GROWING RELIANCE ON TEMPS HOLDS BACK JAPAN'S REBOUND

January 7, 2008

With the rest of the world battered by continuing credit problems emanating from the United States., the state of the world's No. 2 economy, Japan, is an increasing concern, says the Wall Street Journal.

One reason Japan's hasn't gotten traction is the growing reliance on temporary workers:

  • They earn about two-thirds of what full-timers do and can often be hired and fired with just a few days' notice.
  • More than a third of Japan's labor force is categorized as part-timers, temps on fixed-term contracts and people sent to companies by temporary-staffing agencies.
  • That compares with 23 percent in 1997 and 18 percent in 1987.

This heavy use of temps has created an obstacle to the virtuous cycle typically seen in an expanding economy, says the Journal:

  • When companies make better profits they eventually raise wages, which boosts consumer spending -- and leads to more corporate profits. 
  • However, in the past decade, average wages in Japan have fallen every year except two because of an increase in temps and stagnant wages for full-timers.

The result is sluggish domestic demand and growth that is supported by exports to a lopsided extent, says the Journal.  Personal consumption is so weak in Japan that it accounts for only a little over half of the economy, compared with 70 percent in the United States.

Source: Yuka Hayashi, "Growing Reliance on Temps Holds Back Japan's Rebound," Wall Street Journal, January 7, 2007.

For text:

http://online.wsj.com/article/SB119939511325465729.html

 

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