[Special Feature: Confronting the Gender Gap] Employment Disparities Between Men and Women as Seen in the Gender Gap Index

2020/04/06

In the "Gender Gap Index" released by the World Economic Forum in December 2019, Japan was ranked 121st out of 153 countries. In this article, while focusing on indicators in the economic field related to work styles within the Gender Gap Index, I will describe the challenges of the Japanese labor market and consider how they should be addressed.

The Gender Gap Index is a ranking created by the World Economic Forum that quantifies the disparities between men and women in each country. It calculates gender differences across a total of 14 indicators in four fields: economy, education, health, and politics, where 0 represents complete inequality and 1 represents complete equality. The economic field consists of the following five indicators, with Japan's ranking shown in parentheses.

I. Economic Participation and Opportunity (115th)... Labor force participation rate (79th), Wage equality for similar work (67th), Estimated earned income (108th), Ratio of women in managerial positions (131st), Ratio of women in professional and technical positions (110th)

Incidentally, "II. Educational Attainment" is 91st, "III. Health and Survival" is 40th, and "IV. Political Empowerment" is 144th; Japan's rankings in the political and economic fields are low. The areas where the gender gap was particularly large were cabinet ministers (139th), members of parliament (135th), and the ratio of women in managerial positions.

The goal of "expecting the proportion of women in leadership positions in all fields of society to be at least approximately 30% by 2020" was already set by the Headquarters for the Promotion of Gender Equality in 2003, and was approved by the Cabinet in the Second Basic Plan for Gender Equality in December 2005. However, unfortunately, progress has been slow, and it is confirmed that the proportion of women in leadership positions remains low today.

Here, let's compare the Gender Gap Index in the economic field between major countries and Japan (Figure 1). We will look at four countries—the United States, the United Kingdom, Germany, and France—along with Iceland, which ranked first in this index, and Sweden, which often attracts attention regarding its labor market and social security.

Due to space limitations, I will only address the three main indicators. First, looking at the gender gap in the labor force participation rate, Japan's score is 0.814, the lowest among the seven countries. According to the data before conversion into a score, the labor force participation rate [= (employed + unemployed) / population aged 15–64] is 69.8% for women and 85.8% for men, and the score is obtained by 69.8 / 85.8.

The graph of the labor force participation rate by age group for Japanese women used to have an M-shaped curve that dipped at marriage and childbearing ages. However, due to an increase in women continuing to work before and after childbirth, as well as the declining birthrate and the diversification of childbearing timing, this dip has gradually been smoothed out. Nevertheless, the gender gap in Japan remains quite large. In contrast, the gender gap in Iceland and Sweden has almost disappeared.

The second is an indicator regarding the gender wage gap. In the Gender Gap Index, this is not an indicator that directly measures the wage gap between men and women, but is based on responses to the World Economic Forum's "Executive Opinion Survey" regarding "In your country, for similar work, to what extent is the wage for women equal to that for men?" (on a 7-point scale from "1 = not at all equal to men's wages" to "7 = completely equal to men's wages").

For example, Japan's score of 0.672 is calculated by dividing the average value of this evaluation, 4.71, by 7 to index it. Here too, Iceland, ranked 1st, has a high score of 0.846. On the other hand, the lowest is France at 127th, with a harsh evaluation of 0.528.

Incidentally, according to the OECD, the gender wage gap in median earnings for full-time workers was 13.0 in France (2015), which is larger than Sweden's 7.3 (2017), but slightly smaller than the UK's 16.4 (2018) and Germany's 16.2 (2017), and far smaller than Japan's 24.5 (2017). In the Gender Gap Index, "opinion surveys" are used instead of data from the OECD or others that directly measure the gender wage gap, partly because of the large number of countries surveyed. It is worth keeping this point in mind.

Regarding the third indicator, the ratio of managers, Japan's score is 0.174, and the ratio of women in managerial positions (hereinafter "female manager ratio") is low at 14.8%. Iceland, the highest among the seven countries, is 0.708, with a female manager ratio of 41.5%. Furthermore, in the Philippines, which ranks 1st in this indicator, the female manager ratio is 52.7%, meaning there are more women than men in managerial positions.

In Japan, 35 years ago in 1985, the Equal Employment Opportunity Act was enacted (taking effect the following year) in preparation for the ratification of the UN Convention on the Elimination of All Forms of Discrimination against Women. Following subsequent amendments, the law now comprehensively prohibits discrimination based on gender at every stage of employment management. Additionally, regarding support for balancing work and childcare, systems such as childcare leave and childcare services have gradually been enhanced, and women's participation in the labor market has progressed. However, international comparisons such as the Gender Gap Index show that a large gender employment gap remains in Japan.

Based on this situation, the Act on Promotion of Women's Participation and Advancement in the Workplace was enacted in 2015. Under this law, the national government, local governments, and companies with 301 or more employees were mandated to formulate action plans and disclose information for the promotion of women's advancement, based on an understanding of the situation and analysis of challenges regarding women's participation. Following a review three years after its enforcement, an amended law was enacted in 2019, which includes strengthening information disclosure and expanding the obligation to formulate action plans to companies with 101 or more employees; this will take effect in June of this year (the part regarding the expansion of target companies will take effect in April 2022).

The background to the enactment of this law was an awareness of the low female manager ratio in Japan. At the same time, since a major cause of the gender wage gap in Japan is the small number of female managers, increasing the number of women in managerial positions is also expected to contribute to narrowing the wage gap. Next, let's examine the issues to be addressed while considering the reasons why the female manager ratio in Japan is low.

Figure 2 shows the relationship between the ratio of female managers (section manager level + department manager level) and the ratio of female employees (the ratio of women to all employees) by industry. From this figure, it can be observed that there are large differences in the female manager ratio by industry, and there is a positive correlation where industries with a higher female employee ratio also have a higher female manager ratio.

In other words, if we want to increase female managers, it is suggested that we need to work not only on the appointment of women to managerial positions but also on recruitment and retention (continuous employment). It will be necessary to strive to improve a wide range of workplace environments, including recruitment, support for balancing work with childcare and nursing care, correction of long working hours, workplace culture, and placement, development, education/training, and evaluation/promotion.

Around the time the Equal Employment Opportunity Act was enforced, a system was introduced and became widespread, mainly among large companies, where tracks such as "career track" (sogo-shoku) and "general track" (ippan-shoku) were established, and different employment management was conducted for each track from the time of recruitment. Consequently, men have become more numerous in the career track, which trains candidates for managerial positions, while women have become more numerous in the general track, which involves routine tasks. Because of this, fewer women gain the opportunities for training and promotion necessary to become managers in the future.

According to the Ministry of Health, Labour and Welfare's "Basic Survey on Gender Equality in Employment Management" (2017), the percentage of companies with a track-based employment management system is not very high at 11.2% among companies with 30 or more employees, but it reaches 52.8% for companies with 5,000 or more employees. By industry, the percentage of companies that have introduced it is high in "Finance and Insurance." Looking at Figure 2, "Finance and Insurance" is located below the trend line, and the female manager ratio is considerably low compared to the high female employee ratio. The difference in treatment due to this track system is one of the background factors.

When people talk about the promotion of women's advancement, attention tends to focus on the manager ratio, but more than half of female employees in Japan are non-regular workers.

Figure 3 shows the ratio of non-regular workers among employees (hereinafter "non-regular employment ratio") by age group. For men, it is high in the younger and older age groups and low in the middle-aged group. On the other hand, for women, it increases with age. I have called this graph the "stomach shape." According to the Ministry of Internal Affairs and Communications' "Labour Force Survey" (2018), 56.1% of female employees are in non-regular employment, compared to 22.2% for men.

This graph is quite unique compared to Western countries. In the West, the shape for women is close to that of Japanese men, and the non-regular employment ratio after middle age is low. In fact, there is not much gender difference in non-regular employment ratios in the West. For example, in the United States, where the non-regular employment ratio (all ages) is low, it was 4.1% for men and 3.8% for women (2017), and in Spain, where this ratio is high, it was 26.0% for men and 27.7% for women (2018) (OECD survey).

The high non-regular employment ratio for Japanese women can be said to be quite characteristic, but in Japan, it seems that people do not find it particularly strange even if women are non-regular. Incidentally, in November 2015, when the Ministry of Health, Labour and Welfare announced that the non-regular employment ratio had reached 40%, the media covered it extensively. However, in 2003, when the non-regular employment ratio for women exceeded 50% (Ministry of Internal Affairs and Communications' "Labour Force Survey"), it received almost no attention.

Why do these characteristics regarding non-regular employment arise in Japan? One reason is the particularity of part-time labor in Japan. In Japan, the term "part-time worker" generally refers to non-regular workers whose wages and other working conditions are inferior to those of regular workers. In contrast, the English word "part-time," which is the origin, only means that working hours are short—more accurately, legal frameworks have been developed in the West to ensure that "part-time" carries no meaning other than "short working hours."

In EU countries as well, since the 1980s, ways of working other than full-time regular employment (atypical employment) began to increase. Therefore, to avoid the spread of low-wage labor, the EU established the Part-Time Work Directive in 1997, the Fixed-Term Work Directive in 1999, and the Temporary Agency Work Directive in 2008. Following these, each country has proceeded with legal developments toward ensuring "equal treatment" between typical and atypical employment, and the treatment of atypical employment has been improved through such efforts.

On the other hand, in Japan, there are few high-quality short-time employment opportunities. When a woman marries and leaves her job after childbirth, her next job is often non-regular employment; therefore, in the event of a divorce, it leads to child poverty. Most poverty issues in Japan can be traced back to the single mother problem, but it can be said that the fundamental cause lies in the Japanese labor market, where only non-regular employment opportunities are prepared for women re-entering the workforce. Furthermore, people who anticipate such risks hesitate to marry or have children. This is one of the reasons why there is a strong demand for a review of the high non-regular employment ratio for women and the exemptions in employee insurance that encourage it, when considering the future of this country.

Regarding the improvement of treatment for non-regular workers, the 2007 amendment to the Part-Time Employment Act introduced obligations for equal/balanced treatment and selective measures to promote conversion to ordinary workers. Subsequently, after the financial crisis in the fall of 2008, several legal amendments were made, such as the 2012 amendment to the Labor Contract Act, which established a mechanism for fixed-term contract workers to convert to open-ended labor contracts after five years, and the treatment of non-regular workers has improved.

Then, as an extension of these efforts, the Work Style Reform Related Act was enacted in June 2018. Based on this law, so-called "equal pay for equal work" will be introduced starting this April. Note that the Ministry of Health, Labour and Welfare explains that "the introduction of equal pay for equal work aims to eliminate unreasonable disparities in treatment between so-called regular employment workers and non-regular employment workers within the same company or organization," and it is not equal pay for equal work in the international standard sense. The Japanese version of "equal pay for equal work" will not fundamentally change the Japanese labor market, and it is not expected that the problems of non-regular employment will be solved all at once.

As mentioned earlier, the gender gap in Japan is prominent in the political and economic fields, and in particular, the gender difference in the ratio of cabinet ministers, members of parliament, and managers was large. Among these, the female manager ratio correlates with the female employee ratio. If we want to increase female managers, it is surely important not only to focus on the appointment of women to managerial positions but also to create an environment where all female workers can demonstrate their abilities.

Furthermore, in the Japanese labor market, the flexibility of working styles for regular employees is low, and there are few high-quality short-time employment opportunities. For this reason, if one cannot work full-time (often with overtime), the only option is often non-regular employment, which has inferior treatment compared to regular employees. The fact that more than half of female employees work as non-regular workers is extremely characteristic compared to other developed countries.

It is unclear to what extent there is a relationship between solving these fundamental problems and the gender difference in the ratio of cabinet ministers, members of parliament, and managers. As a policy, while improving the Gender Gap Index is important, I would also like to see efforts to address the deep-rooted problems facing the Japanese labor market.