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The Changing Decision Mechanisms of Regional Employment and a Strategy for Securing New Recipients for Surplus Labor
— A vision for regeneration in an era of global competition between regions —

December 16, 2009

Overview

The purpose of this report is to analyze the changes that have taken place, in recent years, in the mechanisms by which regional employment is decided and to make proposals concerning the action required to create employment opportunities at a regional level.

A study of how employment was provided at a regional level in the past reveals that, during Japan's period of rapid economic growth, the economy grew most rapidly in and around urban areas, and that those from rural areas were able to find employment by migrating from rural to urban areas. When the movement of population towards urban areas slowed at the end of the period of rapid economic growth, the emphasis of policy measures for securing regional employment shifted to encouraging manufacturing industry to establish factories locally.
During the recession that followed the collapse of the bubble economy, a series of large-scale and ongoing public works projects helped to secure regional employment in the construction industry. However, since the monetary crisis of 1997, against a backdrop of industrial hollowing-out due to uncertainty over the future, no suitable recipient for surplus labor has been found and unemployment has seen a considerable nationwide increase.

In the mid-2000s, manufacturing companies bringing production back to Japan provided the driving force for the regeneration of regional employment. One point that should not be overlooked is that the use of contracting and of agency workers helped to support the return of manufacturing production activity to Japan. The current administration has taken the stance that the use of agency workers in manufacturing should, in principle, be prohibited but, given the historical facts, it would seem appropriate to allow their widespread use, as a means of securing the future of regional manufacturing bases.
An important feature of this period is that the number of people in employment only showed a clear rise in the major cities of the Tokai and Kinki regions and the northern and southern parts of the Kanto region. In other regions, the fall in the unemployment rate was due in part to a fall in the labor force. This shows the importance not only of directly creating recipients for surplus labor but also of finding ways of moving workers to the places where such recipients are situated.

In recent years, Japan's regions have found their links to other countries becoming stronger than their links to other regions and export growth has become a driving force for regional economic growth. One reason is that "fragmentation" has become possible and that Japan's regions have found themselves competing with the industrialized parts of Asia to induce global companies to set up operations in their region. Moreover, because of the slow growth of the domestic market due to demographics and the economic downturn, competitive companies have developed overseas sales channels.
In other words, Japan's regions have become divided into two groups: those that are managing to integrate themselves into the global network of production and consumption and those that are being left behind. This was the underlying reason for the gaps in unemployment levels between regions, from the end of the 1990s up to the start of the economic crisis in the autumn of 2008. Since the beginning of the crisis, the gaps have been narrowing, but this is a temporary phenomenon and as the global economy returns to the growth path, it is likely that the variation in employment levels between regions will increase.

Given this analysis, the first task to be addressed if regional employment is to be created is the formulation of a strategy for fostering industries capable of building cross-border production and consumption networks incorporating overseas growth areas such as Asia. In addition to traditional export industries such as manufacturing, there is also potential in non-manufacturing industries such as agriculture and tourism, which could become "new export industries".
To foster these export industries, it will be necessary to look beyond the current prefectural framework, promoting the formation of "wide area economic zones" based purely on economic links and building systems that will allow the pursuit of industrial and employment policy measures under regional leadership. To achieve high productivity and create good quality employment, it is essential that Japan should form industrial concentrations that draw on regional strengths and are able to hold their own on the global stage, and bring about a movement of labor to those concentrations.
It will not, of course, be possible to satisfy all jobseekers' needs simply through the movement of labor, and it will be necessary to create employment opportunities elsewhere than in the growth areas. One means to this end is the creation of employment in the "care" industries (nursing, nursing care and childcare services)” operated by non-profit organizations and the support of NPOs through the reform of tax systems applying to donations. The "social enterprise" format operating in the United Kingdom may have potential as a recipient for surplus labor.

For more information on the content of this report, please contact Hisashi Yamada, the Japan Research Institute, Limited.

Tel: 03-3288-4245

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