Back to Work: Japan

Improving the Re-employment Prospects of Displaced Workers

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Job displacement (involuntary job loss due to firm closure or downsizing) affects many workers over the course of their working lives. Displaced workers may face long periods of unemployment and, even when they find new jobs, tend to be paid less and have fewer benefits than in the jobs they held prior to displacement. Helping displaced workers get back into good jobs quickly should be a key goal of labour market policy. This report is the second in a series of reports looking at how this challenge is being tackled in a number of OECD countries. It shows that Japanese employers and the government go to considerable lengths to avoid the displacement of regular workers while also providing considerable income and re-employment support to many of the workers whose jobs cannot be preserved. Challenges for labour market programmes include expanding labour market mobility between regular jobs, improving co-ordination between private and public re-employment assistance for displaced workers, and avoiding that job displacement pushes older workers to the margins of the labour market.



Assessment and recommendations

A significant fraction of workers are displaced every year in Japan and many of them experience a difficult adjustment in the labour market, notably in the form of long periods of joblessness and re-employment at significantly lower wages. On average during 2002-08, 1.4% of employees lost their job each year due to economic reasons such as corporate downsizing and business closings. The displacement rate rose to 2.0% during 2009-10, due to the impact of the global financial crisis. The incidence of displacement is somewhat lower in Japan than in the five other OECD countries where comparable estimates could be made. However, it is important to emphasise that care is required when comparing the incidence and the consequences of displacement in different countries.


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