Part II
The Rapidly Changing Labour Market and New Job Creation

Different Unemployment Situations for Different Age Groups

    Following the collapse of the bubble, the numbers of unemployed and the unemployment rates increased in all age groups. Among young people, the ratio of active job opening to applicants is high due to relatively strong labour demand. However, the unemployment rate is high and has increased a large amount due to factors such as an increase in voluntarily separated unemployed persons and a growing percentage of part-time workers. Among middle aged workers between 45 and 59 years of age, the unemployment rate is low and relatively stable, but has risen considerably in 1998. This reflects the increase in the involuntary separation rate and difficulty in gaining reemployment. Among the elderly, there is an extremely large number of workers experiencing involuntary separation (e.g., through mandatory retirement), but there is not enough employment demand to meet this newly available labour pool. Consequently, the unemployment rate for males aged 60 to 64 reached 10.0% in 1998 (Figs. 20 and 21). Meanwhile, the unemployment duration has increased for middle-aged males.

Manufacturing and Construction Industry Workers Have Difficulty Switching Industries

    Labour mobility has usually been limited to movement within the same occupation or within the same industry, reflecting the interest of both workers and companies to utilize the skills workers acquire. And the period of separation (unemployment) occurring when workers switch occupations or industries is long. Thus the labour market has been gradually compartmentalized according to occupation type and industry type (Fig. 22). Labour mobility between industries is relatively easy when moving between tertiary industries, but is more difficult when moving out of the manufacturing and construction industries. The manufacturing industry in particular has seen a continued decline in employment demand following the collapse of the bubble. Although the separation rate is low in manufacturing, once a worker is separated, it is difficult to gain reemployment in the manufacturing industry, so the unemployment duration is prolonged.

No Rise in the Long-term Unemployment Rate

    While the long-term unemployment ratio has risen for males, regular workers and employees, there has been an increase in the number of workers that tend to have a lower ratio of long-term unemployment, such as females and part-time workers. As a result, the long-term unemployment ratio has not risen very much, and the long-term unemployment rate remains basically in line with the overall increase in the unemployment rate.

Unemployment Duration in the US is Often Short

    The long-term unemployment rate in Japan tends to be higher than in the US, where the short-term unemployment rate tends to be high. However, in December 1998, the Japanese unemployment rate rose above the US rate for the following reasons:

1. The long-term unemployment rate, which rises and falls according to economic conditions, fell in the US and rose in Japan (reflecting differences in each country's economic climate).
2. The short-term unemployment rate fell in the US (reflecting the possibility of improved efficiency in the US labour market).

    An analysis of job-seeking reasons shows that involuntarily separated unemployed persons account for approximately half the total number of unemployed in the US, while in Japan there are many voluntarily separated unemployed persons (Fig. 23).

The Social Costs of Unemployment

    Increased unemployment impacts upon society in a variety of ways. On the macro level, the labour force is not being fully used from a supply perspective, so the economy's potential productive capabilities are not being realized. From a demand perspective, unemployment leads to reduced consumption both through reducing income and due to its effects on consumer attitudes.
    In households where the head of household is unemployed, the large decline in household income resulting from this unemployment is compensated for by the spouse's income and other efforts. In addition, these households exist on the financial assets they have built up, thereby minimizing the decline in their consumption level (Fig. 24). However, a breakdown by age groups shows that households with unemployed heads of household in their fifties tend to significantly reduce consumption. A comparison of unemployed households in 1994 against those in 1984 seems to indicate that the impact on household income of unemployment by the head of household was less severe in 1994 than ten years earlier (Fig. 25). This change is due to the following reasons:

• The role of the income of the spouse of the head of household and other family members as part of real household income has increased.
• Selective consumption has increased, and the margin for consumption reduction has increased.
• Savings have increased, making it easier for households to live off of savings. This makes it possible to avoid a significant decline in the consumption level.

    People have suffered a loss of skills as a result of unemployment and job changes. The impact on middle-aged and elderly workers seems to have been especially severe. In addition, there is concern that younger people will lose the opportunity to develop skills as they repeatedly change jobs.
    Examples of the financial effects of unemployment include a decline in the balance of the government's employment insurance account (due to increased unemployment), as well as reduced governmental revenues from taxes and social insurance premiums.
    Unemployment also has psychological effects that cannot be ignored. An analysis of different age groups shows that the psychological impact of unemployment on the middle-aged and elderly is severe (Fig. 26).