Thursday, May 30, 2013

Labor Reform Not Happening?

A Q&(My)A that appears not to have been used in that media outlet, so here it is:

Q. Given that making it easier for companies to hire and fire people seems unlikely to happen now (according to reports…), what is your reaction? Is this something that Abe needed to implement and why? Is this going to cause problems in the labor market to build up?

Also, is there an outside chance that once Abe gets a majority in both houses, that he might then try to push through some serious jobs reforms, which may not initially be popular with the electorate?

A. I'm disappointed that he does not appear to be abandoning even the scaled-down version that would would allow businesses to buy out employees whose dismissal has been reversed by the arbitration and judicial process. Not surprising, I suppose, when the Abe administration is already avoiding other changes that could offend vested interests--failing to implement the public health insurance copayment hike (from 10% to a still generous 20%) for the elderly immediately comes to mind--ahead of the July upper house election.

He certainly could use what looks to be a more solid mandate from the electoral vote, more credible than the more or less (please do the arithmetic; I do not have the nmbers at the tip of my fingers) 40% of the votes  that won the LDP 70% of the seats, to further push the Abenomics agenda. But to do that in the immediate political future, he would have to leave the issues that he wants revisit open-ended in the official document scheduled to come out next month. I'm skeptical that he will do that, though, since it would open avenues of political attack for the DPJ against which he and the LDP would have a very difficult time forming a coherent defense. There's also the matter of easing in the consumption tax hike. He doesn't want any short-term negatives spooking that process. Moreover, he has a socio-political agenda with the consitutional amendment process at its core that he would surely like to devote the lion's share of his augmented political capital. Thus, my guess is that he will concentrate on implementing the third arrow as is and on pushing his socio-political agenda, while leaving other reform ideas for a later occasion.

I don't see the lack of progress being a meaningful economic drag in the short-run. The economy is on an upswing, so businesses will hire/contract or not depending on their perception of future prospects, if need be as irregular fulltime workers. In the long-run, though, Japan needs a lifestyle overhaul including different hiring/firing rules accompanied by changes in the social safety net to better utilize a diclining working-age population. Maybe after the next lower house election?

Yes, I have a dream.

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