Odd Japanese labour markets

By Eric Crampton 24/10/2013

Am I the only one who read the various stories on impending social collapse in Japan and reckoned there to be a potentially large opportunity for a firm that would be happy to hire women on flex-time arrangements?

Tyler pointed to one story yesterday; another hit the Washington Post today. Short version of both: Japanese labour markets are a disaster. Employers expect that a woman getting married has shifted to the mommy track and so pull her from opportunities for advancement, because she’s likely to leave work after childbirth. And they’re not wrong: the Guardian story says 70% of women leave work after having had a kid. Women wanting to have a career then don’t get married.

Suppose that were all that were going on. We’d then expect some clever firm would figure out that there are tons of qualified women itching to get back into the labour market on flex-time arrangements and would hire them on a compensation bundle including less salary, on-site daycare*, and flex-time. Further, the peculiarities of the Japanese labour market could really work to such a firm’s advantage. If you expect that a firm will dump you post-kid, then you don’t make relationship-specific investments with that firm pre-kid. If you expect that you can flip to a decent flex-time arrangement post-kid, you work much harder for the firm pre-kid. And while the “job for life” norm seems to be abating in Japan, I’d be surprised if it were less true there than elsewhere.

So, why isn’t this happening? First explanation: work norms. Where everyone’s expected to put in really long hours, and where a firm has a mix of 16-hr workers and 7.5-hr workers, there’s really no choice but to sideline the 7.5-hr workers onto the slow-track. But surely that’s somewhat question-begging: it seems pretty improbable that you get that more output from one worker on 16-hour days than from two workers each on 8-hour days (who are on the same hourly but different annual total pay). And even if the 16-hour worker is more productive than two 8-hour workers, you could then just pay the 8-hour worker proportionately less.

Next explanation: The Guardian says kids are unaffordable unless you’re on two incomes, but it’s impossible to be on two incomes. Tokyo’s expensive, but it’s not the world’s least affordable place. Beijing, Rome, Mumbai, London and Paris all come out worse on this index. But, where that index is conditioned on disposable incomes, and where salaries are based on crazy-long hours, then affordability could be a serious issue for those wanting to move to sane work hours. Maybe this part starts sorting itself out as homeowners die off faster than houses depreciate. Housing prices then fall rapidly as supply starts exceeding the number of people.

I can imagine a story where tight space constraints in Tokyo combined with pretty strong work norms have folks bidding up housing prices until it’s pretty tough to afford a spot big enough for a family without two incomes with long work hours. But that story then conflicts with survey data that has money and housing as trivial reasons for not marrying; the Post story reports instead that “Do not feel the necessity” and “Do not want to lose freedom or comfort” were the main reasons given by both sexes for not marrying. And wanting to enjoy hobbies or entertainment was a slightly more commonly given reason for not marrying than wanting to concentrate on work or studies.

Maybe we need a Japanese translation of Bryan Caplan’s book on low-effort parenting. The integral under the kid marginal-benefit curve is a lot bigger if you figure out ways of continuing to enjoy freedom and comfort.

Update: Brennan MacDonald points out that visas for domestic guest workers are much more difficult in Japan than in Singapore; if it’s much harder to get a nanny, then that too helps explain female labour supply differences.

* Daycare availability seems a serious problem.