DPJ Labor Policies May Send Japan Jobs Overseas, Analysts Say

By Jason Clenfield and Toru Fujioka

July 24 (Bloomberg) -- The Democratic Party of Japan, which is leading in polls for next month’s general election, has plans to help workers that may unintentionally send jobs overseas, economists said.

The DPJ’s policy platform released yesterday includes pledges to raise Japan’s minimum wage and ensure equal compensation for temporary workers, a growing group of employees who are paid about 40 percent less than full-timers. So-called non-regular employees make up more than a third of the workforce and were the first to be fired during the current recession.

Japanese companies have hired more temporary workers to cut costs and stay competitive. Even with those cost savings, the nation’s deepest postwar slump is driving more manufacturing offshore. Hoya Corp. last month closed its last domestic digital camera factory and cut 400 jobs. The company now makes all its Pentax cameras in the Philippines and Vietnam.

“Cost and flexibility are the main issues,” said Kiichi Murashima, chief economist at Nikko Citigroup in Tokyo, said in an interview. “The recession has companies thinking about where they should base their operations in the future. Tightening the rules could push them to make the final decision to move on to foreign countries.”

Opinion surveys show the DPJ, which has made protecting consumers a campaign issue, leading the ruling Liberal Democratic Party ahead of the Aug. 30 lower house election. The opposition has an approval rating of 40 percent compared with 30 percent for the LDP, according to a Nikkei newspaper survey published yesterday.

The DPJ wants to discourage hiring through agencies or employment contracts that stipulate time limits, according to yesterday’s release. Temporary and full-time workers should get equal pay and access to training, the document says.

‘Expensive, Regular Workers’

“Why do companies want to hire non-regular workers? One of the reasons is cost,” Randall Jones, head of the Japan desk at the Organization for Economic Cooperation and Development in Paris said yesterday. “Companies have to be competitive with China and Korea and other countries. So they’re not going take on more expensive regular workers that are going to be there for the next 30 years.”

The government should reduce safeguards for regular workers as well as bolster social insurance for temps and part-timers, the Paris-based OECD said in a report last year.

Japanese companies have replaced retirees with temporary workers as they break away from the nation’s tradition of lifetime employment. The LDP made it easier to hire flexible labor with deregulation in 2004 that allowed firms to use dispatched workers in factories.

The move created a two-tiered labor market, with non- regular, mostly younger workers enjoying less job security and fewer benefits.

‘Get Trapped’

“It’s a social issue,” said Tetsuji Nakamura, the 38 year-old legislator who is the opposition’s deputy labor spokesman. “A lot of people who get trapped in these non- regular jobs lose the will to live and achieve. It’s the biggest problem facing our young people.”

Nakamura, an upper house lawmaker representing Nara, a rural prefecture bordering Osaka, said the DPJ wants to stop companies from hiring temporary workers at factories, undoing regulation put in place by former Prime Minister Junichiro Koizumi.

“Lifetime employment should be the basic model,” Nakamura said, adding that difficulty finding work after college in the early 1990s helped him to understand what Japan’s young people are going through. “We have to build a system in which people can count on stable income.”

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Toru Fujioka in Tokyo at Tfujioka1@bloomberg.net