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A Job Half-Done for Japan's Working Women

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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Abenomics -- Japanese Prime Minister Shinzo Abe's economic revitalization program -- has been taking a beating in the media lately. This is result of Japan's recent run of disappointing growth figures, even if this is mostly just the spillover from a slowing China. More generally, Abe is suffering at the polls because of political issues, mostly related to his attempts to allow a more assertive posture for the country's military. But these struggles have obscured a big shift in the country's economic and social fabric that will be transformative in the long run: Record numbers of Japanese women are going to work. 

For decades, Japan stood out as one of the only rich countries that kept a substantial number of its women -- including highly educated, talented women -- in the home instead of allowing them to work. That has changed dramatically. After hitting a low in 1975, Japanese working-age female labor force participation has been rising, and has surged to all-time highs since Abe took office:

But women are not displacing men. In fact, by the headline numbers, Japan's labor market is looking remarkably robust. The overall Japanese labor market remains extremely tight -- there are more than 1.19 job openings per applicant, the highest rate in more than two decades. 

Call this one a win for Abenomics. But the real hero in this story is Kathy Matsui of Goldman Sachs. Although Matsui is an investment banker -- she is Goldman's chief equity strategist for Japan, among other titles -- she has made history as a tireless advocate for change in Japan's policies toward women. Again and again, Matsui has hammered home a single point: Closing Japan's gender gap will boost growth. In 2014, Matsui estimated that raising female labor force participation to the same level as male participation would boost Japan's gross domestic product by an impressive 13 percent. 

At least a portion of Matsui's wish is coming true. Women are going to work en masse. This is no doubt in part thanks to the tight labor market, and to Japan's rapid aging. It is also probably due to Abe's aggressive program of government-supported child care (something the U.S. should think about copying). 

But I wouldn't be surprised if some of it were simply a shift in cultural norms. Rhetoric is powerful, especially in Japan where -- due to the relative lack of organized religions, racial minorities and powerful unions -- the government is the primary source of ideas and opinions. Abe has repeatedly emphasized the idea that women have a vital role in the workplace. 

That kind of moral suasion has real power in a country that has never had a robust feminist movement. Ten years ago, when I lived in Japan, I was astonished to hear female students at top universities tell me that their ambition in life was to be a housewife. When I told them that highly educated foreign women often aspire to a career, the typical response was that foreign women simply did things differently. With no feminist movement to challenge traditional gender roles, Japan was stuck with a tradition that held it back economically. So I suspect that by declaring that tradition to be a thing of the past, Abe is having a bigger effect than skeptics realize. 

But that doesn't mean the work is done -- far from it. Women may be flooding into the Japanese workplace, but they are falling victim to the country's dreaded two-tiered labor market. This is the system where some college graduates are funneled into secure, well-paying jobs with good benefits, while others are shunted into low-paying, low-benefit jobs without the promise of promotion. Once you get on the lower track, it is nearly impossible to switch to the upper track. 

The problem is that women, though they are going to work, are mostly getting dead-end jobs. More than two-thirds of female labor force entrants, in fact, are climbing onto this slow track, meaning that they are destined to be second-class economic citizens for the rest of their working lives. Meanwhile, male entrants are given fast-track jobs at a much higher rate. 

So Japan's labor system has evolved into a sort of caste system, with a mostly-female lower level and a mostly-male upper strata. In some sense, this is progress, because women are no longer confined to the home, and now that they are in the workforce, women will undoubtedly demand better jobs. 

But the sclerotic nature of this two-tiered Japanese labor market is a huge and continuing drag and it should be next on Abe's hit list. Gender equality demands it, but so does the economic health of the nation, since the impossibility of advancing from the lower track to the upper track amounts to an enormous misallocation of talent and skill. 

Destroying the two-tiered labor system, therefore, should be the next big priority for Abe's structural reforms.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Noah Smith at nsmith150@bloomberg.net

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net