Employment of the Young and Elderly

Part 1: Economic changes hitting young people

KAWAGUCHI Daiji
Faculty Fellow, RIETI

Since the latter half of the 1990s when new graduates began to face severe difficulty in finding jobs, high unemployment rates among young people have been attracting much attention. While the unemployment rate of 20-to-24-year-olds had remained at just around 4% during the 1980s, the figure jumped to around 10% in 2000.

The biggest factor behind this rising unemployment of young people is the long-term stagnation that has occurred since the bursting of the economic bubble in the early 1990s, which plunged Japan into what is often referred to as the "lost two decades." As young people are standing at the entrance to the labor market, they are the ones who are affected immediately when the entrance narrows due to the economic slowdown.

In addition to the cyclical factors, changes in the economic structure also negatively affect their employment. One example is the hollowing out of domestic industry. Many factories located in Japan, which had previously employed large numbers of workers, are relocating overseas due to the rise of emerging economies in Asia such as China. Meanwhile, employment in the construction industry has decreased as the government has cut public works spending due to the growing budget deficit. In addition, with progress in information technology, companies now find it less necessary to employ workers engaging in simple clerical work. As a result, the structural demand for low-skilled workers has declined.

Behind the rising unemployment rate of young people are the structural changes surrounding the Japanese economy.

However, Japan's unemployment rate of young people is still low compared to that of other major developed countries. The unemployment rate for 20-to-24-year-old Japanese males in 2012 was 8.8%, significantly lower than the corresponding figures of 14.3% for the United States, 20.0% for the United Kingdom, 29.9% for Italy, and 50.5% for Spain.

Unless we conduct objective analysis on the situation in a pragmatic manner, we may fall into a debate irrelevant to economic analysis, such as whether or not the plight of young people is pitiful.

>> Original text in Japanese

* Translated by RIETI from the original Japanese "Yasashii Keizaigaku" column in the October 17, 2013 issue of Nihon Keizai Shimbun.

October 17, 2013