Chapter 2. Thinking About Measures to Address Employment Risk

We survey the existing empirical research on employment risk, the primary factor in income risk. The literature indicates that, in Europe and the United States, strong employment regulations have resulted in longer periods of unemployment and have increased the rate of unemployment more among young people than among older workers. In Japan, strong employment regulations have reduced new hires. In addition, previous research for Japan shows that: (1) increasing the minimum wage could have the effect of eliminating employment opportunities among certain segments of the working population, in particular, low-paid workers; (2) excessive unemployment benefits impede reemployment; and (3) self-education and on-the-job training allowances do not necessarily result in increased wages. In addition, the worsening employment conditions among new graduates are increasing the rate of temporary employment and joblessness among the younger generation, and causing a decline in annual income. In other words, young individuals are being exposed to risks in response to which they can make no defensive maneuvers, other than continuing their schooling. To correct this intergenerational inequity, it will be necessary to provide support to enable the generation seeking employment during the current recession to find employment under conditions similar to those enjoyed by previous generations.