The labor market reform

In this week, I will talk about Japanese labor market reform under Koizumi administration; especially I will focus on the Dispatched Worker Law, which I researched in last quarter under Mr. Hoshi. 

Mr. Koizumi, prime minister of Japan from 2001 to 2006, amend the law about dispatched worker in order to response to demand for more flexible labor market from both employee and employer. The government said this amendment gave worker flexible worker environment; for instance, worker can choose their preferred hours of work, and this amendment made workers easy to change their job.  It means the collapse of the Japanese traditional employment system. In fact, the number of dispatched workers was increasing yearly since the amendment was promulgated in 2003.

However, there was unintended consequence. The amendment widened the gap between regular workers and dispatched workers because companies defended regular worker’s vested interest and dispatched worker did not get same remuneration for the same work and because the government did not correct the situation. In addition, employer does not recognize the career of a dispatched worker. It means if a worker is hired as a dispatched worker once, it is very difficult to be hired as a regular worker.

As a result, while the amendment was designed to respond the change of worker's demand for employment format, they work same as regular workers with lower wage and many of them want to be hired as a regular worker.  Thus the amendment caused more employment stability.  

While companies received benefit from expanding the use of dispatched worker because they minimized their loss during the global recession of 2008-2009 by firing dispatched workers. This result shows the flexibility of dispatched workers employment.