By Jason Clenfield and Toru Fujioka
Dec. 11 (Bloomberg) -- Yutaka Kanou, a temporary worker at a Canon Inc. camera factory in Oita, Japan, was called to what he thought was a meeting about production cuts. When he got there, he was fired and told he’d be evicted from the company dormitory.
“I was speechless,” said Kanou, 44. “I felt like I’d been given a death sentence.”
Temporary workers like Kanou have been the first to bear the brunt of Japan’s recession, as manufacturers including Canon, Sony Corp. and Toyota Motor Corp. cut production and eliminate jobs that fall outside the country’s lifetime employment system.
The sackings have left policy makers scrambling to patch a welfare system that doesn’t adequately cover the two-tiered workforce that’s evolved in the past 20 years. Their efforts are complicated by the need to find cash to prevent the economic slowdown from deepening.
“The dark side” of the change in the labor market “is becoming pretty clear,” said Makoto Yuasa, director general of Moyai, a Tokyo-based nonprofit organization that provides services for the poor. “The safety net has always been weak because the idea was that companies would take care of their workers. That’s no longer happening.”
During the past two decades, Japanese companies built flexibility into their staffs by replacing retirees with temporary and contract workers. These 17 million people now make up more than a third of all employees, up from 20 percent in 1990. They are paid an average of 40 percent less than full-timers and often aren’t included in pension or unemployment-insurance programs.
Depending on Jobs
“It isn’t just young people who live with their parents and spouses,” said Atsushi Seike, a professor of labor economics at Tokyo’s Keio University and a member of the government’s labor- policy council. “More and more people are depending on these jobs for their livelihoods.”
Prime Minister Taro Aso’s ruling Liberal Democratic Party proposed a 2 trillion yen ($22 billion) package on Dec. 5 to make more temporary workers eligible for unemployment benefits. Four days later, Finance Minister Shoichi Nakagawa said the government is examining measures to assist people who’ve been forced out of company housing.
The ruling coalition faces a general election by September 2009. The opposition Democratic Party of Japan has made the income gap and the nation’s shrinking middle class a campaign issue.
Contracting Economy
A report this week showed the world’s second-largest economy contracted at an annual 1.8 percent pace in the third quarter, twice as much as predicted by economists. While Economic and Fiscal Policy Minister Kaoru Yosano has pledged to spend money to buoy growth, the amount is limited by Japan’s debt. At about 170 percent of gross domestic product, it is the highest in the industrial world.
The Dec. 9 announcement by consumer-electronics maker Sony that it will cut 8,000 contract workers and 8,000 full-timers is the largest culling in Japan since the global credit crunch drove the world into a recession. Auto companies Toyota and Isuzu Motor Ltd., as well as Komatsu Ltd., the world’s second-biggest maker of earthmovers, have also announced job cuts for temporary employees in the past month.
The phones at a Tokyo hotline set up to help such workers were ringing off the hook during a recent weekend, according to Naoko Shimuzi, 35, who spent a day answering calls. Many were from people who said they were losing their homes along with their jobs, Shimuzi said. “People are panicking.”
No Savings
Kanou said he had no idea where he’d go after being forced to leave the Canon dormitory. The 120,000 yen ($1,300) a month he got for soldering parts didn’t leave him with any savings, he said. The temp agency that got him the job can’t find him a new one.
“The winter is going to be bad,” he said, standing backstage at a Tokyo rally for fired workers last week.
Canon said it isn’t responsible for the job cuts at the factory in southwestern Japan. The world’s largest camera-maker outsourced its plant management to companies that make their own staffing decisions, said spokesman Michihiro Honma. He declined to identify the companies.
Corporate decisions to fill vacancies with contract workers partly explain why the economic expansion of the past six years - - Japan’s longest postwar growth streak -- produced only middling prosperity.
Falling Pay
All of the three million jobs created during the period were temporary: The number of full-time jobs fell by 370,000, average pay dropped 4 percent and the number of households on welfare jumped 27 percent to more than 1.1 million.
“Companies used to bear the cost of a recession by continuing to employ people who weren’t needed,” said Keio University’s Seike. “Society now has to bear those costs.”
Paying for unemployment and welfare benefits is just part of the price. There’s also a hidden cost that comes in the form of lost economic growth, according to Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo.
Japan’s government spends less on training and education than all of the Group of Seven industrial countries except Italy, according to the Organization for Economic Cooperation and Development. Companies have taken up the slack -- but only for full-time workers.
“There’s a major skills squeeze in Japan,” Schulz said. “It’s not just unfair, it’s a question of how a generation which didn’t get the traditional company training will be able to cope and keep this economy going.”
Kanou, who’s made a living doing everything from driving a truck to making pastries, said he’s scared he’ll never get a full-time job.
“Being a temp doesn’t give you skills,” he said. “It’s just a way to get from one day to the next.”
To contact the reporters on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Toru Fujioka in Tokyo at Tfujioka1@bloomberg.net
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