Elsevier

Japan and the World Economy

Volume 48, December 2018, Pages 90-105
Japan and the World Economy

Firm-level labor demand for and macroeconomic increases in non-regular workers in Japan

https://doi.org/10.1016/j.japwor.2018.08.006Get rights and content

Highlights

  • The firm-level determinants of the demand for part-time and dispatched workers significantly differ.

  • The creation of part-time jobs stimulated by the increased female labor supply plays an essential role in non-regular worker growth relative to direct demand-side factors.

  • Increases to both the elderly and the female labor supply have reduced demand for dispatched workers.

  • The microeconomic demand conditions for non-regular labor are widely dispersed among firms.

  • Neither the micro demand factors examined in this study nor industrial differences can explain this heterogeneity.

Abstract

The purpose of this study is to account for the increase in non-regular workers, namely, part-time and dispatched workers, in the Japanese economy from the early 2000s. We use a firm-level panel dataset extracted from an administrative survey and distinguish between the short-run and long-run determinants of non-regular labor demand. Using the estimated parameters of the labor demand function, we decompose the rate of increase in the macroeconomic non-regular worker ratio into determinant factor contributions. Our major results can be summarized as follows. First, the firm-level determinants of the demand for part-time and dispatched workers significantly differ. Second, our results suggest that the creation of part-time jobs stimulated by the increased female labor supply plays an essential role in non-regular worker growth relative to direct demand-side factors. On the contrary, increases in both the elderly and the female labor supply have reduced demand for dispatched workers. Third, the microeconomic demand conditions for non-regular labor are widely dispersed among firms. Neither the micro demand factors examined in this study nor industrial differences can explain this heterogeneity.

Introduction

Although the size of the increase depends on the definition considered (e.g., contract length, working hours, or title used by the workplace), non-regular employment in Japan has clearly experienced an overall increase since the mid-1980s. For example, if non-regular employment is defined based on the title used by the workplace, the share of non-regular workers among total employees was 20 percent in 1990, 25 percent in 2000, and 35 percent in 2010 (see, e.g., Kitagawa et al., 2018).

Many studies have already addressed this issue; the most recent studies include Kitagawa et al. (2018) or Kambayashi (2017). However, studies examining the causes of the increase in non-regular employment are relatively scarce, and there is no consensus view of the factors driving this increase. Several reasons related to both labor supply and demand have been suggested. The increase in female labor-force participation, uncertainty surrounding product demand, and the introduction of information and communication technologies have all contributed to firms’ increased usage of non-regular workers, although their respective quantitative contributions are still a matter of empirical debate (Asano et al., 2013). However, it is less well known that the overall increase in the use of non-regular workers is not evenly distributed across all firms or establishments. Instead, non-regular workers are concentrated in some specific firms or establishments (see, for example, Kalantzis et al., 2012) and a better understanding of this stylized fact and its implications is required.

This study tries to identify the sources of non-regular employment growth at the firm level, considering the importance of heterogeneity in individual firms’ labor demand. To this end, we use a comprehensive government survey on corporate behavior, the “Basic Survey of Japanese Business Structure and Activities” (the BSBSA, hereafter), to estimate the firm-level demand function for non-regular workers. This survey contains extensive information on corporate governance and finance. Taking advantage of the rich information contained in the survey, we investigate various determinants of non-regular worker demand from short-run and long-run perspectives, and we distinguish between two types of non-regular workers: part-time and dispatched workers. Then, we apply the firm-level results to a factor decomposition of the macroeconomic growth in non-regular employment and try to identify the primary source of the economy-wide increase in non-regular employment. We also find a large dispersion in non-regular labor demand at the firm level, and we examine the sources of this heterogeneity.

Whereas most studies interested in non-regular workers use surveys of employees, we use an administrative firm survey, which allows us to focus on the corporate characteristics that may explain the diverse use of non-regular workers. Our major results can be summarized as follows. First, the firm-level determinants of the demand for part-time and dispatched workers significantly differ. Second, our results suggest that the part-time job creation stimulated by the increased female labor supply plays an essential role in non-regular worker growth relative to direct demand-side factors. On the contrary, the increases in the elderly and female labor supply have reduced demand for dispatched workers. Third, the microeconomic demand conditions for non-regular labor are widely dispersed among firms. Neither the micro demand factors examined in this study nor industrial differences can explain this heterogeneity.

The remainder of this paper proceeds as follows. Section 2 reviews the aggregate transition and firm-level distribution of non-regular employment. Section 3 presents the empirical model of the non-regular worker demand function with various short-run and long-run determinants. Then, the importance of these determinants is examined based on the estimation results. Section 4 decomposes the factors of aggregate non-regular employment growth to find the major causes, and it investigates the sources of non-regular demand heterogeneity at the firm level. Section 5 concludes.

Section snippets

Overview of the shift in non-regular employment in the BSBSA

The expansion of the non-regular worker sector is a prominent phenomenon in the Japanese labor market. Several characteristics define non-regular employment, as discussed by Kambayashi (2013), for example. The externally identifiable simplex standards used for defining non-regular employment are working hours and contract length. Comparing several government labor surveys, we can see that the share of short-term contract workers among total employed workers has been stable around 15 percent,

Determinants of individual firms’ non-regular worker ratio

This section estimates the determination of non-regular employment behavior at a firm level, including the case in which a firm employs no non-regular workers. We try to identify the influential factors of individual firms’ demand for non-regular workers.

Factor decomposition of non-regular growth and dispersion

Based on the estimated results in the previous section, this section examines the major causes of the growth in the aggregate non-regular worker ratios and then proceeds to investigate the sources of the cross-sectional dispersion of the firm-level non-regular worker ratios.

Conclusion

This study investigates the rapid growth in non-regular employment in the recent Japanese economy from the perspective of firm-level demand for non-regular workers. The non-regular workers examined in this study are part-time and dispatched workers, both of which are typical types of non-regular workers with shorter working hours and/or short-term contract lengths. By using panel data from a government corporate survey, we demonstrate the following findings.

First, the determinants of demand are

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    H. Teruyama and Y. Goto's research received financial support from the Japan Society for the Promotion of Science (JSPS KAKENHI Grant Numbers 16H03631 and 26285068 and JSPS Core-to-Core Program, A. Advanced Research Networks), and we would like to acknowledge this support. S. Lechevalier wishes to acknowledge that this work has received funding from the European Union's Horizon 2020 Research and Innovation Programme under the Marie Skłodowska-Curie Grant Agreement No. 645763. We are grateful to an anonymous referee and the participants in the 2017 SASE meeting (Lyon University, June) and the 2016 and 2017 INCAS workshops (Waseda University, September 2016; Oxford University, May 2017) for their critical comments that helped us improve the paper. The usual caveats apply.

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