The Correlation Between the Sense of Well-Being and the Labor Market in Japan

JFS Newsletter No.149 (January 2015)

Image by Yahho

An interesting discussion on the characteristics of the Japanese people's subjective sense of well-being and the country's distinctive labor market was recently hosted by Professor Takashi Omori of Tokyo City University. This month's JFS newsletter introduces excerpts from his research paper, titled "Peculiarities from the Viewpoint of Well-Being: Gender, Regular/Non-regular Employment and Deflation," published in May 2014 in journal of the Japan Association for Planning and Public Management.

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High Income Levels but Lower Sense of Well-Being

The reported sense of the general well-being of Japanese people is relatively low compared to their high income level. In terms of subjective well-being, Japan ranked 43th among 156 countries in the World Happiness Report 2013, produced by the Sustainable Development Solutions Network, a Global Initiative for the United Nations.

World Happiness Report 2013
http://unsdsn.org/resources/publications/world-happiness-report-2013/

The report lists the following six factors for quantitative analysis of subjective well-being: (1) GDP per capita; (2) social support (i.e., having someone to count on); (3) healthy life expectancy; (4) freedom to make life choices; (5) prevalence of generosity (i.e., behavior of donating after income adjustment); and (6) perceptions of corruption.

None of these six factors were measured at low levels in Japan. In fact, the country is ranked as having the world's highest standard in healthy life expectancy, implying that some other distinct factors are the cause of the decreased perception of subjective well-being, but what factors could these be?

Moderate Japanese Character and Different Religious Values

Japanese people tend to avoid best/worst answers when given multiple choice questions, and a strong belief that "prosperity will not last forever" may be affecting their decisions, as well as not being self-satisfied even if their current condition is good. Different religious values may also influence their perception of well-being.

Anxieties Prevailing among Japanese

The sense of anxiety of Japanese people was ranked at the highest level among the world's major countries, even before the Great East Japan Earthquake in 2011, according to previous research. Anxiety about factors including political leadership, economic trends, and financial deficit were stronger than personal factors; however, anxiety and well-being are not negatively correlated from a global point of view. A recent study revealed that a large number of Japanese have a short serotonin transporter gene, which is said to trigger depressed feelings due to its insufficient transporting function. If the gene affects mood, the presence of the gene explains the reason for the particular low sense of well-being in Japanese people.

How about the level of life satisfaction through the gauge of life in general and well-being? This was revealed in the Cabinet Office's National Survey on Lifestyle Preferences.

Two Major Groups in Well-being Distribution

The line plot of subjective well-being distribution in Japan generally shows two distinctive peaks. This phenomenon was noticeable every year until 2011 by the "National Survey on Lifestyle Preferences," in which subjective well-being was questioned on a scale of zero to ten, from least happy to most happy. The indicator usually shows a peak on the scale of seven or eight, a couple of levels down from the best score of ten, while the same indicator shows another peak on the middle scale at five, implying that respondents hesitate to decide exactly what their feelings are. This propensity applies to a wide age group in Japan. As it is unusual for overseas surveys to show similar results, the reason of the middle peak will be the key to unveil the Japanese tendency of their sense of well-being.

Gender Gap and Well-Being

Women's participation in society has been slow to catch on in Japan. The nation is ranked 105th in the Global Gender Gap Index 2013 by the World Economic Forum. Less participation may be driving down women's sense of well-being, perhaps triggering the overall low sense of well-being level in Japan.

The Global Gender Gap Report 2013
http://www.weforum.org/reports/global-gender-gap-report-2013

Statistically, the gender gap index and subjective sense of well-being have a significant correlation. This is possibly explained by the following four points: (1) women's discontent exerts a direct influence; (2) societies largely without the participation of women are distorted, which inevitably leads to a suppressed sense of well-being in both men and women; (3) societies making use of women's abilities achieve a higher national income; and (4) advanced nations with higher incomes generally have less gender discrimination.

When excluding the income factors mentioned in hypothesis (3) and (4), a significant correlation was observed between residuals of the gender gap index and those of subjective well-being (both adjusted for income). This may show that hypotheses (1) and (2) are correct. To distinguish the difference between (1) and (2), the next step is to take a closer look at the gender difference regarding the sense of subjective well-being.

Japanese Men Have Lower Levels of Happiness than Women

Whether it is men or women who have a sense of higher subjective well-being varies by country. Various research projects, including the World Values Survey, show that women in Japan consistently tend to report higher levels of a subjective sense of well-being than men. The studies indicate that the difference in the happiness level in Japan is larger by gender than in the United States and United Kingdom. This is a kind of unexpected result considering that Japan has significantly larger gender gaps relative to other countries of the world.

Examining the relationship between the gender differences in happiness and gender gap index, it was found that there is no correlation between them. That is, male-dominated societies do not always make men happier than women. This suggests that (2) is a more reasonable explanation than (1) and that Japanese men's feeling of well-being may be more suppressed than global levels.

It's Tough Being a Man in Japanese Society

In Japan, men are traditionally expected to play the role of family breadwinner. As labor market mobility is less flexible in Japan, if a man quits a job as a regular employee* at a company, it is hard for him to find another job. Therefore, he tends to put up with impossible demands from his boss and work long hours of overtime. Meanwhile, if he becomes a non-regular employee**, he has to work at low wages without any guarantee of long-term employment, and without much hope for any wage increase or skills development. So, it is difficult for him to get married.

Notes
*Regular employee: Open-ended, full-time, direct employment under public insurance systems including workers compensation, unemployment, health care and retirement pension.
**Non-regular employee: Employment that does not meet one of the conditions for regular employment of open-ended, full-time, and direct employment.
Source: http://www.jil.go.jp/english/reports/documents/jilpt-reports/no.10_japan.pdf

Japanese women are also affected by the circumstances facing men. A wife whose husband works as a regular employee tends to have a heavy burden of childcare and housekeeping as well as nursing-care of her parents-in-law, because her husband has to deal with his job first before dealing with his family. With such a burden, it is hard for her to have her own job. Even if she gets a job, she cannot fully devote herself to it or hope for smooth promotions in the same way as men, because companies prefer men for their dedication to work rather than women, regardless of their abilities or broader perspectives. On the other hand, an increasing number of women cannot find a man to whom they can entrust their future, which is causing a rapid rise in the ratio of women who never marry. Such distortions of society are thought to be reasons for the lower level of well-being of both Japanese men and women.

Recommendations from Two International Organizations:

These problems are not exactly common in the rest of the world. For years, two international organizations have been calling for improvements, asserting that Japan's labor market is not normal.

The first is the International Labor Organization (ILO). Japan is one of the few countries that has not ratified ILO Convention No.111, which states the principle of equal remuneration for workers for work of equal value, as a fundamental convention of labor standards. In Japan, there still remains a significant wage gap by employment status between workers doing the same job.

The second is the Organisation for Economic Co-operation and Development (OECD), which pointed out that there is too much of a gap regarding employment protection between regular and non-regular workers in Japan. When compared to the average level of protection among OECD countries, Japan's protection level is slightly lower for regular workers and significantly lower for non-regular workers. The problem is the huge gap between them, and the OECD has repeatedly recommended that Japan should take steps to reduce employment protection for regular workers to close the gap. On this point, the Japanese government has been sticking to its basic policies of maintaining current employment protection for regular workers, while increasing protection for non-regular workers.

Restrictions on Employee Dismissal Limits Labor Inflow

In Japan, it is very difficult to dismiss a regular employee after being hired because of four strict legal conditions: (1) proving the necessity of staff reduction; (2) showing efforts to avoid staff reduction; (3) providing rational criteria for selecting the staff to be dismissed; and (4) propriety/reasonableness of the dismissal procedure. This legislative difficulty in firing regular employees motivates more companies to hire low-wage, non-regular workers. Strict restrictions to outflow limits inflow of the labor force. Under these conditions, after being dismissed from a job, the opportunities for a regular employee are quite limited even for highly capable workers.

Root Problems in Japanese Society -- Disincentives for Happiness

These conditions show that Japanese society has not yet realized a secure labor market that can give people expectations of decent wages based on their ability as long as they work diligently, even if they lose their job because of a layoff or corporate failure.

The large disparity in wages between regular and non-regular workers in Japan affects the direction of developing industrial technologies and deflation. Compared to companies overseas, Japanese corporations have been focusing on price-cutting strategies to eliminate costs by replacing high-wage regular contract employees with automated machines, which allows low-wage and non-regular contract workers to operate them easily, rather than creating new markets through the development of new products. This strategy functioned as one of the factors causing deflation. From the worker's point of view, no matter how hard they work to become more skilled, they have a higher risk of becoming obsolete and being replaced by automation.

With increased longevity and senior citizens highly motivated to work, the working years of Japanese people have been extended. In contrast, the "life cycle of skills" has shrunk, as various artisan skills are replaced by automation. Thus, the risk that any skills soon become obsolete in one generation becomes a reality. It is getting harder than before for younger generations to have a clear vision of what to learn to make their living in the future and during their working years.

Increasing People's Sense of Well-Being

Besides the particular characteristics of the Japanese people, the peculiarity of Japan's labor market is assumed to be one of the factors curbing their sense of well-being. This also leads to long-term stagnation of the Japanese economy. Because the country can no longer rely on playing catch-up as an economic strategy, and we are now in an era of economic globalization, individual corporations can no longer provided guaranteed employment. Despite this, Japanese society as a whole has failed to make the shift to a social system that secures employment in the labor market as a whole. As a result, Japanese society and people suffer.

For a breakthrough in this situation, it is important to start reducing employment protection standards for regular workers, based on a reform plan for the medium term. This will not only reduce the entitlement of regular workers but also cause increased joblessness in the short term, if companies implement it while having a surplus workforce. Thus the reforms will require careful and sufficient preparations, including measures during a transitional phase.

Then, as time goes by, these reforms will turn out to be good by making it easier to find a job suitable to people's abilities, boosting capacity building, encouraging new businesses, optimizing the relationships between companies and workers, and modifying education that currently puts excessive emphasis on preparing for entrance exams for university and college. These improvements can be expected to contribute to an increased sense of well-being regardless of gender.

Written by Takashi Omori
Professor, Graduate School of Environmental and Information Studies, Tokyo City University
Edited by Junko Edahiro