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  • 1 0000000404811396https://isni.org/isni/0000000404811396International Monetary Fund

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© 2022 International Monetary Fund

WP/22/89

IMF Working Paper

Asia and Pacific Department

The Japanese Labor Market During the COVID-19 Pandemic

Prepared by Shinya Kotera and Jochen M. Schmittmann*

Authorized for distribution by Ranil Salgado and Chikahisa Sumi

May 2022

IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

ABSTRACT: This paper investigates labor market dynamics in Japan during the COVID-19 pandemic drawing on macro and micro data. The pandemic and related containment measures had a large negative impact on employment, labor force participation, earnings, and labor market mobility, although policy support through furlough schemes partially mitigated the rise in unemployment. Our results indicate that industry effects were a crucial driver of labor market outcomes for different groups of employees — women, younger age groups, non-regular, self-employed, and low-income workers accounted for a disproportional share of employment in the hardest hit industries. We also find empirical evidence for the need to improve childcare and related support, training and upskilling offerings, and teleworking availability, and the role of skill mismatches in reducing labor market mobility and resource reallocation.

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Contents

  • Glossary

  • 1. Introduction

  • 2. COVID-19 and Labor Market Policies

    • 2.1 General Background on the Japanese Labor Market

    • 2.2 COVID-19 Developments

    • 2.3 Labor Market Policies During COVID-19

  • 3. Labor Market Developments During the Pandemic – Evidence from Macro Data

  • 4. Labor Market Developments During the Pandemic – Evidence from Micro Panel Data

    • 4.1. Panel Data Set

    • 4.2 Employed Persons at Work (group 1)

      • 4.2.1. Earnings Developments for Employees with no Job Change (group 1-1)

      • 4.2.2. Job Changes for Employees Continuously at Work Through 2020 (group 1-2)

    • 4.3. Unemployed or Dropping out of the Workforce (group 2)

    • 4.4. Employees Placed on Temporary Leave in 2020 (group 3)

  • 5. Conclusion and Policy Implications

  • Appendices

    • Appendix 1: Descriptive statistics of JPSED

    • Appendix 2: Variables used for the DML

    • Appendix 3: DML with a linear Lasso

    • Appendix 4: DML result of the Earnings Analysis of Job stayers (Group 1-1)

    • Appendix 5: DML result of Unemployed or NILF (Group 2)

    • Appendix 6: Logistic regression result of Group 2 (Unemployed or NILF)

    • Appendix 7: DML result of employed person not at work (Group 3)

  • References

  • FIGURES

  • Figure 1. Working-age (15-64) and 65+ Population

  • Figure 2. Overview of the Japanese Labor Market

  • Figure 3. New infection cases in Japan

  • Figure 4. Employment Adjustment Subsidy (EAS)

  • Figure 5. Employed person not at work

  • Figure 6. Employment Insurance

  • Figure 7. Employment during the Pandemic

  • Figure 8. Changes in total cash earnings

  • Figure 9. Labor Market by Industry

  • Figure 10. Actual and Desired Job Changes

  • Figure 11. People Not in the Labor Force (NILF)

  • Figure 12. Household income and consumption

  • Figure 13. Targeted Sample

  • Figure 14. Employees switching jobs

  • Figure 15. Persons becoming unemployed or leaving the workforce

  • Figure 16. NILF female by the youngest child age

  • Figure 17. Ratio of people finding a new job

  • Figure 18. Duration of leave from work and life satisfaction

  • TABLES

  • Table 1. Labor Market Changes by Gender and Age

  • Table 2. Sample size

  • Table 3. Selected result of DML analysis

  • Table 4. Job Level Change (%)

  • Table 5. Characteristics of affected industries

  • Table 6. Employees switching jobs

  • Table 7. Selected result of DML analysis

  • Table 8. Workers who reach the compulsory retirement age

  • Table 9.Average annual earnings changes (%)

  • Table 10. Selected result of DML analysis

Glossary

DML

Double Machine Learning

EAS

Employment Adjustment Subsidy

EI

Employment Insurance

GFC

Global Financial Crisis

JPSED

Japanese Panel Study of Employment Dynamics

MHLW

Ministry of Health, Labor, and Welfare

NILF

Not In the Labor Force

VET

Vocational Education and Training

WSR

Work Style Reform

*

The authors would like to thank Chikahisa Sumi, Ranil Salgado, Pablo Lopez Murphy, Piyaporn Sodsriwiboon, Ippei Shibata, and seminar participants at the IMF’s Office for Asia and the Pacific and the IMF Japan team for helpful comments and suggestions, and the Recruit Works Institute for providing the Japanese Panel Study of Employment Dynamics (JPSED) microdata set. Ted Zhu provided excellent research assistance.

The Japanese Labor Market During the COVID- 19 Pandemic
Author: Shinya Kotera and Jochen M. Schmittmann