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Economic Growth, Labour Markets and Gender in Japan

Why did the women's labour force participation rate in Japan not increase with the process of economic development, unlike in other developed nations? What kind of policies and social and cultural barriers hinder the process? What kind of returns of economic growth did women in the labour force receive with economic growth? The flip side of growth in export-oriented Japan was that many of the women lost their jobs as production was relocated abroad. In fact, underwriting Japan's rapid growth and industrial transformation was a labour system based on the oppression of women, the use of temporary workers and subcontracting.

Economic Growth, Labour Markets and Gender in Japan

Why did the women’s labour force participation rate in Japan not increase with the process of economic development, unlike in other developed nations? What kind of policies and social and cultural barriers hinder the process? What kind of returns of economic growth did women in the labour force receive with economic growth? The flip side of growth in export-oriented Japan was that many of the women lost their jobs as production was relocated abroad. In fact, underwriting Japan’s rapid growth and industrial transformation was a labour system based on the oppression of women, the use of temporary workers and subcontracting.

UMA RANI

J
apan’s “miracle” growth of the 1960s and its successful transformation from a war-ravaged economy often became a matter of discussion in the development discourse of the developing economies. This tremendous growth was due to a number of factors, which included improvement in productivity in each individual sector of the economy and the shift of labour from low productivity to high productivity sectors [Iyotani 1995]. That apart, Japan followed the path of export-oriented growth, which reaped benefits and became a trendsetter for most of the south-east Asian economies in the region, which started emulating the growth process of that country. There exists substantive literature on the success of the Japanese growth model, the management practices and lifetime employment system, but none of this literature makes any mention of the role of women.

The motivation behind looking into this aspect was the high women’s participation in the labour force in the beginning of the development process (1956), compared to other developed nations.1 Such high participation among women indicates that they probably had a much larger role to play in the development process of Japan, which brought about such high economic growth in a short span. However, what is puzzling is that while the developed nations, particularly the US displayed a upward trend in their participation rates (73.4), by 1998 due to increased economic opportunities brought about by economic growth, Japan in contrast had a relatively stable women’s labour force participation throughout its economic growth, and in fact the recent years show a decline in their participation rates.

It is in this context, we examine the role played by Japanese women in the economic growth of their country. Why did the women’s labour force participation rate in Japan not increase with the process of economic development, as in other developed nations? What kind of policies and social and cultural barriers actually hindered this process? What kind of returns to economic growth did women in the labour force receive? It is often argued that the returns of economic growth, would eventually lead to improving the quality of the labour force and improving or maintaining a sense of equity and social justice among the labour force participants [Van der Hoeven 2001].

Section I discusses the economic growth of Japan over the different periods and the role played by women in this process. This section also discusses the kind of employment opportunities that were available to women. Section II addresses the issue of gender wage differentials in Japan. Section III addresses issues related to policy and the social and cultural barriers that have hindered women from improving their economic situation in Japan.

I Economic Growth and Female Labour Force

The Japanese economy underwent a number of structural changes as a result of expansion and liberalisation of international trade, oil crisis, appreciation of yen, introduction of new technology and various other factors, which were accompanied by the need to reallocate human resources, that is employment adjustment. Figure 1 illustrates the relationship between economic growth and unemployment rate between 1960 and 2001. The fluctuations in the annual rate of economic growth were not transmitted to the unemployment rate. The rate of unemployment remained low and unchanged despite the steep drop in GDP compared to other industrialised nations.2

The GDP growth trend for Japan shows three downswings along the rising trend (the first one being a relatively mild one). The first downswing occurs in the mid-1960s, the second one in 1973 and the third one, beginning in the 1990s. In Japan there is a clear demarcation in the growth trend before and after 1974. The earlier period is one of rapid industrialisation and high economic growth (1960 to 1974), when real GDP rose at 8 per cent annually. The period after the high economic growth was that of post-industrialisation or development of a service-oriented economy (1974 to 1992), when real GDP grew at 4 per cent annually. The 1990s were a period of recession except for a slight pick-up in the mid-1990s, when the GDP grew at 1.6 per cent.

Rapid Industrialisation Phase: 1960 to Mid-1970s

From 1960 to the mid-1970s, Japan closed the gap in per capita income and labour productivity with advanced industrial economies in western Europe and north America. This was achieved through rapid technology borrowing to strengthen its manufacturing base and by pursuing an export-led growth strategy based on light manufactures [Burkett and Hart-Landsberg 2000]. Exports expanded rapidly in both heavy and chemical industries and light-industrial products such as textiles, toys and simple electrical appliances. These goods accounted for 65 per cent of

Unemployment Rate

Figure 1: GDP Growth and Unemployment Rate

12

10 8 6 4 2 0

–2

–4

196119631965196719691971197319751977197919811983198519871989199119931995199719992001 Years GDP Growth Unemployment Rate

for economic fluctuations, in the process injecting flexibility in the labour market. Between 1966 and 1974, the proportion of part-time workers increased from 6.3 to 8.6 per cent (Table 4) and the proportion of female part-time workers increased from

51.4 to 61 per cent. This increasing part-time or temporary labour was assumed to be a temporary phenomenon proliferating in response to the labour shortage caused by the nation’s rapid economic growth [Shioda 1994].

Stable Growth Period: 1974 to 1985

all Japanese exports in 1955 and by 1965 they continued to account for 52.8 per cent. This export success was at the expense of other capitalist countries which responded with import restrictions [Brenner 1998].

External trade pressures apart, internally rising wages became difficult for Japan’s light manufactured exports to remain internationally competitive and it slowed down the growth in the mid1960s. The Japanese government adopted the strategy of moving light manufacturing plants to the east Asian countries, mainly South Korea, Taiwan and the ASEAN countries. Production of cotton textiles was moved in the mid-1960s followed shortly by synthetic textiles [Steven 1983]. This resulted in a decline in the share of labour-intensive exports to 43.5 per cent in 1973 [Krause and Sekiguchi 1976: 409]. Despite rising wages and external trade frictions, this dual strategy of heavy industrialisation and exports of light manufactured goods brought about an impressive growth rate of 8 per cent per annum, with manufacturing growth at 11 per cent (Table 1). The high investment and high export strategy helped in establishing the manufacturing base in the economy, and this sector contributed almost 40 per cent of income in 1970 (Table 2).

Rapid economic growth also brought about a rapid growth of employment, particularly in the manufacturing (3.2 per cent) and services (3.2 per cent) sector, while unemployment remained at less than 1.5 per cent, attaining the state of “full employment” (Table 1). The rapid growth of output and employment also encouraged a number of women workers to get gainfully employed in the manufacturing sector, which provided opportunities. This led to a massive outflow of workers both male and female from the agricultural sector, which observed a negative employment growth (-5.8 per cent) (Table 1). These changes brought about a steady decline in family workers and selfemployed and a substantial increase in employees hired both on a regular and temporary basis (Table 3). The trend towards hiring workers as an employee increased for both men and women, and it pertained more strongly to women. However, female labour force participation declined by four percentage points between 1960 and 1965, despite the expansion of manufacturing and service sector (Table 3). This decline was argued to be a part of a secular shift reflecting the decline in the share of agriculture and the associated loss of employment opportunities for women as unpaid family workers [Darby, Hart and Veechi 2001].

This period also observed an increase in temporary and parttime3 jobs especially in factories and offices [Steven 1990]. The temporary or part-time work enabled women to earn an income without detracting from her duties as mother and homemaker to supplement her husband’s income and cover increasing household expenses [Shioda 1994]. This allowed corporations to adjust

The period from 1974 to 1985 was that of stable growth, when the economy grew at 3.7 per cent. The combined impact of the yen’s revaluation and a sharp rise in oil prices was felt severely

Table 1: Growth Rate of GDP and Workers

GDP
1955 197419851992 1961 1971 1981
1973 1985 1992 2000 1970 1980 1990
Agriculture 1.1 0.03 -0.5 -3.1 -1.4 0.7 1.6
Manufacturing 11.3 3.5 3.9 -1.4 11.7 4.1 4.5
Services 7.7 4.1 3.3 3.4 8.4 5.1 4.3
All 8.2 3.7 3.4 1.6 8.7 4.5 4.3
All Workers
1961 197419851992 1961 1971 1981
1973 1985 1992 2000 1970 1980 1990
Agriculture -5.8 -2.4 -2.8 -2.3 -4.6 -3.4 -2.1
Manufacturing 3.2 0.4 1.2 -1.4 3.1 0.6 0.8
Services 3.2 1.8 1.8 0.9 3.0 2.0 1.8
All 1.3 0.9 1.3 -0.01 1.2 0.8 1.1
Male Workers
Agriculture -5.6 -2.1 -2.3 -1.9 -4.4 -3.1 -2.0
Manufacturing 2.9 0.1 1.3 -0.7 2.7 0.6 0.6
Services 3.1 1.4 1.3 0.4 2.8 1.8 1.3
All 1.5 0.6 1.1 -0.1 1.4 0.8 0.8
Female Workers
Agriculture -6.0 -2.3 -3.1 -2.8 -4.8 -3.8 -2.2
Manufacturing 3.7 1.0 1.1 -3.0 3.9 0.6 1.2
Services 3.3 2.4 2.5 1.4 3.2 2.3 2.4
All 0.8 1.3 1.6 0.1 0.9 0.8 1.7

Sources:(i) Report of the National Accounts from 1955 to 1994,Economic Planning Agency, Government of Japan.

(ii) Annual Labour Force Survey, Statistics Bureau, Ministry of Public Management, Home Affairs, Posts and Telecommunications, Government of Japan.

Table 2: Sectoral Distribution of GDP and Workers

GDP
1955 1960 1970 1980 1990 2000
Agriculture 16.7 13.2 5.0 3.2 2.4 1.4
Manufacturing Service 23.1 60.2 28.6 58.1 39.5 55.5 38.4 58.4 39.2 58.4 30.8 67.7
All Workers
Agriculture Manufacturing 31.2 29.2 17.4 35.2 10.4 34.7 7.2 33.6 5.1 30.7
Service 39.6 47.3 54.5 58.7 63.6
Male Workers
Agriculture 25.3 14.1 8.7 6.3 4.7
Manufacturing 34.5 39.4 38.9 37.9 37.2
Service 40.2 46.4 52.2 55.2 57.4
Female Workers
Agriculture 39.9 22.5 13.2 8.5 5.5
Manufacturing Service 21.3 38.8 28.6 48.7 28.2 58.3 27.3 63.8 21.2 72.6

Sources:(i) Report of the National Accounts from 1955 to 1994,Economic Planning Agency, Government of Japan.

(ii) Annual Labour Force Survey, Statistics Bureau, Ministry of Public Management, Home Affairs, Posts and Telecommunications, Government of Japan.

by simple electronics and the heavy and chemical industries. The heavy chemical industries processed large amounts of imported oil and other material into exports, and it affected their profitability and competitiveness [Burkett and Hart-Landsberg 2000]. The wage increase brought about by the oil shock also became a major problem for management and the Japanese bureaucrats [Nakamura 1992]. To overcome the crisis, firms tried to scale down production and reduce labour costs by reducing overtime and dismissing temporary and part-time workers. Light manufactured products, including TVs and tape recorders were relocated to South Korea and other east Asian countries.

This period observed growth of advanced electrical machinery and precision instruments industries, along with other “processing” industries, which included other machinery, transport equipment and metal products. As these industries were technologically upgraded and automated, they tried to rationalise labour through the system of subcontracting and expanding the part-time labour force, which included women, day labourers, contract workers and temporary workers [Steven 1997]. This labour process together with the new microtechnology allowed these firms to be internationally competitive. Some of their specialised products like microelectronics had a growing world demand at that time. During this phase the economy of Japan became even more dependent on export industries such as automobiles, electrical machinery and equipment, precision machinery [Nakamura 1995]. The rapid technological change in the manufacturing sector also had a spillover in the services sector. Innovative technologies evolved and automation advanced rapidly and city banks were connected by an on-line system [Koshiro 2000]. Most of the employment that was created for women in this sector was of part-time nature.

The oil crisis and the relocation of labour-intensive light manufacturing industries resulted in the decline of female labour force participation (45.9 per cent) by 1975 (Table 3). This indicated that females, who were largely hired on part-time or temporary basis, were first to be discharged. They actually operated in the periphery of the labour market moving in and out of it, depending upon the economic situation, as compared with the conventional labour force centring on male household heads representing continuity and regularity.

The “peripheral workforce” acted as a cushion against business fluctuations, enabling companies to make effective use of them in prosperous business days and fire them under the reverse circumstances [Nishikawa and Shimada 1980]. They also prevented unemployment from increasing rapidly during the recession by moving out of the labour force to their homes, as they were secondary household earners. The characteristics of the peripheral labour force, seen among part-time workers, were fully displayed during the high growth period. Nakamura (1975) estimated that 11.7 per cent of female workers exited out of the labour market in 1974.

This probably discouraged women workers from participating in the labour market and could be one of the reasons why female labour force participation did not improve. It is possible that discouraged-worker effects appear to be a significant labour market feature in Japan, particularly in the 1970s. Darby et al (2001) also show in their study that female employment in Japan was being used as an important buffer to cyclical fluctuation. Tachibanaki and Sakurai (1991) also found that the discouraged worker effect was essentially a female phenomenon in Japan.

Recession: 1985-1992

The new high value added consumer goods from Japan in the world market continued to create problems for the developed capitalist world, most of whom were facing recession, unemployment and trade deficits due to rising costs of oil imports. Trade tensions between the US and Japan escalated, as more than 40 per cent of all Japanese machinery exports between 1983 and 1985 were sold in north America, and this included 60 per cent of Japanese motor vehicle exports [Steven 1990]. This export success of Japan was creating problems especially for the US, as their trade deficits were growing and deindustrialisation was taking place. All these factors culminated in the Plaza Accord4 in 1985 to bring about more balanced trade. Towards such efforts exchange rate adjustments were made, which led to appreciation of the yen in 1985.

Export industries were severely hit and imports began to rise with the newly industrialising economies (NIEs) becoming serious competitors to Japan in both domestic and overseas markets [Nakamura 1992]. There was also increasing pressure from the US on Japan to open its market in hi-tech (integrated circuits) and agricultural products (rice). These factors slowed down the economy for a brief period, but production resumed its upward trend in 1987.

To maintain competitiveness worldwide, large portions of motor vehicles, electric machinery industry, precision instruments and machinery industry were “hollowed out” and relocated

Table 3: Labour Force Participation Rates and the Distribution of Labour Force by Employment Status, Japan, 1960-2000

Women Per Cent Distribution Men Per Cent Distribution
Employees Employees
Female Labour Total Regular Selif- Family Male Labour Force Total Regular Self- Family
Force Participation Employed Workers Participation Employed Workers
Rate Rate
1960 54.5 38.4 32.9 15.1 46.5 84.8 59.6 53.9 28.7 11.7
1965 50.6 46.4 39.7 14.1 39.5 81.7 66.7 61.3 24.6 8.7
1970 49.9 54.8 47.1 14.3 31.0 81.9 71.6 67.4 22.4 6.0
1975 45.9 59.9 51.1 14.4 25.7 81.6 76.0 72.0 20.2 3.9
1980 47.6 63.3 51.9 13.7 23.0 79.8 77.3 73.1 19.4 3.3
1985 48.7 67.4 54.3 12.5 20.1 78.1 79.2 75.0 18.0 2.8
1990 50.1 72.5 58.5 10.7 16.8 77.2 81.1 76.6 16.4 2.5
1991 50.6 74.2 60.4 10.3 15.6 77.6 81.9 77.5 15.8 2.3
1995 50.0 78.5 64.0 9.0 12.5 77.6 83.8 79.2 14.3 1.8
2000 49.3 81.6 64.4 7.8 10.6 76.4 84.5 78.7 13.9 1.6
2001 49.2 82.7 7.1 10.1 75.7 85.0 13.4 1.6

Source: Annual Labour Force Survey, Statistics Bureau, Ministry of Public Management, Home Affairs, Posts and Telecommunications, Government of Japan.

abroad, mainly in south-east Asian countries and China to take advantage of cheap labour. The other force driving Japan’s recovery was the famous “bubble economy”, an investment and construction boom driven by an escalating upward spiral of stock, share, land and housing prices. Monetary policy was accommodative, as the interest rates were kept low for the bigger keiretsu5 corporations [Nakamura 1995].

However, Japan’s continuous export dependence and its regional and global production strategy used to maintain its export competitiveness had adverse consequences for the Japanese working class in particular. Some of these industries were heavily dependent on female labour and with the “hollowing out” of production overseas, female employment began to decline. The proportion of females in the manufacturing sector declined to 23.5 per cent in 1990. Many of these workers found employment in the service sector (28 per cent), which was already growing (Table 5). The structure of the economy began to shift from manufacturing to a service economy, as 58 per cent of the overall workforce and 64 per cent of the female workforce were engaged in the service sector (Table 2).

In the 1960s, while the temporary and part-time workers were hired to meet peak demands, the 1970s observed the utilisation of this labour to reduce costs and to maintain competitiveness, especially in the manufacturing sector, which was later adopted by the service sector. The 1980s observed a further increase of such workers with specific knowledge and skills and this phenomenon was also observed in the other developed capitalist world.

Most of these workers found employment through placement services, which was in principle prohibited by law. As firms felt that it was becoming difficult to operate without such workers, they deliberated on the need to have legal protection in terms of working conditions and the application of social security laws for such workers. This led to the Dispatched Workers Law,6 which was promulgated in July 1986 for limited categories of work (16 specified occupations). The promulgation of this law led to an increase in part-time workers from 11.7 per cent in 1986 to 16.3 per cent in 1991, more for women than men. While female part-time workers increased from 22.7 per cent to 29.3 per cent, males increased from 5.5 to 8.3 per cent. The proportion of female part-time workers peaked during this period at 71.8 per cent in 1989 (Table 4). The increase in female labour force participation rate (50.7 per cent) during this period came from part-time workers, and not full-time workers.

This period also saw the enactment of the Equal Employment Opportunity Law (EEOL) under international pressure to deal with discriminatory treatment of women at work in terms of recruitment, training, promotion and remuneration. This law laid down the basic legal framework for promoting equal opportunities for women at work. However, the EEOL embodied no explicit penalties for non-compliance due to which the personnel policies of the large companies and government agencies remained unaltered. Instead, firms, especially the large ones, introduced formally a two-track system composed of managerial (‘sogoshoku’) and clerical (‘ippanshoku’) tracks, which already existed. The promulgation of the EEOL actually intensified segmentation in the already segmented labour market [Kawashima 1995].

Despite the changing structure of the economy and employment growth, unemployment continued to rise. Although lower than other countries, it was still high by Japanese standards and had become a sensitive political issue [Nakamura 1992]. The appreciation of the yen, structural change and growth of tertiary industry, the ageing population and increased female participation in the labour market, became the preoccupations of policy-makers.

Labour Market Adjustments in 1990s

The economy grew at a meagre 1.6 per cent during the 1990s (1992-2000). It managed a weak recovery in 1994-95, but the yen appreciated sharply forcing Japanese companies to invest overseas. The shift in the manufacturing industry was not restricted to large companies alone but also to small and medium manufacturers, leading to the “hollowing out” of industry. This undermined domestic investment, although information technology did fortunately create considerable impetus for new investment. The economic conditions were badly aggravated by the financial crisis – especially the non-performing loans including the bad debts [Koshiro 2000].

Table 4: Proportion of Part-time Workers among Total Workers

Part-time Male Female Proportion of
Workers Part-time Part-time Female Part-time
Workers Workers Workers
1966 6.3 4.5 10.1 51.4
1971 7.1 4.2 13.1 60.1
1974 8.6 5.0 16.1 60.9
1976 8.7 5.0 16.4 61.1
1979 9.6 5.1 18.4 64.5
1981 10.0 5.0 19.6 67.3
1984 11.1 5.0 22.1 70.7
1986 11.7 5.5 22.7 70.0
1989 13.1 5.9 25.2 71.8
1991 16.3 8.3 29.3 68.6
1994 18.8 10.1 32.5 66.9
1996 19.4 10.1 34.0 68.2
1999 21.8 11.6 37.4 67.9
2001 22.9 11.9 39.3 68.8

Source:Labour Force Survey, Statistics Bureau of the Management and Coordination Agency, Government of Japan.

Table 5: Employment Distribution of Women by Industry, Japan, 1960-2000

(Per cent)

1961 1965 1970 1975 1980 1985 1990 1995 2000

Agriculture and

forestry 39.3 33.0 22.0 16.5 12.7 10.0 8.1 6.2 5.2 Non-agricultural

industries 60.7 67.0 78.0 83.5 87.3 90.0 91.9 93.8 94.8 Fisheries 0.7 0.7 0.4 0.4 0.5 0.6 0.4 0.3 0.3 Mining 0.3 0.2 0.1 0.1 0.0 0.1 0.0 0.0 0.0 Construction 1.8 2.1 2.6 3.0 3.5 3.3 3.8 4.1 3.7 Manufacturing 19.3 21.0 25.9 24.3 24.6 24.9 23.5 20.7 17.5 Electricity, gas

and water supply 0.0 0.0 0.0 0.2 0.2 0.2 0.2 0.2 0.2 Transport and

communications 1.8 2.0 2.3 2.1 1.9 1.9 2.1 2.6 2.9 Wholesale and

retail trade, Restaurants 20.5 23.0 26.3 26.0 26.9 27.1 27.2 27.8 28.8 Finance, insurance

and real estate 0.0 0.0 0.0 3.9 4.1 4.3 5.0 5.0 4.4 Services 15.5 16.7 18.9 21.8 23.7 25.8 27.9 31.2 34.5 Government (not

elsewhere classified) 1.0 1.2 1.2 1.7 1.5 1.5 1.4 1.6 1.8 Total 40.5 39.7 39.3 37.4 38.7 39.7 40.6 40.5 40.8

Source:Annual Labour Force Survey, Statistics Bureau, Ministry of Public Management, Home Affairs, Posts and Telecommunications, Government of Japan.

Figure 2: GDP Growth Rate and Wage Increases

195519571959196119631965196719691971197319751977197919811983198519871989199119931995199719992001

Rates Years 35 30 25 20 15 10 5 0 –5

GDP

Wages of All Industries

Wages of Top 1000 Companies

During the early phase of the recession, the permanent employment was not affected. The employment adjustment was carried out by reducing the number of hours much more sharply than in the earlier recessions. The growth of workforce declined by 0.01 per cent during this period (1992-2000). Unemployment was at its unprecedented high, almost reaching 5.0 per cent in 2000. The slow down in the rate of growth of the economy and the ageing of the labour force, generated problems that became difficult to address by piecemeal adjustments involving only parts of the employment system.

The 1990s saw a large increase in part-time workers from 16 per cent in 1991 to 23 per cent in 2001 (Table 4). This period also observed a rapid increase in female part-time workers compared to males, which was also growing. The rise in male part-time workers was largely due to the persistence of recession in the 1990s and the restructuring process. Japanese companies were forced to address the flaws in traditional management practices as the gap between successful and floundering firms widened. There was also enormous pressure from the US to change its business practices and to make organisations leaner, cost efficient and more flexible.

In an effort to retain/recover the competitive advantage in the marketplace, companies started to take bolder steps by reducing the number of full-time employees and resorting to part-time workers. The three most common measures were, (1) reduction of workers on full benefits (with lifetime employment, senioritybased salaries and full retirement packages); (2) replacement of workers on full benefits with other more flexible workers (new workers recruited in mid-career, part-time workers, contracted workers, and temporary workers supplied by temporary staff placement agencies); and (3) switching from a seniority-based salary structure to a merit system reflecting each individual’s ability and capability of carrying out tasks and making contributions to the company. These changes resulted in an increase in part-time or flexible workforce.

With the restructuring process and increase in male part-time workers, the opportunities for women who were hitherto employed as part-time workers actually started to decline in the 1990s. The proportion of female part-time workers declined from 72 per cent in 1989 to 69 per cent in 2001 (Table 4). There was also an increase in discouraged workers during this period. The 1990s thus observed a tremendous change in the employment structure and a greater injection of flexibility in corporations, with the reduction of permanent employment.

II Gender Wage Differentials in Japan

The trends in GDP growth rates and real wage increases since 1955 give an indication that the returns to economic growth are translated into better wages for the workers in the labour market (Figure 2). Even during periods of an economic slump the real wage rate actually does not decline for all workers. If we look at the real wage increase in the top 1000 companies listed in the Tokyo Stock Exchange, we find that wage increase is considerably higher than that of the annual average wage increase. This no doubt implies that the top companies enjoy a considerably higher share of economic growth. This increase in wages seems to be possible due to the efforts of the labour unions7 that were quite successful in promptly translating increased growth to pay increases in the labour market through ‘shunto’.8 The government also favoured this mechanism, as it decided to increase the welfare and well-being of its people through economic growth and rejected the western approaches that introduce public provision such as social security and other assistance measures for the unemployed, sick, aged and others [Sheridan 1998].

During the periods of rapid economic growth in Japan, wage increases were explained by the demand-supply conditions in labour markets. The job offer-application ratio acted as a proxy for excess labour demand, and indirectly for the level of aggregate

Table 6: Wages, Hours and Relative Wages by Sex, Japan, 1962-2001 (1000 Yen)

Women Men Women Relative to Men

Monthly Earnings Total Annual Hourly Monthly Earnlings Total Annual Hourly Monthly Earnings Annual Hourly Monthly Special Wage Monthly Special Wage Special Wage Total Contract Hours Cash Total Contract Hours Cash Total Contract Cash Earnings Earnings Earnings

1965 18.2 17.5 196 41.6 110.5 35.5 31.6 210 102.5 209.7 0.513 0.554 0.406 0.527 1970 35.2 33.7 195 90.1 219.0 68.4 60.1 210 206.4 407.6 0.515 0.561 0.437 0.537 1975 88.5 85.7 185 289.5 608.8 150.2 139.6 192 568.4 1029.0 0.589 0.614 0.509 0.592 1980 122.5 116.9 187 364.8 817.6 221.7 198.6 200 748.4 1420.3 0.553 0.589 0.487 0.576 1985 153.6 145.8 186 465.7 1034.5 274.0 244.6 199 940.1 1770.6 0.561 0.596 0.495 0.584 1990 186.1 175.0 185 567.1 1261.4 326.2 290.5 198 1154.2 2133.2 0.571 0.602 0.491 0.591 1995 217.5 206.2 176 684.2 1559.8 361.3 330.0 187 1264.2 2495.5 0.602 0.625 0.541 0.625 1996 221.3 209.6 174 695.9 1605.3 366.1 334.0 184 1278.4 2568.7 0.605 0.628 0.544 0.625 1997 225.3 212.7 173 698.5 1638.8 371.8 337.0 184 1289.2 2604.5 0.606 0.631 0.542 0.629 1998 226.8 214.9 172 696.3 1656.0 367.9 336.4 183 1282.0 2594.2 0.616 0.639 0.543 0.638 1999 230.7 217.5 172 685.1 1673.2 367.2 336.7 181 1217.5 2589.3 0.628 0.646 0.563 0.646 2000 235.1 220.6 174 677.0 1675.4 370.3 336.8 184 1162.4 2538.9 0.635 0.655 0.582 0.660 2001 237.1 222.4 173 677.2 1696.7 373.5 340.7 183 1177.1 2577.0 0.635 0.653 0.575 0.658

Note:Hourly wage is calculated as the sum of total monthly earnings plus one-twelfth of the annual special payments divided by monthly hours. Source:Basic Survey of Wage Structure, Ministry of Statistics, Government of Japan

Economic and Political Weekly October 14, 2006

Figure 3: Average Monthly Contractual Cash Earningsshaped workforce participation rate among women offers perhaps

by Gender, Age and Size of the Firm, 2001

a partial explanation for such wage differentials between men

600

and women. As women exit the labour market, there is a break in their career and continuity of tenure or experience is lost, and

500 400 300 200

re-entry into the same job is most often not possible. In antici

pation of such a career pattern, employers do not offer investment

(1000 Yen)

in education or training and company-specific skills to women.

Such policies reflect misogyny or prejudice against women, and

10-99 M
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10-99 F
100
0 < 17 19-19 20-24 >1000 M >1000 F 25-29 30-34 35-39 Age Group 100-999M 100-999F 40-44 45-49 50
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54 55-59 60-64 -- 5-9 M 5-9 F 65 +

production. This equation lost its explanatory ability after the first oil crisis, which triggered a rapid rise in consumer prices and resulted in trade union demands for higher wages during the 1974 spring wage negotiations. This resulted in a wage hike of 33 per cent [Nishikawa and Shimada 1980; Nakamura 1992]. Since then, consumer prices, enterprise profits and terms of trade (input and output prices) have become the determining factor [Amante 1994]. However, in the current austere economic climate, there has been a shift in the focus of “spring wage offensive” from negotiating for wage increase to job security.

The wage gap between large and small firms continues to exist, though there is a spillover of the negotiated wage increases from the major sector of the economy to small- and medium-sized firms [Koshiro 1986]. Wage differentials between large and small firms reflecting the duality of labour markets have long been the subject of serious discussions. Some argue that the official statistics on wage differentials by size of firm exaggerate the picture and that actual wage differential adjusted for skill differences and worker-career profiles are only half of the official estimates [Koike 1983]. However, Tachibanaki and Ohta (1994) after adjusting for education, age, size and sex still found wage differentials across the size of the firms. They argued that it could be due to a pure size effect, as larger firms were able to offer substantially higher wages than smaller firms, and their higher wages were not explained by higher qualifications of employees in these firms.

The gender wage differential was much more stark and disturbing when looked across the career paths of male and female workers in different firm sizes. Female workers engaged in companies with more than 1,000 workers received wages, which were lower than the wages received by males in small firms with five-nine workers (Figure 3). These patterns show that female workers were treated quite differently from male workers. This large gender wage gap actually discouraged women from participating in the labour market.

The gap in the relative wage earnings of the Japanese women was similar to that of men when they entered the labour force, and the wage gap widened sharply with age. While men experienced a steep earnings growth with age, women have very flat wage profiles. This showed that increases in women’s tenure do not actually get translated into steeper wage profiles. The argument often made for such wage differentials is that it is because of the seniority wage system, since women exit and re-enter the labour market due to marriage, child birth, child care, old age, etc, which reduces their length of service. Apart from the academic background, skills and on-the-job training (OJT) are argued as some of the reasons for such differentials. The “M” they do limit the career opportunities [Flath 2000].

Adjusted Relative Wage Earnings

To obtain any meaningful wage differential estimate, one would have to take into consideration factors like the size of the employer, occupation, schooling, continuity of experience and industry. In order to analyse the extent to which changes in the underlying determinants of wages9 can explain the recent downward trend in female relative wages, we use data for the period 1965 to 2001. The data was obtained from the Basic Survey on Wage Structure that reported total and contractual earnings as well as annual special wage earnings, age, job tenure by sex, education and firm size categories. This data is used to estimate an hourly wage, including bonus payments, and also to calculate measures of women’s relative earnings (Table 6). During the initial period of rapid economic growth there was a relative rise in the growth of women’s wage, partly due to the growth in secondary and tertiary sectors [Hill 1996]. When the female labour force participation reached a trough in 1975, the female relative wages to men were at a maximum (0.59). As the female labour force grew, relative wages declined to 0.57 in 1980, and began to pick up only after 1985. In 2001 women’s relative monthly earning was 63 per cent of that of men’s wages (Table 6).

To estimate the adjusted real wage earnings, for each year, two independent variables were used:10 the natural log of total monthly earnings (including a monthly measure of the annual bonus), and the hourly wage. Each dependent variable for the cell was regressed on sex, age, tenure and a dummy variable for firm size if larger than 1,000 employees. Two equations were estimated for each year and the exponential of the sex coefficient provides an estimate of women’s adjusted relative wages.

The adjusted wage ratios are presented in Figure 4. After accounting for differentials in tenure, age and size of the firm, the adjusted earnings ratio ranged from 0.70 in 1965 to 0.76 in 2001. Further, after accounting for the hours differential, the adjusted relative wages ranged from 0.75 in 1965 to 0.81 in 2001, closing the gender wage gap. The adjusted relative monthly earnings rose till 1976 closing the gap, but thereafter it has remained almost the same. The relative hours wage differentials seem to be closing the gap much more than the monthly earnings. We find that even after adjusting for these various factors, there still exists a wage differential. The findings are similar to those of other researchers [Hotchkiss and Moore 1996; Seguino 1997; Tam 1996; Barros Ramos and Santos 1995]. When the factors behind the earnings ratios were decomposed, it was found that discrimination against women workers explained more than twothirds of the differential, while human capital endowments (including education) explained less than a third [Terrell 1992]. This would only mean that though there are various other factors, which do explain gender differentials in wages, there is also explicit discrimination that exists which could be either culturespecific or due to the patriarchal system.

It is often argued that wage differentials are due to sex seg-Figure 4: Women’s Relative Earnings and Wages,Adjusted, 1965-2001

regation of jobs and within any specific occupation such differ

entials do not exist. To see the wage differential at the occupation

level, we choose a specific occupation “electronic computer

operator”, which employed men and women in the ratio of 51:49.

The unadjusted women’s relative wage earnings to men was

0.85

0.81

0.77

0.73

Relative Earnings

67 per cent. The adjusted wage earnings after controlling for all

0.69

the various quality variables improved the wage differential to

0.65

70 per cent. This could mean that even if there exists no bias against women’s working abilities, gender wage discrimination

1965196719691971197319751977197919811983198519871989199119931995199719992001

Year

would still occur amid a company’s intensive pursuit of effi-

Earnings

Hourly Wages

ciency. A part of the male-female wage differentials could be

attributed to increasing labour market segmentation as within sector hierarchies become more pronounced and occupations more starkly partitioned between men and women. The conditions of their employment are on average inferior to those faced by men and are often “atypical” (i e, part-time, temporary, or casual work).

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