Part-time Work and Work-sharing

Transcription

1 Part-time Work and Work-sharing Tadashi Yagi Doshisha University

2 1. Introduction As the fertility rate in Japan decreases, many come to think that Japanese work style is a factor of declining fertility rate. Japanese work style rests on life-long employment and the seniority wage system. Life-long employment coupled with the seniority system is effective in inducing worker s loyalty to the company and hard work without hesitating over-time work. While Japanese work style has some merits in enhancing economic growth, we should remind of the fact that it is sustainable with sacrifices of the full-time housewife and low wage part-time workers. Seniority wage system increases labor costs as employee ages, and low wage part-time worker is employed in place of the full time worker to decrease labor costs. Long work hours of full time worker requires a full time housewife for housework and child rearing. This makes it risky for women to invest in human capital development because they may need to quit full time job at the time of the marriage. That is, Japanese work style discourages women to get marry and to give birth child. Japanese work style mentioned above is risky in a sense that the household s income depends only on husband s earnings. In case of unemployment and illness, the household s income decreases drastically, and it is hard to recover the decrease in income by other members of the family because wage rate of part-time worker is around the half of that of full-time regular worker in Japan. Annual income of part-time worker is around 30-40% of that of full-time regular worker. The current Japanese employment system is not flexible for the changes in environment that surrounds households. For example, it is not easy to decrease working hours in case of caring parents, rearing children, or schooling for accumulating human capital. These kinds of risk discourage women to get marry or to give birth child, and decreases fertility rate. The purpose of the paper to examine the conditions for the success in part-time revolution and work-sharing in the Netherlands by comparing Japanese labor market situations, and consider the labor policy that decreases the risks that Japanese households face. Especially, we focus on the work conditions and roles of part-time workers in Japanese company by using panel data of Japanese distribution industry. Although there are many researches on part-time work in Japan using interview method such as Sano (2000), only a few examine the labor market situation of part-time worker using panel data. The panel data analysis enables us to examine roles and limitations of employing part-time worker in Japanese company. 1

3 2. Part-time revolution in the Netherlands 2.1 Labor market in the Netherlands This section surveys the labor market in the Netherlands. First, we compare the situation of employment between the Netherlands and Japan. The differences between these two countries are shown in Figure 1-a and 1-b. 1) The labor participation rate of 45 years old and over of the Netherlands is smaller than that of Japan. Especially, that of 55 years old and over is quite small in the Netherlands. 2) It follows that the unemployment rate of 55 years old and over is low in the Netherlands. 3) The unemployment rate of youth is lower in the Netherlands than that in Japan. 4) The labor participation rate of years old is higher in the Netherlands than that in Japan. Source: Central Bureau of Statistics, 1999 Survey of Labor Statistics. Source: Statistics and Information Department, Minister s Secretariat, Ministry of Health, Labor and Welfare, 2001 Year Book of Labor Statistics. 2

4 Figure 2 shows the distribution of working hours in the Netherlands by sex. As is shown in the figure, female workers are main source of part-time worker, and male workers work more than 35 hours per week as full-time worker. Source: Central Bureau of Statistics, 1999 Survey of Labor Statistics. Figure 3 shows the working hours by age class. As is shown in the figure, we cannot find large difference in the distribution of working hours by age class. It is, however, worth noting that the ratio of part-time work (12-19 hours per week) in youth is larger than that of any other age classes. Source: Central Bureau of Statistics, 1999 Survey of Labor Statistics. 3

5 In the Netherlands, non-regular worker is called as a flexible worker. As of 1999, the ratio of flexible worker is around 10% of the total employees (excluding self-employees). Figure 4 shows the distribution of job types and skill levels of the flexible workers by comparing those of regular workers. As is shown in the figure, the ratio of manual work or low skill job is larger than that of the regular worker. It should be mentioned, however, that the ratio of high skill job or professional job is not small even for the flexible worker. This is against the expectations that a flexible worker is used only as a manual worker or a low skilled worker. According to CBS (1999), as of 1999, 93% of male workers work as a regular worker and 7% work as a flexible worker, and 87% of female workers work as a regular worker and 13% work as a flexible worker. In addition, 40% of male flexible workers and 34% of female flexible workers are dispatched workers. Source: Central Bureau of Statistics, 1999 Survey of Labor Statistics. Figure 5 shows the distribution of working hours of both regular and flexible worker. Around 28% of flexible workers work hours per week, and this portion is around four times as large as that of regular workers. Around 70% of regular workers work as a full-time worker, while 42% of flexible workers work as a full-time worker. It should be reminded that more than 40% of flexible workers work as a full-time worker. 4

6 Source: Central Bureau of Statistics, 1999 Survey of Labor Statistics. Figure 6 shows the ratio of regular and flexible workers by age class. This figure shows that most of the flexible workers are young, and almost all the workers more than 25 years old work as regular worker. This suggests that the length of service as a flexible worker is short and these points are quite different from Japan. Source: Central Bureau of Statistics, 1999 Survey of Labor Statistics. 5

7 2.2 Labor law of the Netherlands To understand the labor market situation of the Netherlands, it is necessary to summarize the employment contract and the labor law. As a whole, labor law in the Netherlands protects workers right more strongly than that of Japan. The 628 th article states that a worker has a right of receiving 3 hours value wage even when working hours is less than 3 hours, if working hours per week is less than 15 under contract or undefined. This guarantees the minimum wage of part-time worker. The 629 th article states that a worker who is unable to work because of illness, pregnancy, childbirth has a right to receive 70% of the designated wage or at least legally defined minimum wage for 52 weeks, if daily wage does not exceed the maximum wage defined by the article 9-item 1 of the law on social security adjustment. This guarantees the income in case of illness, pregnancy, and childbirth. Paid vacation is an important item in labor cost. The 634 th article-item 1 states as follows: A worker who receives full wage defined by the contract for more than one year has a right of receiving four weeks (in terms of working hours per week) paid vacation for one year. Even when working hours in the contract is defined by annual working hours, a worker has a right of receiving the equivalent length of paid vacation. This guarantees that all the workers has a equivalent right of receiving paid vacation in a sense that the length of paid vacation is proportional to working hours. Four weeks paid vacation is longer than the length of paid vacation in Japan. Since the length of paid vacation in the Netherlands is proportional to working hours, the length of paid vacation of part-time workers are far longer than that in Japan. In addition, 634 th article item 2 states that a worker whose length of service is less than one year has a right of receiving paid vacation whose length is proportional to the length of service. 635 th article item 2 states that a female worker who is not eligible of receiving full wage during one year because of pregnancy or childbirth has a right of receiving a defined length of paid vacation in a contract, even during paid non-working period defined by the second chapter in part 3 of Law on labor and care. This law guarantees the female s right of receiving paid vacation during pregnancy or childbirth. 635 th article- item 4 states that a worker who could not work as defined by a contract because of illness has a right of receiving paid vacation for the last 6 un-worked months, regardless of the right of receiving wage. This is an additional right given to workers besides from 634 th article, and shows that worker s right of receiving paid vacation is strongly guaranteed. 638 th article item 6 states that employers are obliged to provide workers with 6

8 paid vacation for the amount of un-used paid vacation, unless there is a serious reason. This enforces employers to provide workers with full paid vacation. Labor law in the Netherlands (640 th article) does not allow a worker to exchange paid vacation with money during labor contract is effective. Thus, it is usual for workers to take full paid vacation in the Netherlands. In addition, 641st article states that a worker has a right of exchange un-used paid vacation with money at the end of labor contract. These statements on paid vacation in the labor law of Netherlands imply that a paid vacation is a great burden for the enterprise. Chapter 4 of the labor law defines the equal treatment of workers. 646 th article-item 1 states that an employer has to treat female employees equally in a contract, training, work condition, promotion, termination of contract, and a employer has to prove the legality of the act in the court if he is sued. 649 th article item-1 states that a employer has to treat temporary workers equally with regular workers in work conditions, unless there is an objectively proper reason. It is note worthy that the labor law in the Netherlands requires employers to treat temporary workers equally as well as part time workers. Chapter 6 defines employer s obligation, and requires employers to make labor contract in documents. The items those should be written in the contract are as follows: 1) duty or details of job, 2) period of contract for temporary worker, 3) number of paid vacation or method of calculation, 4) work hours per day or per week, 5) wage and amount of job, 6) membership to pension system, and so on. The labor law in the Netherlands is the most advanced even in EU. Especially, legal protection to a part-time worker is a kind of reference model. At April , the executive committee of EU agrees on enforcing the member countries to obey the committee s command on outline of part-time labor, which is concluded by UNICE, CEEP and ETU (see Shibayama (2003)). This provides EU member countries with legal enforcement to modify their domestic labor law to legislate equal treatment of part-time worker. Responding to the command, German government legislated a new labor law on part-time worker and temporary worker (Teilzeit- und Befristungsgesetz: TzBfG) at January 1, This enforces employers to treat part-time workers equally with full-time workers (See Miyamae (2003)). These movements in EU are important and influential in considering Japanese policy for part-time workers. 7

9 2.3 Comparison of age-wage profile between the Netherlands and Japan. This subsection compares wage structure between the Netherlands and Japan to examine the sustainability condition of work-sharing in Japan and the Netherlands. Figure 7-a and Figure 7-b show age-wage profiles of the Netherlands and Japan. Wage rate is defined by logarithmic term to avoid the differences in units between the countries. Data source of the wage rate in the Netherlands is Statistical Yearbook 2003 by Central Bureau of the Statistics, the Netherlands. Japanese wage rate is given by Wage Census by Ministry of Welfare and Labor, Japan. It is possible to estimate a wage function by using the information on sex, age, school career, length of service, and firm size from Japanese wage census. It is, however, not easy to estimate the wage function by using the same set of information in the Netherlands because of the limited availability of the data. Thus, we use a simple age-wage profile for comparing the countries. This age-wage profile contains various factors such as school career, and is not a pure age-wage profile. That is, the age-wage profile is interpreted as that of the average worker in each country. The wage rate is transformed into logarithmic form so that the comparison between the Netherlands and Japan is independent from the unit of wage rate. Figure 7-a shows that wage rates are the same between part-time workers and full-time workers in the Netherlands. This reflects not only the legally mandated equal treatments of part-time worker and full-time worker, but also the equal attribute, such as job type and job status, of the average full-time workers and average part-time workers. By comparing with Figure 7-a and Figure 7-b, it is also shown that the difference of wage rate between flexible workers and full-time workers is smaller than that of Japan. To make the comparison easy, we present an age-wage profiles of the two countries for the case when 1 Euro is equal to 130 in Figure 7-c. This shows that wage rates of full-time workers are almost the same level and the same shape between the two countries. The distinguished difference is found in the level and the shape of the wage rates of flexible workers in the Netherlands and the part-time workers in Japan. The wage rate of Japanese part-time workers is far lower than that of the flexible workers in the Netherlands, and the wage rate does not increase so much even at the midst of the 40s. These findings tell us that the wage rate of Japanese part-time workers is quite lower then the appropriate level judging from the referable temporary workers in the Netherlands. The comparison with the temporary workers in the Netherlands gives us a criterion in discussing the appropriate wage difference between part-time workers and full-time workers in Japan. Figure 7-c suggests that the wage rate of part-time workers would be increased around 50%. 8

10 9

11 One of the important differences in labor market between the two countries is the difference in the length of service. Chuma (1996) compares the length of service between the two countries (See Figure 8.). This shows that the average length of service in Japan is 10.9 years and that in the Netherlands is around 7 years, and the median value in Japan is 8.2 years and that in the Netherlands is 3.1 years. This implies that turn over is less disadvantageous in the Netherlands than Japan, or long service is less advantageous than Japan. The costless turn over has some merits for workers, because workers can avoid some risks in choosing job place and job type and responding to various changes in work environment such as bankruptcy or serious illness. That is, costless turnover is a kind of safety net for workers. 10

12 2.4 What we can learn from the experience in the Netherlands. In this subsection, we summarize what we can learn for work-sharing from the experience in the Netherlands. Hearing from some institutes in the Netherlands such as Ministry of Welfare of the Netherlands, Camber of Commerce of Japanese company in the Netherlands, JETRO Amsterdam branch was helpful in understanding the real situation of the Netherlands. To understand the success of the work-sharing in the Netherlands, we summarize the distinguished characteristics of the labor market in the Netherlands. First, length of service is not important factor in determination of wage rate, and the ability is more important factor. This point is confirmed by the hearing. In the Netherlands, recruiting the university graduates is not limited to a specific time like in Japan, because the timing of university graduation is not fixed. Employers meet with applicants when it is needed, and judges the employability through an individual interview. Whether a worker is a new graduate or a worker with work experience is not an import matter in the decision of appointment. This is one of the reasons for the short length of service in the Netherlands. The important point stressed in the hearing is that the marginal productivity of a worker is a dominant factor in the determination of wage rate. This is good for improving the flexibility of employment, because the narrow gap between the wage rate and the marginal productivity makes it easy to differentiate working hours by each worker. Philosophical stance for accepting part-time revolution and work-sharing is also important for explaining the success in the Netherlands. People believe that the 11

13 ultimate purpose of work is to enrich their life, and making working hours flexible is necessary to adjust their work style into various life-styles that may vary in the life cycle. Part-time revolution makes it possible to realize this philosophy. The essential difference in stance for work-sharing between Japan and the Netherlands is whether workers intend to utilize work-sharing for enriching their life or not. In Japan, work-sharing is considered as a tool for maintaining employments, and only the incentive that drives full-time worker to accept shortening working hours is reducing the risk of unemployment. Thus, Japanese full-time workers are quite negative for work-sharing because they believe that the value of reduced working hours is less than reduced wage. One reason is that not all the workers have an idea of how to utilize the reduced working hours. Therefore, it is important to consider the introduction of voluntary reduction of work hours by establishing the employment system that permits the part-time work of a regular worker. Increasing the wage rate of Japanese temporary part-time worker has a positive effect on promoting this movement because this decreases the relative merits of employing a temporary part-time worker. The success story of the work-sharing in the Netherlands is summarized as follows. 1) Unlike Japan, the ratio of temporary worker is relatively small in the Netherlands. Introduction of part-time worker increased the flexibility in production, and increased the productivity by reducing the mismatch between labor supply and labor demand. 2) Labor demand in IT and service sectors where work-sharing is easily applicable increased, and this increased the demand for female labor. This made it possible to increase the labor supply per household, i.e., 1.5 units model (both husband and wife supply 0.75 units labor) became feasible. 3) The increase in labor supply in a household from one unit to 1.5 units increased the amount and variation of consumption. The increased variation of consumption promoted the creation of new industry and stimulated the existing industries. For example, the demand for cosmetic was small before the introduction of work-sharing because of the low household income. As the female labor supply increased, the demand for cosmetic increased because of an increase in household income. 4) Highly advanced social welfare system decreased anxieties in life, and reduced the necessity for saving. This stimulated consumption and increased the aggregate demand. For example, almost all the medical expenses are covered by a mandatory medical insurance, and people are endowed the equal opportunity of receiving medical service independently from income level. Not only medical service but also education are provided publicly, and almost all the costs for compulsory education are covered 12

14 publicly. Regardless of the high tax burden (VAT rate is 19%, and income tax rate is around 30%-40%), most part of the minimum living costs necessary for life are covered by public. The positive side of this advanced welfare state enhanced the economic growth until In the hearing, it is told that the good combination of strong worker s right and economic growth is ending in the Netherlands. One reason is the high labor cost reflecting the labor law that protects worker s right strongly. As the economy declines, firms hesitate to employ a regular worker because the cost of lay-off is expensive. Thus, the ratio of temporary worker is increasing recently. Declining economy is not only the reason for the increasing temporary workers. The Act on Flexibility and Security (Flexwet) that came into force in January 1999 is another factor. By this law, 1) right of dispatched worker is improved, and employment stability is increased, 2) the employment conditions in temporary employment contract is clarified, and the flexibility in employing temporary workers is increased, 3) the regulation on human dispatching company is abolished, and the supply of temporary worker is increased. In concrete, in case where the contract for temporary worker is renewed within one month, the contract is qualified as that for regular worker before the amendment. After the amendment, the contract is qualified as that for regular worker, in case where temporary worker works more than 3 years. In addition, trial period is shortened after the amendment. According to the survey done in February 2002 by the government, one quarter of flexible workers answers that the right of flexible worker has improved after the law came into force, and negative stance of employers for the law has weakened (See JETRO (2003)). This law encouraged employers to employ temporary workers because the ambiguous legal conditions for employing temporary workers were clarified. Recent decline in economic growth makes the negative side of strong worker right in the Netherlands clear. Economic decline is caused from a decrease in capital inflow into the Netherlands, and unemployment rate is reaching to 5.3%. A change in political regime also worsens the relation between labor unions and firms. From these reasons, firms are now claiming to decrease labor cost. Actually, there are negative opinions on Dutch employment system. For example, the rich social welfare program reduces work incentive because strong safety net decreases the necessity of working. Strong worker s right brings about moral hazard problem such as frequent absent from work because of illness. In the Netherlands, absent from work because of illness and maternity is not counted as paid vacation, and this is far more favorable treatment for workers than many other countries such as Japan. Coupled with the increased wage 13

15 rate during the economic growth period in 1990s, these kinds of labor conditions worsened the competitiveness of Dutch companies. The above problems do not necessarily imply the failure of work-sharing in the Netherlands. Equal treatment between full-time worker and part-time worker will increase labor cost of firms. However, the experience of the Netherlands shows the merits of shortening regular worker s working hours for enriching worker s life, and reducing risks in life. The equal treatment reduces the income loss from child rearing, recurrent education, illness of partner, and caring parents. The most important part is the voluntary shortening working hours increases the space for employing more workers, and reduces unemployment. Work-sharing that is consistent with both workers incentive is sustainable for long time, and could be a good reference for reforming Japanese employment system. 3. The firm s behavior for part-time employment in Japan This section analyzes the firm s behavior for employing non-regular part-time workers by examining the factors that affect the ratio of part-time workers in total employments. In this section, part-time worker means non-regular worker, and it includes non-regular full-time worker with long period of service, non-regular part-time worker with long period of service and temporary worker. For this purpose, we use panel data compiled by the association of labor unions in Japanese distribution industry. First, we summarize the actual status of Japanese part-time labor market. Second, we examine the macro economic factors that affect the ratio of part-time worker in a firm by time series analysis. Third, we analyze the relation between part-time employment and profit rate, labor cost, and per capita profit by conducting the panel analysis. 3.1 Part-time employment in Japanese labor market Before examining the micro data, we summarize the current state of Japanese part-time employment by using Japanese labor market statistics (excluding agriculture and self-employment). Figure 8 shows the increasing trend of the ratio of temporary employments in the total employments, and the ratio reaches around 14% in Recalling that the non-regular employee includes temporary employee and non-regular employee with long period of service, the ratio of temporary is different from the ratio of non-regular employee. 14

16 Source: Statistic Bureau Ministry of Public Management, Home Affairs, Posts and Telecommunications, Japan, 2002 Annual Report on the Labor Force Survey. Temporary employee includes daily employee and temporarily employed for causal job. Figure 9 shows the sharp contrast between the movements in the growth rate of non-temporary employees and that of temporary employees. Since 1998, the growth rate of non-temporary worker is negative, but that of temporarily employed daily is positive. This implies that Japanese firms are substituting non-temporary workers by temporarily employed workers since From labor statistics, it is not easy to distinguish whether non-temporary employee (means the employee with long period of service) is regular employee or non-regular employee precisely. Thus, we analyze this issue by using micro data in 15

17 which whether the employee is regular or non-regular is clearly distinguished. The micro data is complied by the association of labor unions in the distribution industry. The period of data is from 1975 to To provide a reference to this micro data, we summarize the figures of the data of 2001 general survey on part-time worker compiled by the ministry of welfare and labor. According to the survey, the ratio of part-time employment in the total employment is 26%, and the difference among firm sizes is around 2%. Figure 9 shows the part-time ratios by industries, and we find that the part- time ratio in wholesale/ retail/restaurant is the highest (48%). This survey asks the reasons for employing part-time worker, and the survey result shows that 65.3% of enterprise answers that the main reason is to decrease labor cost, 39.2% employs the part-time worker to cope with the busiest time in a day, and 31.4% employs the part-time worker for manual job White Paper on Labor shows that wage gap between full-time worker and part-time worker expanded from 39.0 to 36.9 (relative wage per hour when full-time is set to 100), and inequality of treatment between full-time worker and part-time worker is worsening. Source: Statistic Bureau Ministry of Public Management, Home Affairs, Posts and Telecommunications, Japan, 2001 General Survey of Part-time Workers Condition. 16

18 3.2 The part-time employment and labor market This subsection analyzes how the labor market conditions affect the part-time employment by using the micro data of the distribution industry General Survey on Labor Condition and macro data on consumption expenditure and labor market conditions. Figure 11 shows the relation between profit rate and the wage gap ratio in per hour total wage payments (including bonus, allowances) between regular full-time employee and part-time employee. To make the comparison clear, we fix some attributes, i.e., the age is fixed at 35, school career is high school graduate, and sex is female. From this figure, we cannot find any systematic relations between the profit rate and wage gap. From the micro date used in this study, it is shown that the variation of wage rate for part-time employee is quite small. That is, the difference in wage gap is the difference in the wage rate of regular full-time employees. Thus, it is reasonable that the relatively more profitable firms pays relatively higher wage. On the other hand, relatively higher wage increases labor cost and depresses profit. These opposite effects are reasons for the un-systematic relation. The next step is to analyze the factors that change the part-time employment ratio. Figure 12-a and Figure 12-b show the distribution of part-time ratio in total number of employments for department stores and super-markets. From these figures, we can observe the following facts. 1) The ratio of part-time employee is higher in super-markets than that in the department stores. 2) The maximum part-time ratio in super-markets is more than 85%, and that in department stores is less than 50%. 3) The distributions of both super-markets and department stores shift rightward in time series. 17

19 Especially, the changes from 1975 to 1980 and from 1995 to 2000 are prominent. To capture the time series changes in the distribution more clearly, we show the changes in cumulative distributions of department stores and super-markets in Figures 13-a and 13-b. From these figures, we observe the following facts. 1) The drastic increase in part-time ratio occurred during 1990s in department stores, while it occurred from 1985 to 1995 in super-markets. 2) The increase in the ratio of part-time 18

20 employment in super-markets is more prominent than that of the department stores. The increase in the ratio, however, stops after 1995 even in super-markets. This implies that the ratio of the part-time employment is reaching to the limit, and employers are getting aware of the risks of the negative effect on business of further increase in the ratio. Figure 14 shows the time series changes in the average age of part-time employees for both super-markets and department stores. In this figure, it is observed that the average age of part-time employees is increasing in trend for both 19

21 super-markets and department stores, but it began to decrease after 1995 (1998) in department stores (department stores), respectively. The average age of part-time employees in department stores is slightly higher than that in super-markets, but the difference is not large. The change in the average age of part-time employee is caused from the change in the length of service. A time series change in the length of service shown in Figure 15 is similar to the change in the average age shown in Figure 14. It is observed that the length of service in super-markets didn t increase since the midst of 1980 while that in the department stores continued to increase steadily until Currently, the length of service in department stores is longer than that in super-markets. 20

22 Figure 16 shows a time series change in the average ratio of part-time employee in the total employments. It is clearly shown that the ratio in super-markets sharply increased since the beginning of 1990s and it reached at around 55% in 2000 while it is still 20% in department stores as of In the next subsection, we examine how the macro economic factors such as labor market conditions affect the average ratio of part-time employee. 21

23 3.3 Macro economic factors that affect the ratio of part-time employee In this subsection, we regress the time series change in the average part-time ratio shown in Figure 16 on macro economic factors. Explained variables are the ratio of part-time employments in the total employments for both super-markets and department stores. Explanatory variables are the effective competitiveness of job-offer (RJOB), real wage rate (RWAGE), work force population, and real private consumption expenditure (RCONSUM). Table 1 shows the result for department stores, and Table 2 shows the result of super-markets. From these two tables, it is shown that the ratio of part-time employment of department stores is not affected by macro variables, while that of super-markets is affected by macro variables. Super-markets decrease the ratio of part-time employment during the period when labor market is tight and effective competitiveness of job-offer is high and real wage rate increases. One interpretation for this result is that labor supply as an involuntary part-time worker decreases in this situation, and super-markets have to substitute part-time employments by full-time regular employments, while workers who wish to work in department stores work as a part-time worker voluntarily. It is open question why the job for part-time workers is more attractive in department stores than in super-markets. One hypothesis is that the job in department-stores is less manual or effective for skill formation. To examine this hypothesis, we need to collect detailed information through interview study. Positive effect of real consumption expenditure on the ratio of part-time employment in super-markets is interpreted as an increase in demand for part-time worker caused from the increase in demand for super-markets. In department stores, firms may increase demand for regular worker when the demand for the department stores increases. 22

24 Table 1. Regression result for department stores Dependent Variable: RATIO Method: Least Squares Sample: Weighting series: NUMEMP White Heteroskedasticity-Consistent Standard Errors & Covariance Variable CoefficientStd. Errort-Statistic Prob. C RJOB RWAGE WFORCE RCONSUM Weighted Statistics R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Akaike info criteri Sum squared resid Schwarz criterion Log likelihood F-statistic Durbin-Watson stat Prob(F-statistic)

25 Table 2. Regression result for super-market stores Dependent Variable: RATIO Method: Least Squares Sample: Weighting series: NUMEMP White Heteroskedasticity-Consistent Standard Errors & Covariance Variable CoefficientStd. Errort-Statistic Prob. C RJOB RWAGE WFORCE RCONSUM Weighted Statistics R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Akaike info criteri Sum squared resid Schwarz criterion Log likelihood F-statistic Durbin-Watson stat Prob(F-statistic) Effects of employing part-time workers on profits and labor cost: Panel analysis In this subsection, we examine the effect of employing part-time workers on profits and labor cost by mixing the panel data mentioned above and Nikkei financial data. Nikkei financial data includes firm s profit rate and labor cost. Econometric analysis on panel data is executed by Eviews 4. First, we examine effect of part-time employment on firm s profit. Table 3.1 shows the panel estimation result of the case where variance of error term is weighted for each cross section data and constant term is common for each cross section data. This is the case of GLS estimation. Table 2 shows the panel estimation result of the 24

26 random effect model. Whether the fixed effect model is more appropriate than the random effect model is tested by the Wu-Hauseman test. When we set null-hypothesis as the fixed effect model is appropriate, test statistics is 1.26 and p-value is 0. Thus, the random effect model is accepted. From tables 3.1 and 3.2, it is shown that part-time ratio has a significantly negative sign on the profit rate for both cases. This implies that an increase in the ratio of part-time employees does not contribute to increase profits, or decrease profits. This result seems to be reasonable when we consider the following case. By increasing the ratio of part-time employments, R&D capacity decreases or quality of service decreases, and competitiveness decreases. In other word, the strategy of increasing competitiveness through cost reduction and price reduction may lead to vicious cycle. When the quality of service and attraction, only the method of increasing competitiveness is to decrease costs and decrease price by substituting regular employees by part-time employees. This substitution leads to the over-load of regular employees and decreases the capacity of R&D or deteriorates human capital of regular employees. Through this process, competitiveness of the firm decreases, and profit rate decreases. This story is consistent with the results of interview study on part-time employment by Sato (1999) and Sano (2000). Sato concludes that an increase in the ratio of part-time employee increases amount of job and widens a range of job, and deteriorates the human capital development of regular employees. Sano makes the difference clear in the scope of job between regular employees and part-time employees in department stores. He concludes that rigid discrimination of the scope of job between part-time employees and regular employees increases the load of regular employees mainly in the area where the ratio of part-time employments is high. We can observe several cases those are consistent with above story in the panel data used in this panel study. For example, super-market K in Kasai area has been achieving relatively high profit rate for long years. Even in 90s, the profit rates were 4 or 5%. The ratio of part-time employment is relatively low compared to the other super-market, and the wage rate is around 20% higher than the average wage rate. This case implies that producing high quality service by using regular employees with high incentive increases competitiveness, and increases profit rate. 25

27 Table 3.1 Panel Analysis on profit and part ratio: common case Dependent Variable: PROFIT? Method: GLS (Cross Section Weights) Date: 10/31/03 Time: 16:46 Sample: Included observations: 24 Number of cross-sections used: 19 Total panel (unbalanced) observations: 184 One-step weighting matrix Cross sections without valid observations dropped Variable CoefficientStd. Errort-Statistic Prob. C TYPEDUM? NUMEMP? E AGE? TENURE? RATIO? Weighted Statistics R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Log likelihood F-statistic Durbin-Watson stat Prob(F-statistic)

28 Table 3.2 Panel Analysis on profit and part ratio: Random effect case Dependent Variable: PROFIT? Method: GLS (Variance Components) Sample: Included observations: 24 Number of cross-sections used: 19 Total panel (unbalanced) observations: 184 Cross sections without valid observations dropped Variable CoefficientStd. Errort-Statistic Prob. C NUMEMP? AGE? TENURE? RATIO? Random Effects _I--C _MT--C _MZ--C _MR--C _ME--C _KI--C _SO--C _DA--C _SA--C _HA--C _IW--C _JY--C _SE--C _TO--C _YU--C _IZ--C _LI--C _TE--C _YN--C GLS Transformed Regression R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat

29 In the above analysis, it is not easy to identify the causality direction. It is possible that the decrease in profit forces the company to increase the part-time workers ratio. To distinguish the causality direction, we execute panel estimation by lagged variable of part-time ratio. Table 3-3 and Table 3-4 gives the results of the cross section estimation and the panel estimation. In both case, the lagged variable of part-ratio has significantly negative effect. The result of panel analysis shows that an increase in part-ratio decreases profit rate even after controlling the individualistic effect. It is noteworthy that the absolute value of the coefficient of the lagged variable is larger and p-value is smaller than those of the non-lagged variable estimated in Table 3-1 and 3-2 both in cross section estimation and panel estimation. These results suggest that it is more plausible to state that an increase in part-ratio decrease profit rate, rather than the statement that a decrease in profit rate increases part-ratio. 28

30 Table 3-3 Lagged variable of part-time workers ratio: common coefficient case Dependent Variable: PROFIT? Method: GLS (Cross Section Weights) Sample: Included observations: 23 Number of cross-sections used: 18 Total panel (unbalanced) observations: 152 One-step weighting matrix Cross sections without valid observations dropped Variable CoefficientStd. Errort-Statistic Prob. C TYPEDUM? NUMEMP? AGE? TENURE? LAGRATIO? Weighted Statistics R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Log likelihood F-statistic Durbin-Watson stat Prob(F-statistic) Unweighted Statistics R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat

31 Table 3-4 Lagged variable of part-time workers ratio: Random effect case Dependent Variable: PROFIT? Method: GLS (Variance Components) Sample: Included observations: 23 Number of cross-sections used: 18 Total panel (unbalanced) observations: 152 Cross sections without valid observations dropped Variable CoefficientStd. Errort-Statistic Prob. C NUMEMP? AGE? TENURE? LAGRATIO? Random Effects _I--C _MT--C _MZ--C _MR--C _ME--C _KI--C _SO--C _DA--C _SA--C _HA--C _IW--C _JY--C _SE--C _TO--C _YU--C _LI--C _TE--C _YN--C GLS Transformed Regression R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat Unweighted Statistics including Random Effects R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat

32 Next, we examine the effect of increasing the ratio of part-time employment on labor cost ratio. Table 3.5 shows the cross section regression result by using GLS method. By Wu-Hauseman test, we select random effect model for panel analysis, and Table 3.6 gives the result of this model. It is shown that the effect of increasing the ratio of part-time employment on the ratio of labor cost is significantly negative. This result is consistent with the purpose of employing part-time workers. The negative sign of the number of employments implies that there is an economy of scale. The positive sign of department dummy in cross section model implies that the labor cost is higher in department stores. Table 3.5 Panel Analysis on labor cost and part ratio: common effect case Dependent Variable: LABCOST? Method: GLS (Cross Section Weights) Sample: Included observations: 24 Number of cross-sections used: 19 Total panel (unbalanced) observations: 184 One-step weighting matrix Cross sections without valid observations dropped Variable CoefficientStd. Errort-Statistic Prob. C TYPEDUM? NUMEMP? -9.95E E AGE? TENURE? RATIO? Weighted Statistics R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Log likelihood F-statistic Durbin-Watson stat Prob(F-statistic)

33 Table 3.6 Panel Analysis on labor cost and part ratio: random effect case Dependent Variable: LABCOST? Method: GLS (Variance Components) Sample: Included observations: 24 Number of cross-sections used: 19 Total panel (unbalanced) observations: 184 Cross sections without valid observations dropped Variable CoefficientStd. Errort-Statistic Prob. C NUMEMP? -7.85E E AGE? TENURE? RATIO? Random Effects _IS--C _MT--C _MZ--C _MR--C _ME--C _KI--C _SO--C _DA--C _SA--C _HA--C _IW--C _JY--C _SE--C _TO--C _YU--C _IZ--C _LI--C _TE--C _YN--C GLS Transformed Regression R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat

34 Finally, we examine the effect of increasing the ratio of part-time employments on the ordinary profits per employee. Since the original data of profit per employ is the profit per regular worker, we generate the data of profit per total employee by multiplying the original data and (1--part-ratio). Table 3.7 gives the result of cross section analysis by using GLS, and Table 3.8 gives the result of panel analysis by using random effect model. Random effect model is selected by Wu-Hauseman test. In cross section model, the ratio of part-time employments has significantly negative effect on profits per employee. In random effect model, the ratio of part-time employments has also significantly negative effect (p=0.00) on profits per employee, and shows that an increase in part-ratio decreases profit even after controlling the individualistic effect. These results imply that an increase in the ratio of part-time employments has negative effect on profits per employee. 33

35 Table 3.7 Panel Analysis on profit per employee and lagged variable of part ratio: Common case Dependent Variable: EMPPROD? Method: GLS (Cross Section Weights) Sample: Included observations: 24 Number of cross-sections used: 19 Total panel (unbalanced) observations: 183 One-step weighting matrix Cross sections without valid observations dropped Variable CoefficientStd. Errort-Statistic Prob. C TYPEDUM? NUMEMP? AGE? TENURE? RATIO? Weighted Statistics R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Log likelihood F-statistic Durbin-Watson stat Prob(F-statistic) Unweighted Statistics R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat

36 Table 3.8 Panel Analysis on profit per employee and lagged variable of part ratio: random effect case Dependent Variable: EMPPROD? Method: GLS (Variance Components) Sample: Included observations: 24 Number of cross-sections used: 19 Total panel (unbalanced) observations: 183 Cross sections without valid observations dropped Variable CoefficientStd. Errort-Statistic Prob. C NUMEMP? AGE? TENURE? RATIO? Random Effects _I--C _MA--C _MZ--C _MA--C _ME--C _KI--C _SO--C _DA--C _SA--C _HA--C _IW--C _JY--C _SE--C _TO--C _YU--C _IZ--C _LI--C _TE--C _YU--C GLS Transformed Regression R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat Unweighted Statistics including Random Effects R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat