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Japan OKs reforms aimed at addressing labor market woes

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Christian Fernsby ▼ | June 23, 2019
Shinzo Abe
Asia   Shinzo Abe

The cabinet of Prime Minister Shinzo Abe has approved labor reforms designed to solve Japan's demographic challenges.

Under the annual economic policy blueprint, the government wants to see 300,000 new jobs created over the next three years for people in their mid-30s to mid-40s who have had difficulties finding stable employment in the years since the end of Japan's economic boom in the early 1990s.

The government hopes to help around 1 million people who graduated from high school and university between 1993 and 2004, collectively called the "employment ice age generation."

The government is concerned the social security system, including the public pension system, will falter if the ice age generation is unable to find full-time work and generate sufficient tax revenue, officials said.

It hopes the policies will help them find work to offset the country's serious labor shortage, according to the officials. Japan introduced a new visa system in April to bring in more foreign workers, a policy incorporated in last year's blueprint.

But many of those affected complain the government wants to deploy them into labor-hungry sectors that have poor working conditions.

Critics say the planned reforms will not succeed unless Japanese companies shake up their employment practices, including the hiring of new graduates en masse, promotion by seniority and lifetime employment.

Under the policy blueprint, which will be reflected in drafting the state budget for fiscal 2020, the government also seeks to encourage the elderly to work longer.

It specifically plans to scale back and eventually abolish a system that reduces the pension of people who still earn at a certain income level.

The government believes the system discourages those of advancing age from continuing to work full-time.

"It is necessary to set the stage for the elderly who are willing to work so they can fully exercise their abilities," the policy guideline said.

In a strategy separately approved Friday by the cabinet, the government decided it will ask companies to consider keeping employees in work until age 70, with many firms having already raised the retirement age from 60.

To secure funds to cover swelling social security costs, the policy blueprint also confirms the government's planned October consumption tax rate hike from 8 percent to 10 percent.

With widespread fear that the tax hike could hurt the economy by weakening domestic demand, the government is looking to increase the national average minimum hourly wage to 1,000 yen ($9.30) from the current 874 yen "at an early date," according to the blueprint.

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