Japan's unemployment rate is just 2.6% but there is a tradeoff (as usual)

See Why Japan’s Jobless Rate Is Just 2.6% While the U.S.’s Has Soared by Ben Dooley and Hisako Ueno of The NY Times. Excerpts:

"A mix of social, demographic and epidemiological factors has kept unemployment down even as the coronavirus has damaged the country’s already weakened economy."

"Before the pandemic, Japan’s shrinking and graying population had created one of the planet’s tightest labor markets. Even now, some companies are having difficulty finding workers, with more than 120 job openings for every 100 job seekers nationwide in April.

And Japan, unlike the United States or China, has avoided a devastating spike in coronavirus cases, allowing it to keep more of its economy open. It asked businesses to close on a voluntary basis during a state of emergency that lasted a month and a half and ended in May.

But those differences account for only part of the gap. The rest comes down to a fundamental divergence in attitudes and policies toward labor.

In the United States, “when the economy gets bad, people get laid off one after the other, and the unemployment rate shoots up,” said Tomohisa Ishikawa, director of the Macro Economic Research Center at the Japan Research Institute. But for Japanese employers, “laying people off is difficult both psychologically and practically.”

Companies in Japan are more likely than their American counterparts to prioritize employees’ interests over those of shareholders, focusing on the sustainability of their business rather than maximizing growth, said Naohiko Baba, chief Japan economist at Goldman Sachs.

“During good times, companies accumulate profits on their balance sheets by restricting rises in worker’s salaries,” Mr. Baba said. “During bad times, companies refrain from firing redundant workers by using retained earnings accumulated during good times, so that people can have secure jobs.”

There are also strong social expectations that Japanese companies will retain workers. Japan’s businesses are often tough on their employees, asking them to put in some of the longest hours in the world, but companies are expected to provide job security in return — in many cases, for life."

"Pro-labor attitudes have been reinforced by strong legal precedents built up since the end of World War II that prevent companies from laying off employees unless they can demonstrate they have no other choice."

"Japanese law requires businesses to pay furloughed employees 60 percent of their wages."

"While Japan’s aversion to layoffs is a godsend for workers in hard times, it also comes with a price.

Critics say it makes companies reluctant to take risks in hiring new employees, reducing options for the country’s young workers. It may also make it more difficult for businesses to retool their work forces to adapt to changing conditions, making them less productive and hurting their ability to compete in the global economy.

In recent decades, companies have tried to gain some flexibility by increasing the ranks of “non-regular workers” — employees on short-term contracts who work for lower wages and have less job security.

In times of crisis, such workers have been let go in large numbers. During the 2008 financial crash, these workers, who currently account for about 40 percent of the work force, were the first to lose their jobs. The pattern has held during the coronavirus pandemic, with 970,000 non-regular workers losing their jobs in April, according to government data."