Japan: How Womenomics Works?
By admin May 11, 2018

Back in 2012, the Japanese Prime Minister Abe announced “three arrows of economics,” one of which was Womenomics. The word Womenomics was created to show the need for Prime Minister Abe to encourage more women to join the labor market and enlarge the influence of women in the economy.  Five years later, it is necessary to review how Womenomics has progressed in Japan.

Over the first five years Womenomics has made huge progress in Japan. Women’s participation rate rose from 63.5 percent in 2012 to 76.3 percent in 2016, a number that exceeded their participation in the United States. Not only did participation rate increased but the total number of women employeed increased as well. From 2012 to 2015, according to official statistics, the total number of female employees in Japan increased from 26.54 million to 28.59 million, meaning that 2.05 million more women joined Labor market during this time. At the same time, the total number of employees and total number of male employees also increased by 2.6 million and 0.56 million respectively. In general, more Japanese people were hired from 2012 to 2017.

Despite such huge progress, there are some concerns,  that Prime Minister Abe should be concerned. First , as more and more women join the labor market, labor supply will increase. Secondly, despite an increase in total number employees, total number of regular employees, which has the highest standard of benefit package, decreased from 47.44 million to 34.32 million. On the other hand, the number of ordinary workers, who might have lower standard of benefit packages, increased from 43.81 million to 50.57 million. So it is reasonable to conclude that the increase of total number of employees in Japan is driven by the increase of ordinary or contract employees. With an increase in labor supply and a trend that favors contract employees over regular employees, the wage of employees could go down. If we assume a positive elasticity between wage and price, prices of goods could go down when the wages drops. Given the information that lower prices can cause deflation and Japan wants to have a higher inflation, Prime Minister Abe might want to take a look of the effect of the lower wage.  Prime Minister Abe can encourage the public and private sectors to transfer some ordinary employees to regular employees, a movement that will keep higher wages so that the pressure of deflation will be lower.

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