The Structure of Unemployment and UV Analysis

    Unemployment may be divided between deficient demand unemployment, which rises or falls according to business conditions; and structural and frictional unemployment, which is determined by the structure of the labour market. According to UV analysis, since the second half of the 1970s, the UV curve shifted trendwise upward to the right (except for a somewhat downward shift during the bubble period), and the structural and frictional unemployment rate rose over the mid and long term. This rate rose by especially large amounts after the first oil crisis and after the collapse of the bubble (Fig. 27).

Trends in Unemployment Owing to Mismatch

    One of the main factors contributing to the rise in the structural and frictional unemployment rate was the expansion of mismatch due to structural changes in labour force supply and demand. Mismatch among age groups shrunk from the latter half of the 1980s through the bubble period, then subsequently expanded after the collapse of the bubble. This happened due to overall trends in supply and demand of labour, as well as the effects of the spread of the mandatory retirement system for workers aged 60 and over (Fig. 28). Because the mandatory retirement system for workers aged 60 and over is now almost universal, in the future, the supply and demand of persons in their early sixties will be the key factor determining the mismatch among age groups. It is also necessary to keep a focus on the supply and demand of middle-aged persons aged 45 and over -- an age group with a poor balance of supply and demand of labour.

    Mismatch among industries, based on indicators reflecting percentages in the service sector and the production sector (compared to the previous year), expanded sharply in the second half of the 1970s. This was the time period that marked the transition to the period of stable growth. Thereafter, mismatches among industries remained low into the early 1990s, with the exception of temporary fluctuations during the high-yen recession. However, such mismatch again grew significantly after the collapse of the bubble (Fig. 29). Although structural changes were greater during the period of high growth, the unemployment rate then was low because the structural changes were directed toward increasing employment in growing sectors. In contrast, the structural changes during the period of stable growth were largely due to an increase in pressure to exit sectors with contracting demand. Therefore, these changes led to greater unemployment owing to mismatch. Mismatch among regions have been decreasing, especially since the collapse of the bubble.

Unemployment Trends Not Owing to Mismatch

    One non-mismatch-related factor contributing to a rise in the structural and frictional unemployment rate is the consciousness of work. There has been an increase rate of desire for job-change, primarily among young people. This is a factor contributing to the rise in unemployment by voluntary job separation, particularly among young people (Fig. 30). Influences related to the rise in the rate of desire for job-change among young people include diversification of employment patterns. In addition, there has been an increase in the number of persons regarding work that allows them to utilize their own particular competencies as important, leading to an increase in attitudes towards job-change among regular staff employees. The diversification in employment patterns (the rise in the percentage of part-time workers and others with high unemployment rates) has led to an increase in the unemployment rate among young people in particular (Fig. 31). Furthermore, because the number of self-employed workers and family workers who become unemployed is extremely small, the rise in the percentage of employees is another factor contributing to the increase in the unemployment rate.

Characteristics of the Structural and Frictional Unemployment Rate

    The expansion of mismatch lowers the probability that people will make the transition from unemployment to employment, and is a factor contributing to the increased duration of unemployment. Greater diversity in employment patterns, changes in consciousness of work, and other factors forming the background of the rise in frictional unemployment contribute to an increase in the frequency of unemployment. In addition, the increase in deficient demand unemployment is a factor contributing to both the duration of unemployment and the frequency of unemployment. The duration of unemployment rose immediately after the first oil crisis, then remained flat or downtrended somewhat. After the collapse of the bubble, however, it rose again. With the exception of the bubble period, frequency of unemployment has been in an uptrend (Fig. 32).

Business Cycles and Unemployment

    In periods of labour shortage in which the supply and demand of labour is tight, as evinced by the reduction of mismatch among age groups during the bubble period, mismatch reduces due to growth in substitution demand, wherein demand for labour force groups with deficient supply is shifted to labour force groups with deficient demand.
    Since the second half of the 1970s, sensitivity of the female labour force participation rate to supply and demand of labour fell against the backdrop of rising desire for work among females, while the unemployment rate conversely became more sensitive to supply and demand of labour (Fig. 33).
    On a macro level, since the collapse of the bubble there has been essentially no change in the making of employment adjustments in response to variations in production based on variations in wages, non-scheduled working hours, and labour productivity.