TOKYO: More than half of Japanese who are laid off will still be out of work a year later, an international report said Monday, adding firms must be more flexible if Japan's economy is to improve.
The findings come as Japanese Prime Minister Shinzo Abe embarks on his third year in power, after pledging to awaken the country's long-slumbering economy, in part by cutting red tape.
Around 1.4 percent of workers lose their jobs each year, with older, less educated employees and those on temporary contracts at highest risk of remaining jobless, the Organisation for Economic Co-operation and Development (OECD) said in a report on Japan's labour market.
"A significant fraction of Japanese workers are laid off each year and then face long periods of joblessness before finding work, often at much lower wages," the OECD said.
On average between 2002 and 2013 only 48 percent of those who are retrenched found a new job within 12 months, the report said, adding those who do find employment suffer an average 20 percent cut to their income.
The trend persists for the next three years, and "even four years after the displacement, their earnings are about 15 percent lower than they were," said lead writer and OECD senior economist Paul Swaim, noting the same pattern is observed in other developed countries.
"The costs borne by displaced workers are likely to remain high in many cases... if the employment opportunities available to mid-career job changers remain limited," the report said.
The slow death of the culture of lifetime employment and a greater dependence on part-time or casual employment means Japan's workers, not the firms that employ them, bear almost all the costs of the little flexibility the job market has.
"In Europe there is a word called flexicurity, which means reconciling flexibility with security for the entire workforce," said Swaim.
"It means some mobility between jobs, not meaning becoming permanently poor as a worker," Swaim said.
Deregulating the jobs market is a key plank of Abe's plan to turn around the world's third largest economy, with rigid rules on hiring and firing sometimes blamed for the national flat-footed responses to changing global markets.
Supporters say a more flexible workforce would better allow families to look after children and the growing ranks of elderly, as well as permitting firms to adapt more quickly.
But critics say reforms run the risk of taking away job security.
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