Annex I. Update on the Privatization of Japan’s Postal Savings and Insurance:Key Risks and Challenges1
Bassanini, Andrea and Duval, Romain, 2006, “Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions,” OECD Economics Department Working Paper No. 486.
Bentolila, Samuel and Saint-Paul, Gilles, 2003, “Explaining Movements in the Labor Share,” Contributions to Macroeconomics, Berkeley Electronic Press.
Blanchard, J. Olivier, Nordhaus, D. William, and Phelps, S. Edmund, 1997, “The Medium Run,” Brookings Papers on Economic Activity, 1997(2), pp. 89–158.
Feenstra, C. Robert, 2007, “Globalization and Its Impact on Labour,” The Vienna Institute for International Economic Studies, Working Paper.
Guscina, Anastasia, 2006, “Effects of Globalization on Labor’s Share in National Income,” IMF Working Paper 06/294 (Washington: International Monetary Fund).
International Monetary Fund, 2007b, “Japan: Boosting Productivity in Services—Priorities for Deregulation,” Chapter V in Japan: Selected Issues, July.
Jaumotte, Florence and Tytell, Irina, 2007, “How Has The Globalization of Labor Affected the Labor Income Share in Advanced Countries?” IMF Working Paper 07/298 (Washington: International Monetary Fund).
Ministry of Health, Labor, and Welfare (MHLW), 2003, General Survey on Actual Conditions of Diversification in Employment Styles.
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This paper was prepared by Martin Sommer.
The accumulated gap between nominal hourly compensation and labor productivity is much smaller—about 10 percentage points. This is due to a divergence in price trends: the CPI index fell by -0.5 percent during 1996-2006, while the GDP deflator used for the calculation of real productivity fell by 10 percent over the same period, in part due to rapidly falling prices of capital goods.
In the chapter, labor income share is defined as the share of employees’ and self-employed persons’ compensation in GDP (for the aggregate economy) or gross value added (for sectors). The methodology of adjustment for self-employed persons’ income follows European Commission (2007).
The manufacturing deflator fell by 20 percent’much faster than the GDP deflator or CPI (footnote 2).
Nonregular employees include part-time workers, workers dispatched through temporary agencies, short-term hires and others (see Bank of Japan, 2005 for details).
This comparison potentially makes the Japan’s labor market dualities appear less pronounced because the largest increase in non-regular employment in Japan in the past couple of years was in the segment of shortterm hires and workers dispatched through temporary agencies. See OECD (2002) for a detailed discussion of various pitfalls in comparing temporary employment data across OECD member countries.
The low labor productivity of Japanese services is related to the barriers to entry, limited contestability of local markets, low use of information and communication technology, and other impediments. See IMF (2007b) for details.
Large firms are defined as corporations with capital exceeding Y100mn.
Small firms also contributed most to the employment increase in recent years.
Some caution is necessary when making productivity comparisons between large and small companies. The MoF Survey does not report hours worked and it is therefore not possible to control for the increase in part-time and other forms of non-regular employment. Moreover, the MoF Survey and national account samples are different.
In the late 1990s and 2000s, a number of companies introduced elements of performance-based compensation (Bank of Japan, 2005).
In order to assess the impact of changing demographics on aggregate wages, one can calculate the counterfactual average wage by holding the earnings-age profile unchanged at some year’s level (for instance, 2002), while accounting for the actual age structure of employees. Figure III.5C presents three versions of such calculation using vintage years 1999, 2002, and 2006.
The model estimated in this section builds upon the econometric framework of Jaumotte and Tytell (2007) but is expanded to capture factors that reflect dualities. The data sources for variables are OECD, Ameco, EUKlems, and IMF databases, and Bassanini and Duval (2006). Other recent studies of wage developments in advanced economies include Bentolila and Saint-Paul (2003), Guscina (2006), European Commission (2007), and IMF (2007a). Earlier research includes Blanchard, Nordhaus and Phelps (1997).
Bank of Japan (2005) presents interesting sectoral evidence that larger import penetration tends to be associated with a greater weight of skilled labor in total labor cost.
Year 1990 was selected as the starting point for this calculation because the early 1990s coincide with the increasing integration of large emerging-market economies into the global economy and regulatory reforms in many countries. Moreover, labor shares were adjusting downward during the 1980s in response to the previous unsustainable rise in the period of oil shocks.
A wave of corporate restructuring in Japan during the 1990s and 2000s has accelerated the reallocation of employment from manufacturing to services. While the restructuring process could on its own explain some of the wage sluggishness, its impact on the labor share (i.e., wages relative to productivity) is likely to have been positive as service sectors typically have higher income shares than manufacturing
Of course, rising wage inequalities have raised public concerns also in these countries, nothwithstanding the relatively solid growth of average wages (see, for example, IMF, 2007a).
Prepared by Romuald Semblat (APD)
However, both institutions will still benefit implicitly from having the government as their sole shareholder.