Employment Reductions of Local Governments and Changes in the Public Service Delivery System

Author Name KITAMI Tomitaro (Consulting Fellow, RIETI)
Creation Date/NO. March 2016 16-J-037
Research Project Research on the Liberalist Reforms of the Public-Private Relationship and the Establishment of the Third Sector in Japan
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This paper empirically examines the effects caused by a sharp decline in the number of local officials in recent years on the regional public service supply system, the regional employment, and the business environment of non-profit organizations. Especially, from the viewpoint of the Regional Revitalization Policies, this paper analyzes the kinds of municipalities and types of public services where the employment reductions occurred, and whether they are functionally absorbed in cooperation with the regional third sectors through office consignment and subsidizing, etc. From the results of the analysis, first, when viewed in the most recent five years, the number of skilled labor related staff members, such as cooks, largely declined in municipalities, and the rate of decline is higher in municipalities with distressed local economies and government finances, as well as with available capacity for further administrative reform. Second, the employment rate of change in the municipalities has a significant positive correlation with that of non-company offices, such as unincorporated and third sector offices. In addition, the employment of skilled labor related staff by municipalities suggests that this is functioning as an unemployment measure. Third, savings in "labor costs" through employment reductions in municipal finances do not lead to an increase in "office consignment," as they are substituted by an increase in "subsidy" and "part-time job wages" alternatively. Fourth, in the finance of social welfare corporations, office consignment revenue from the government administrative sector shows a significant positive correlation with the change in the "office consignment" budget of the location municipality, but no significant correlation is observed with the change in the number of paid staff members in the third sector.