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.



Executive summary

Workers who are involuntarily displaced from their jobs face substantial economic and social costs. On average during 2002-08, 1.4% of employees lost their job each year in Japan due to economic reasons such as corporate downsizing and business closings. The displacement rate rose above 2.0% in 2009, due to the impact of the global financial crisis, but had returned to its pre-crisis level by 2012. Less than one-half of all displaced workers become re-employed within one year and re-employment rates are particularly low for older workers, women and less educated workers. When they succeed in moving back into employment, many displaced workers earn substantially less than on their prior job and/or accept non-regular employment. The unemployment and earnings losses following job displacement underlie the importance of public policies assisting job losers to find new jobs where then can be economically secure while making good use of their productive skills.


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