Employment Creation Fund : Responses of Japanese Government

under Financial Crisis

Nov. 7, 2014

Local Employment Measures Office

Employment Security Bureau

Ministry Of Health, Labour And Welfare

AYA Kenji, Deputy Director

3.9 4.0

5.1 5.1

4.5

2.0

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14.0

15.0

2007年 2008年 2009年 2010年 2011年

France

U.S.

Germany

U.K.

Sweden Denmark

South Korea

Netherlands Japan

Spain

unemployment rates in OECD countries

21.0

20.0

18.0

（％）

1

How the Global Financial Crisis affected employment worldwide

○ The global financial crisis which started in fall 2008 (triggered by the bankruptcy of Lehman Brothers) rapidly deteriorated Japan’s job

market ○ The level of deterioration was limited when compared to other countries

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

（％） （Times）

Changes in total unemployment rate and effective jobs-to-applicants ratio

Effective job/applicant ratio 1.10 in Aug. 2014

Jobless population recorded all-time high

of 3.68 mil. in Aug. 2002

(Low)1999.1 (High)1997.5 (High)2000.11 (Low)2002.1

Effective job/applicant ratio 1.08 in Jul. 2006

Unemployment rate reached

3.6% in Jul. 2007

Effective job/applicant ratio recorded the lowest of

0.42 in Aug. 2009

(Low)2009.3 (High)2008.2

完全失業率

過去最高 5.5％ 14年6月、8月、15年4月、

21年7月

Unemployment rate recorded all-time

high of 5.5% in Jun., Aug., 2002, Apr. 2003 and Jul.

2009

(High)2012.4 (Low)2012.11

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (Year)

Unemployment rate reached 3.5% in Aug. 2014 with unemployed population of 2.3 mil. (Original

figure: 2.31 mil.)

Total unemployment rate (Bar on right)

Effective jobs-to-applicants ration (Bar on left)

How the Global Financial Crisis affected employment in Japan

2

※Period in grey represents recession

Policy

objective

Performance

objective

① “Maintain” jobs : Prevent unemployment and support

workers in promptly finding new jobs ② “Lead to” jobs: Facilitate the acquirement of

skills and knowledge ③ “Create” jobs : Generate local job opportunities

① Reduce unemployment rate to 3% range as early as

possible ② Raise the employment rate of population aged 20 to 64 to

80% range by 2020

Japan’s employment policy to address the Global Financial Crisis ①

3

Expand policies “to support part of wages for employers who do not lay off workers and encourage workers to take leave of absence instead” （Ease payment requirement, increase fund size and extend eligible period)

【Employment Adjustment Subsidy】

○ Establish policies to provide livelihood support and job training

to those ineligible of receiving employment insurance ○ Expand public job training

“Lead to” jobs

Launch employment creation fund projects (Direct Job Creation Program)

“Create”jobs

4

“Maintain” jobs

○ Create temporary job opportunities

(Type1) ○ Create sustained job opportunities

(Type2)

Japan’s employment policy to address the Global Financial Crisis ②

Employment issues including the termination of contract with temporary workers

worsened due to the Global Financial Crisis

To address the unpredictable trend of job market, the establishment of funds in local government was considered as an effective policy measure to actively and flexibly cope with the situation

The Japanese government thus established the following two direct job creation fund projects

Type1： “Immediate Employment Projects” to generate urgent and temporary jobs

Type2： “Hometown Employment Revitalization Special Fund Projects” to create

sustained job opportunities based on the creative efforts of local areas

Background and objective of the establishment of Employment Creation Fund Projects

5

う

Min

istry of H

ealth, Lab

ou

r and

Welfare

P

refectural

govern

men

t

Project plan

Fund

Provides subsidy

Mu

nicip

al go

vernm

ent

Subsidize

Private

corp

oratio

ns

Commissions project

Commissions project

Job

seekers

Directly implements project

Directly implements project

Hire

Hire

Hire

Hire

Public job agency Match job openings and job seekers

Cre

ate e

mp

loym

en

t op

po

rtun

ities

○ Each prefecture (equivalent to regional local governments) establishes the fund with the central government’s

subsidy.

○ Prefectural or municipal governments (equivalent to basic local government) implement projects that fit the needs

of the local area and create jobs by employing workers needed in carrying out the projects

Type 1 (Local government directly hires workers

Type 1, Type 2 (Local government hires workers by commissioning to private corporations

Management plan on Employment Creation Fund Projects

6

Period Dec. 2008 to Mar. 2012

Budget 450 billion yen(4.3 trillion won)

Within 6 months. One renewal allowed.

The wage and other worker-related expense of newly employed job seekers must account for over 50% of project budget

Requirement

Employment & working period

Prefectural and municipal governments enact project plan

Prefectural and municipal governments create jobs with the following method

① Commission projects to private corporations

② Local public entities directly implement projects

Create temporary employment opportunity to people who had to find another workplace amidst difficult regional job market

Project introduction

Ministry of Health, Labour and Welfare

Prefectural government Fund

Municipal government

Private corporations and others

Project plan Provide subsidy

Subsidize

Commissions project to private entities

Create employment opportunities

Commissions project to private entities

Directly implements project

Job seekers

Project flow

Directly implements project

Hire Hire Hire Public job agency

Match job openings and job seekers

Immediate Employment Projects（Type1）

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Nikaho City, Akita Prefecture Created 30 jobs

Improved the environment by executing a project of collecting coastal waste

[Project implemented by] Nikaho City, Akita Prefecture

Hamamatsu City, Shizuoka Prefecture Created 18 jobs Cleared waste in forests and pruned tress to facilitate an effective usage of neglected waste of thinned trees

[Project implemented by] Three entities including Tenryu Forestry Cooperative

Ishii Town, Tokushima Prefecture Created 2 jobs

Dispatched physical education teaching assistants who aids classroom teachers to local

kindergartens and elementary schools to help improve children’s physical strength

[Project implemented by] Ishii Town, Tokushima Prefecture

Immediate Employment Projects（Type1） Examples of local government projects

8

Ministry of Health, Labour and Welfare

Fund

Prefectural Labour Bureau

Social partners

Regional Fund Project Council

Municipal government

Private entities and others

Create employment opportunities

Pro

ject p

lan

Commission

Subsidize

Pro

vide

sub

sidy

Prefectural government

Support activities aimed at creating job opportunities for local job seekers which are customized to the region or based on creative effort

Project introduction Project flow

Period Oct. 2008 to Mar. 2012

Budget 250 billion yen(2.4 trillion won)

Over 1 year. Can be renewed as needed

The wage of newly employed job seekers must account for over 50% of project budget

Requirement

Employment & working period

Major areas Elderly care, agriculture, forestry, fishery, environment and tourism

Hometown Employment Revitalization Special Fund Projects(Type 2)

Prefectural and municipal governments establish plan on projects expected to have local demand and contribute to future regional development

Prefectural and municipal governments created jobs based on the following methods

① Commission projects to private corporations, etc.

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Commission

Aomori Prefecture Created 7 jobs

Applicants were hired as train attendants that introduce and advertise tourist attractions in areas including the Tsugaru railway to tourists inside the train of Oku-Tsugaru region

【Project implemented by】 Tsugaru Railway Co.

Zao Town, Miyagi Prefecture Created 3 jobs

Hired craftsmen to demonstrate the making of Japanese traditional kokeshi doll and teach classes to visitors of “Miyagi Zao Kokeshi Center” while learning related traditional skills

【 Project implemented by】 Togatta Traditional Kokeshi Wooden Toy Industry Cooperative

Okinawa Prefecture Created 16 jobs

Hired professional staff in charge of childcare support, elderly care support (recuperation centers and nursing homes) and employment consulting to provide aid to those who could not find job or continue working due to childcare or elderly care problems.

【 Project implemented by】 Okinawa Prefecture Elderly Welfare Association

Hometown Employment Revitalization Special Fund Projects (Type 2) Examples of local government projects

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○ Around 600,000 jobs were generated via the two fund projects

○ Over 60% of those employed via the projects continued working ⇒ Project increasingly perceived as “viable” solution of local job creation

Immediate Employment Projects (Type1）

Status after project implementation

■ Employment status after the completion of fund project Employed：75.7％ Unemployed：23.9％

■Did you find the fund project useful? Yes：82.2％ Not sure：13.1％ No：3.8％

（Reason） Job task fitted my interest：52.2％

Immediate income realized：50.3％ Learned skills and acquired experience：49.5％

※ Responses of 2,766 who worked as part of Immediate Employment Projects（From Apr. 2011 to Mar. 2012)

Hometown Employment Revitalization Special Fund Projects（Type2）

Status after project implementation

■ Employment status after the completion of fund project Employed：62.8％ Unemployed：35.3％

■ Did you find the fund project useful? Yes：93.5％ Not sure：4.2％ No：1.1％

（Reason） Learned skills and acquired experience：41.5％

Job task fitted my interest ：32.1％ Immediate income realized ：16.1％

Evaluation on each project

※ Responses of 26,540 who worked as part of Hometown Employment Revitalization Special Fund Projects (As of Feb. 9, 2012)

Job creation effect [Approx. 750,000 yen per person］ Job creation effect [Approx. 2,640,000 yen per person］

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○ The management plan of the projects were also utilized in securing jobs for those who lost jobs due to the aftermath of the Great East Japan Earthquake of March, 2011.

○ They were also utilized for the following purposes to promptly cope with changes in the circumstances related to employment ① Human resources development in growing industries ② Address lack of human resources in certain industrial areas ③ Address employment challenges in regions with declining population

⇒ Approx. 1.8 trillion yen (17,086 trillion won)was subsidized after the

New application of the Employment Creation Fund Projects

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Global Financial Crisis (From Oct. 2008 to Mar. 2015) Around 1.4 million jobs were created

150 bil.

450 bil.

Special Fund Project for

Rural Employment

Revitalization

250 bil. yen

■Project establishment

■ Fund establishment

■ No fund increase

■ In principle, project can continue until late 2023

Oct. 2008 ②Supplementary

budget

Job

creation

pro

jects in m

ajor areas

250 bil.

■ Sep. 10 「Three-phase economic measure」

50 bil.

150 bil.

150 bil.

100 bil.

■ Oct. 8「Economic measure against strong yen and deflation」

Second supplementary budget for 2020

350 bil.

■ Establishment of project to address the aftermath of Great Earthquake <Measures against Great Earthquake>

400 bil.

■ Establishment of employment promotion project <Measures against Great Earthquake >

351 bil.

Im

med

iate Emp

loym

ent C

reation

Fun

d P

rojects

Special tem

po

rary sub

sidy (G

eneral/Sp

ecial pro

mo

tion

al)

751 bil.

80 bil. （Main）

■Nov. 30 “Japan Rebuilding Acceleration Program”

150 bil.

100 bil.

450 bil. 450 bil. 450 bil. 450 bil.

831 bil.

Nov. 2011 ③ Supplementary

budget

■ Jan. 11 “Emergency Economic Measure for the Rebuilding of Japan”

50 bil. （Great

Earthquake）

■ Business establishment

100 bil.

Ho

meto

wn

Emp

loym

ent

Revitalizatio

n Sp

ecial Fun

d

Pro

jects (Special su

bsid

y on

eld

erly care)

Imm

ediate

Emp

loym

ent C

reation

P

rojects

102 bil.

881 bil.

44.8 bil.（For

economic revival)

■ Business establishment

■Economic measure (Consumption tax)

Apr. 2009① Supplementar

y budget

Dec. 2009 Supplementar

y budget

Sep. 2010 Reserve

Oct 2010 Supplementary

budget

May 2011① Supplementa

ry budget

Nov. 2012 Reserve

Feb. 2014①Supplementary

budget

Feb. 2013①Supplementary

budget

Local resid

ent creatio

n

pro

ject

Bu

siness In

cub

ation

A

gency

Local Jo

b C

reation

P

roject

■ Fund expansion (Increase)

300 bil.

■ Fund establishment

Evolution of the Employment Creation Fund Projects

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In case of Japan,

○ Funds were established in local governments in response to the worsening

job market triggered by financial crisis and unemployment measures were implemented to enable local governments to carry out projects that meet the local needs.

○ As this method enables job creation and human resource development

customized to regional characteristics, it has been used to address various employment challenges.

Conclusion ①

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○ In order to effectively take advantage of this method,

Local governments must take the initiative along with related regional

parties (labor unions, employers associations, banks and universities) to, ① Identify regional employment challenges and resources

② Exert efforts in creating regionally-customized ’jobs’ by tapping into

local resources and nurturing ‘talents’ working in the regions. ○ The central government must properly support such motivated moves made

in the regional level.

Conclusion ②

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