The concept of "Womenomics," which links gender equality to economic growth, has been in the spotlight since Shinzo Abe became prime minister in 2012. Amid record-high female participation in the workforce, the Diet passed a labor reform bill last month that encourages working more efficiently over fewer hours.
The unemployment rate also reached a historically low 2.4 percent in June. How will these developments affect the future of working women in Japan?
Nobuko Kobayashi, a partner at global management consulting firm A.T. Kearney, spoke with The Japan News about the prospects for working women as well as the need for meaningful labor reform in Japan. The following are excerpts from the interview.
The Japan News: The Internal Affairs and Communications Ministry recently reported that the percentage of women aged 25-39 in the workforce reached 75.7 percent in 2017. Is this good news?
Nobuko Kobayashi: Yes, albeit with a caveat. More women of child-rearing age can join the workforce thanks to improved social infrastructure, hence the flattening of the M-curve, which traditionally shows declining labor participation among women in their 30s and 40s. On the other hand, Japanese women on average earned 73.4 percent of what their male counterparts earned in 2017, up only 2.5 percentage points from 2012, according to the Japan Institute for Labor Policy and Training.
While the direction is positive, there is still a substantial 26.6-point gap, double the average gender wage gap of 13.9 points for OECD countries in 2017. In fact, Japan has the third-worst gender wage gap among OECD countries, trailing only South Korea (34.6 points) and Estonia (28.3 points).
There are also concerns as to whether enough women occupy positions of authority. According to a 2016 government study, women hold only 13 percent of managerial positions in Japan versus about 43 percent in the United States and about 33 percent in France. A high quantity of women are working, but the quality of their opportunities must improve.
Wage gap has deep roots
Q: What explains the sharp gender wage gap in Japan?
A: Lack of sufficient women in managerial positions notwithstanding, the wage gap primarily results from deep divisions between regular and non-regular workers. Regular workers, 70 percent of whom are male, work full-time and are directly employed by companies. They also have open-ended contracts. Today, regular workers account for about 60 percent of the workforce, with the ratio having declined since 1997 as employers seek to cut labor costs. On the other hand, women account for 70 percent of all non-regular workers. The number of regular workers peaked in 1997, which also happens to be when the primary income of Japanese households -- often earned by a married male regular worker -- peaked at around 6 million yen. The figure subsequently fell to around 5 million yen in 2016, with women increasingly assuming non-regular employment to supplement declining primary incomes.
The rift between regular and non-regular workers is particularly wide in Japan compared to Western countries. A traditional Japanese career path sees a [male] regular employee accrue seniority at a company, assuming a range of different positions along the way. The system starkly contrasts with the Western system in which an individual assumes a well-defined role that is standardized across companies, which leads to less of a wage gap between regular and non-regular employees.
Given the higher status of regular workers in Japan, non-regular [often female] workers are typically paid less to do the same work and are considered second-class citizens, receiving insufficient credit or lacking a voice within companies. They also receive inferior benefits, and face many obstacles in attaining regular employment.
This system leaves most women on the fringes unless they enter the workforce as a regular worker directly out of school and remain at their companies, often without having children. Although we have partly moved beyond the standard model of a male breadwinner and female homemaker, gender roles remain skewed, albeit with a different twist.
Q: Will the recent work reform bill bridge the gap between regular and non-regular workers?
A: "Equal pay for equal work," one of the three pillars of the legislation, provides guidelines for standardizing treatment of regular and non-regular workers. While the gap will not be completely erased due to differences in responsibilities, it will narrow the wage gap and motivate non-regular workers by leading to better compensation.
The narrowed gap will promote mobility between non-regular and regular positions, as employers seek to retain staff amid the ongoing labor shortage. In 2016, about 23 percent of companies surveyed by the Japan Institute for Labor Policy and Training said they had revised or were in the process of revising their policies on transitioning non-regular workers into regular positions. The new bill will strengthen this trend.
Equal work across firms?
A: The term "equal work," however, can be tricky. Due to the tribal nature of Japanese companies, individual firms adopt different approaches to similar work. While we may be able to compare the work of regular and non-regular employees at the same organization, it is difficult to draw comparisons even among firms in the same industry. This must change if Japan is to boost productivity, the overarching goal of the work reform bill. Because workers adapt to the unique customs of their company, they are unable to transfer to other firms, leading to overall inefficiencies.
Not just a women's issue
A: The rising life expectancy of Japanese also means we may very well work longer than our parents. Many elderly people are motivated to actively participate in society as long as they are healthy. A 2015 Cabinet Office study found that Japanese seniors are highly motivated to work, with about 45 percent replying they want to continue to hold a job, compared to about 39 percent in the United States or about 23 percent in Germany. Some employers retain elder employees to mentor the next generation. Ajinomoto AGF Inc., for example, recently raised salaries for rehired employees aged 60-65 by 30 percent while implementing 3-day weekends.
This longevity further highlights the need for employment mobility. Workers are increasingly likely to adjust their employment situations in response to changes in their lives, such as illness or a need to care for one's children or parents. The lifetime employment system that guaranteed stability for [male] regular workers is quickly falling apart. It is therefore important to improve employment mobility and flexibility for regular, non-regular and even freelance workers.
Aging is considered a dirty word in Japan as it connotes a chronic labor shortage and stagnant consumption. However, seniors' continued employment will support the workforce, even with the shrinking influx of new workers. In the long run, their increased consumption power will help counter deflation.
Q: What are the consequences of shifting from lifetime employment to greater mobility among companies?
A: We should not fool ourselves. The transition will not be painless, as greater labor mobility may lead to higher unemployment. The government must help ease the pain. First, it must provide a social safety net for those between jobs. Second, the education system must be reformed to provide more pragmatic training. Labor mobility requires jobs be standardized across companies. Basic training should not be left to companies that customize training regimes based on their peculiar customs. This applies not only to new hires but also to mid-career employees who require new skills to keep up with changes in society and the economy. Due to the lack of labor mobility, Japan today lags far behind its OECD peers in retraining mid-career employees. Needless to say, opportunities to acquire new skills would help women reenter the workforce after maternity leave.
The private sector, on the other hand, must emphasize promotion based on merit. This requires a radical shift in approach. Output-based metrics, such as generation of innovative ideas, should be valued more than input-based metrics, such as time spent at the office. Contrary to popular belief, labor mobility does not necessarily mean constant hiring and firing. Employers can retain top talent by rewarding competence.
Lastly, workers themselves will need to navigate their careers as they will be unable to outsource career management to a lifetime employer. This will be very difficult as it runs counter to current cultural norms.
In sum, addressing gender equality in the workplace leads us to the question of changing Japanese work practices for everyone, including men and eventually foreigners. Do we accept possible risks such as unemployment or do we retain outdated practices, forgoing individual flexibility and sacrificing productivity? Change can only be successful if all stakeholders -- including the government, the private sector and workers themselves -- are in sync at each stage of the transition. Only by embracing a holistic approach can we escape the shackles of current practices.
--This interview was conducted by Japan News Staff Writer Etsuo Kono.
-- Nobuko Kobayashi / Partner, A.T. Kearney
Kobayashi specializes in management consulting with a focus on cross-border investment strategy. She began her career at A.T. Kearney's Tokyo office in 1998, and later moved to the United States to earn her MBA and to work as an investment professional. She returned to A.T. Kearney in 2009. Kobayashi received her MS degree from the Graduate School of the University of Tokyo and her MBA from Harvard.
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