Japan’s Tight Labor Market Has Problem Sectors That Crimp Wages

(Bloomberg) -- Economic theory suggests that the tightest labor market in more than forty years ought to be more than enough to push wages and inflation higher in Japan. Reality is proving different.  

A sector-by-sector look at the job-to-applicant ratio released on Friday shows pockets of significant looseness, especially in areas like clerical work, as shown in the chart below.

It also indicates that many workers are unwilling or unable to switch occupations to areas where demand is highest. The gap between the different categories in the chart remains fairly even over the past five years.

Another key point when it comes to weak wage gains for the total workforce is that some of the tightest sectors are relatively small in terms of the number of people they employ.

While there are 3.7 jobs in construction and mining for every person looking for that kind of work, the sector accounts for less than 5 percent of jobs in the economy.

At the other end of the spectrum, the clerical sector is the largest, accounting for almost 13 million people, but there are more people seeking employment there than jobs available.

There's a slight increase in labor market mobility, but "a large number of people still belong to the jobs-for-life system," said Ruriko Toshida, an economist at Mitsubishi UFJ Research and Consulting Co.

To contact the author of this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

To contact the editor responsible for this story: James Mayger at jmayger@bloomberg.net, Brett Miller