Japan's economy hit the headlines this year as inflation rebounded for the first time in decades, workers earned wage increases and the Bank of Japan raised interest rates for the first time in 17 years.
But there is another long-term trend occurring in Japan's economy that may be of interest to U.S. policymakers. One reason is that women's employment is steadily increasing.
Japan's working-age women have been participating in the labor market for years, and this trend has continued strongly in recent months as a tight labor market prompts companies to attract new employees.
The surge in women's participation was partly by design. Since around 2013, the Japanese government has been trying to make both public policy and corporate culture more friendly to working women. The goal was to attract new talent as the world's fourth-largest economy faces an aging and shrinking labor market.
“What Japan has done well over the last decade is to develop a care infrastructure for working parents,” Nobuko Kobayashi, partner at EY Parthenon Japan, wrote in an email.
Still, even those who were around when the “Womenomics” policy was created were caught off guard by how many Japanese women are now choosing to work, thanks to policy changes and shifting social norms. Some people are.
“We all underestimated it,” said Adam Posen, director of the Peterson Institute for International Economics, who advised the Japanese government in introducing policies to increase the number of women in the workforce. Posen thought at the time that perhaps 800,000 women could be brought into the labor market, which is far less than the roughly 3 million actually participating in the labor market. However, many women work part-time).
This is a surprise that could be an important reminder for economic players around the world. Economists often try to extrapolate from history to estimate how much a country's labor force can expand, but they tend to assume that there is a limit to the number of people that can be attracted to the labor market. This is because some people remain at home to provide care and care. Other reasons.
But over the past decade, history has been of little use to Japan as social standards, marriage rates, and birth rates have changed. And the lesson from Japan's experience is simple. Women may be a larger potential workforce than economists typically expect.
“Obviously, Japanese women wanted to work,” Posen said. “It raises the question of what are reasonable expectations for women’s labor force participation.”
That message could have implications for the U.S. central bank, the Federal Reserve.
A key question for the Fed is how much room there is for the US labor market to expand in 2024. Over the past year, U.S. employment has held steady and inflation has declined and wage pressures have eased, even as the economy expanded rapidly. These positive results have been made possible because the domestic supply of workers is expanding.
The increase in the labor force in recent years has been driven by two major factors. One is an increase in immigration, and the other is a recovery in the labor force participation rate, which fell during the pandemic. This is especially true for prime-age women between the ages of 25 and 54, who are joining the job market at record or near-record rates.
Economists are now questioning whether the economic expansion can continue. Immigration to the United States appears to be a continuing trend. Economists at Goldman Sachs said the U.S. could add about 1 million more immigrants than usual this year. The question is whether the number of participants will continue to increase.
At this point, it looks like things have leveled out overall over the past year or so. Given that the population is aging and there are fewer jobs for older people, many economists say the overall number is likely to remain flat and even decline over time. These trends have led some economists to question whether improvements in labor supply can continue.
“Further rebalancing of the labor market will need to come from slower growth in labor demand, rather than continued rapid growth in worker supply,” one San Francisco Fed analysis concluded this year.
But in the late 2010s, economists thought there was little room to add new workers to the U.S. labor market, only to find to their surprise that people were still coming back from side jobs.
And while the labor force participation rate for women in their prime years has remained fairly stable since last summer, Japan's experience raises the question: Could American women in particular end up working more? Questions have arisen.
The United States once had a higher labor force participation rate for working-age women than other developed countries, but as of 2015 many countries, including Japan, exceeded that level.
These days, about 77 percent of prime-age women in the United States have a job or are looking for a job. This figure is about 83% for Japanese women, up from about 74% a decade ago and about 65% in the early 1990s. Although the labor force participation rate of working-age women remains high in some countries, such as Canada, the proportion of women in the labor force in Japan is now about the same as in Australia.
These changes occurred for several reasons. The Japanese government has taken several important policy measures, including increasing the capacity of daycare centers.
Changes in public attitudes toward the family also helped liberate women into work. The average age at first marriage is steadily rising, and birth rates are at record lows.
“That's the big social context: delayed marriage, delayed childbearing, not getting married at all,” said Paul Sheard, an economist who has focused on the country for years.
But there were limits. The country still has a tax penalty for second-income earners, and the quality of jobs women have is not as high. Wages are often low and hours are limited. Furthermore, there are very few women in the leadership ranks of Japanese companies.
Kathy Matsui, former vice chair of Goldman Sachs Group's Japan division and the woman who pioneered the idea of Womenomics, said the effort requires continued effort.
Still, Japan's experience may provide a hint at what may come next for the United States. For example, declining birthrates and marriage rates in the United States may provide room for the labor force rates of young and middle-aged women to continue to rise in the short term, but in the future there will be a decline in the population and a shrinking economy. seeds will be sown. . Remote or hybrid work arrangements may also make it easier for caregivers.
And some of the more family-friendly policies Japan has adopted could serve as a model for the United States, experts say.
EY Parthenon's Kobayashi pointed out that the number of children on waiting lists for daycare centers has fallen from 19,900 five years ago to 2,680 in 2023.
But Wendy Cutler, deputy director of the Asian Social Policy Research Institute, said Japan could learn from America's more flexible work culture. This allows women to avoid dropping out of the labor market or having their career paths interrupted when they have children.
“Focusing on the quality of these jobs will become increasingly important,” Cutler said.
