work against them when receiving the pension benefits. 37 The Netherlands, unlike the Scandinavian countries and France which are rich in child-care services, lack such resources. In addition, its people are culturally not too enthusiastic about mothers working full-time. Therefore, it could be said that the participation of mothers in the labor force has been advanced in the form of part-time workers with the development of the aforementioned system on part-time labor (O Reilly and Fagan (1998)). On the other hand, there has been a study conducted which casts light on a different perspective of work sharing. As a result of this practice, there has been an increase in the number of workers employed for a fixed-term, but the study argues that this leads to a low growth rate of labor productivity and an increase in unit labor cost. 38 Another study, however, demonstrates that workers employed for a fixed-term improve the labor productivity. 39 As such, measures to overcome the difficult issue of how to improve labor productivity must be formulated in tandem with the practice of reducing work hours. From this perspective, the Netherlands is increasing expenditure for vocational training and its content is of a high standard among the European countries. 40 Thus, it is presumed that the Netherlands is engaging in efforts to improve the quality of its 36 Fagan, C., Word, K. (2003). 37 Kenjoh, et al. (2003). 38 Fagan, C., Word, K. (2003). 39 Cabinet Office (2002). 40 Auer, et al. (2004). 41 According to the Cabinet Office (2002), the expenditure for vocational training of the Government of the Netherlands in 1980 was very low at 0.05% of the GDP. However, after the Wassenaar Agreement entered into force in 1982, it has positioned enhancement of vocational training as its top priority. As a result, the annual average

18 workers. (3) Family support measures in Sweden In Sweden, the number of babies born in one year recovered to a level of 100,000 for the first time since 1995, as the number reached 100,928 in There is an ever increasing trend for women aged 40 or above to give birth, as can be seen from the fact that 3,300 births of the above total are classified under this category. The number of childbirth cases of women in their 30s is also increasing, marking a roughly 20% increase from a decade ago and now accounts for close to 60% of the whole. In contrast, the number of childbirths by women in their 20s is decreasing every year and does not even account for 40% of the whole. The number for those in their 30s traded place with those in their 20s. 41 While it is assumed that there is a higher possibility of women bearing fewer children the older they start having children, 42 Sweden is maintaining a high total fertility rate and this number has been showing an increasing trend in recent years. In this section, we will introduce the family support measures practiced in Sweden which allows for both an increase in the birthrate and a high rate of workforce participation by women (Figure ). A number of experimental studies analyzing the factors contributing to the decreasing birthrate in the advanced countries have been conducted. Increase in the opportunity cost 43 of women participating in the labor market may be said to be one such factor. 44 A conclusion has been drawn from the studies that the key behind Sweden and other Scandinavian countries being able to recover and maintain their birthrate after mid-1980s is that they have succeeded in taking the burden, such as the opportunity costs of childbirth and child care, off the shoulders of the women through developing and enhancing comprehensive measures that support families in balancing between child care and work, such as the system for paid maternity and child-care leaves (increase in income compensation rate). However, there are people who assess these outcomes as a byproduct of the government s effort to realize gender equality both in the labor market and at home and to promote child welfare, instead of it being a countermeasure against the decreasing birthrate. 45 growth rate of the expenditures for vocational training up until 1998 was 14.0%, the highest rate in Europe. Furthermore, according to the OECD (2004c), the total amount of expenditures for vocational fees and measures for employment of the younger generation to the GDP in 2002 of the Netherlands is the second highest among the OECD member countries. 42 Sanpei (2005). 43 Kenjoh (2004). 44 According to the Economic Planning Agency (1997), opportunity cost is defined as cost incurred from one temporarily ceasing to work during maternity and child care leave. Furthermore, Kenjoh (2004) defines the same term as the gap between the lost earnings during the (maternity or child care) leave plus the wage the person will be receiving after returning to work from the wage he/she would have received had the person continued working (or in other words, if they had not taken a leave). 45 Date, Shimizu (2004). 46 Tsuya (2003)

19 (People) 2.2 Figure Trends in total fertility rates in US and European countries US France Norway Denmark Netherlands Sweden UK Germany Japan Italy (Year) Source: National Institute of Population and Social Security Research. The details of the family support measures in Sweden include: (1) child allowance, (2) parental insurance system and child care leave, and (3) day-care services. What is distinctive about the child allowance system in Sweden is that all children may receive a benefit, with the period over which they are eligible for such benefits being relatively long. Income restrictions are imposed on the Japanese child allowance system, but in Sweden all parents with children under age 16 are entitled to receive a monthly child allowance benefit of 950 kronas 46 per child, and an additional amount may be received when they have more than one child. In addition to this, there is the extended child allowance for children who are attending compulsory schools even after turning 16 as long as they are in school, as well as the child support aid where the government pays the child support fee in the event that the parents get a divorce and one does not pay the child support fee to the other with whom the child is living. The money paid by the government is, of course, to be paid back by the parent who is responsible for the payment. The parental insurance 48 system is an income compensation system for parents who are on child care leave that was adopted in It is unique in world history in the sense that the benefits may be claimed by the parent of either gender. A characteristic of this system is that men are also required to take child-care leave in order to encourage them to take part in child-care and, in turn, contribute to reducing the labor burden on 47 1 krona = 15.2 yen (as of March 2005). 48 Economic and Social Research Institute, Cabinet Office (2004)

20 women in the household as well as the burden on their opportunity cost. The breakdown and details of the benefits are: pregnancy benefit (provision of 80% of the remuneration for a maximum of 50 days if a women cannot work due to pregnancy), parental benefit (provision of 80% 49 of the remuneration for 390 days and 60 kronas (minimum insurance amount) for the remaining 90 days when taking child care leave), and temporary parental benefit (in principle, provision of 80% of the remuneration for 60 days per child when taking a leave to nurse children under 12 years old). Furthermore, out of the 390-day child care leave where parents are guaranteed to receive parental benefits equivalent to 80% of their remuneration, the papa-quota and mama-quota that may not be traded between the spouses are 60 days each, and those days that may be traded between the spouses are 135 days each. The child care leave system practiced in Sweden is very flexible, where leaves may be taken in increments of a whole day, three-quarters of a day, half day, or a fourth of a day of the work hour depending on the situation of the parents anytime between 10 days prior to childbirth through the child s eighth birthday. Furthermore, the parents are not obligated to take consecutive days off. In Sweden, the parents have the right to leave their children with a day-care center in order to work. Thus, the local public organizations are legally responsible for taking in and looking after children while their parents are at work. As such, it has a rich base of day-care facilities as services are provided to all children between ages one and twelve who are in need of day-care service 50 for reasons such as working parents and so on. In 2002, an extremely high percentage of families used the day-care services (81% of children aged 1-6, 22% aged 7-9, and 9% aged 10-12). 51 Furthermore, the pension system is a structure which supplements the family support measures. People are exempted from paying their pension premium on child care and higher education during service. The pension benefit amount is calculated based on the assumption that the pension premiums during the aforementioned periods have been paid. 3. Foreigners with various statuses of residence If the capacities of women and the elderly are harnessed to their full potential, then the entire labor force will not greatly decrease until The labor force may, however, decline if the measures to counter the declining birthrate prove to be ineffective (Figure ). 52 Where the labor force is predicted to decrease in 49 A minimum insurance amount of 180 kronas per day will be paid to people who are unemployed. 50 The day-care services provided in Sweden are classified into four types: (1) Preschool for children between ages one and six and before reaching the age to attend school. It is equivalent to nursery schools in Japan, with full-day service available. (2) Preschool class for six-year old children. They are established inside elementary school buildings so that these children learn how to live in a group before starting to attend schools, and half-day services are available. (3) After-school center or leisure-time center for children between ages six and twelve. They are established next to elementary schools and may be used before and after school hours, as well as on holidays. (4) Family daycare for both age groups (children between ages one and twelve). An individual certified as a day-care personnel looks after a small number of children at his or her own home. 51 International Affairs Division, Minister s Secretariat, Ministry of Health, Labour and Welfare (2004). 52 Yashiro (1999) points out that the labor force will inevitably decline over the long-term even if the employment