Japan Battles an Unfamiliar Foe: Unemployment : Even Traditionally Strong Steel Sector Caught in Tow of Giant Wave of Cutbacks

Japan, which takes pride in having the lowest level of unemployment in the industrialized world, is bracing for a spurt in joblessness.

Unemployment in October was only 2.8% of the work force, a tenth of a percentage point below the record high rate set last December, but Prime Minister Yasuhiro Nakasone has ordered creation of a special office to promote employment.

Among the trouble signs:

- More than 10,000 workers in the coal mining industry are expected to be put out of work in the next five years because of a government decision to reduce coal production by 40%.

- Since last January, Japan’s seven major shipbuilding firms have been retrenching; more than 14,000 jobs have been eliminated.

- Nonferrous metals companies and textile manufacturers are closing plants, throwing more people out of work.

- Shipping firms say they will trim their work forces by 10,000 during the next few years.

- Even steel, the mainstay of Japan’s postwar economic boom, has fallen on relatively hard times. In the past year, the steel industry has quietly reduced its work force by more than 4%, eliminating 15,463 jobs. For the most part, according to the Japan Iron & Steel Federation, this has been accomplished by not replacing people who have retired. The steel industry now employs about 350,000 people.

Also, in the first such cases since World War II, three steel firms have begun reducing workers’ time on the job. On Dec. 1, New Japan Steel, the world’s largest steel firm, announced cutbacks at seven of its 10 mills, affecting 12,100 workers, and said it will extend the action to the other three mills early next year. As a result, every worker is expected to lose about two days’ work a month.

Others Follow Suit

On the same day, Kobe Steel put a similar plan into operation at eight of its plants, affecting 5,900 workers, and Kawasaki Steel did the same thing at one of its plants, affecting 2,000 workers. (Labor laws provide for the government to make up two-thirds of the pay of furloughed workers.)

New Japan Steel is also studying plans to reduce its 65,000-member work force, and Kobe Steel, Kawasaki Steel, Sumitomo Metals and Nihon Seikojo, a major steel processing firm, have already announced that they will cut their payrolls by more than 15,000 workers in the next two or three years.

Nomura Research Institute forecast recently that Japanese steel firms may be forced to lay off as many as 100,000 workers by 1990 to maintain their competitive position in the world. The institute foresees a 15% decline in steel production in the next four years as a result of the appreciation of Japan’s currency (more than 50% in the past 15 months), a development that has sharply reduced the attractiveness of Japanese exports overseas.

In addition, the breakup and privatization of the Japan National Railways next April 1 will make an additional 61,000 workers redundant. About 20,000 are expected to retire voluntarily, and the remainder will be carried on the payroll of a special government corporation for three years. During that time the government has promised to find new jobs--in either the private or public sector--for them.

Despite widespread agreement that unemployment will increase, there are no signs that it will approach European or American levels.

Shift to Service Sector

During the past year, service industries have provided enough new jobs to absorb all but 20,000 of the 230,000 people thrown out of work in manufacturing, leaving 1.61 million unemployed in October. This compares to 1.41 million a year earlier. In the same period, the number of people employed rose by 490,000.

Corporations here have refrained from cutting payrolls in direct ratio to rises in labor costs. The Sanwa Research Institute said on Nov. 26 that labor costs now account for 14.9% of the sale price of manufactured products, compared to 13.5% last year. The increase imposed a burden of about 4 trillion yen (about $25 billion) in extra costs to employers--the equivalent of the pay of 870,000 workers.

If manufacturing firms had dismissed that many workers to hold labor costs at last year’s level, the unemployment rate would have risen to 4.2%, with 2.6 million people out of work, the institute said.

For the long term, the institute forecasts that unemployment in manufacturing will increase as Japanese firms transfer production overseas to counter the rise in the value of the currency.

The institute pointed out that universal adoption of the five-day workweek would have the effect of creating as many as 3.8 million new jobs. But, at the end of last year, only about 50% of the workers in large firms--those with 1,000 or more employees--were getting two days off every week. In firms with fewer than 100 employees the percentage was only 3.2%, according to the Labor Ministry.

And now, growing sluggishness in the economy has all but halted the spread of the five-day workweek.

Many Were Dismissed

Most ominous in the October report on unemployment was the disclosure by the Management and Coordination Agency that 490,000 people, 30% of the unemployed, had been dismissed, even though nearly all companies describe payroll retrenchments as “voluntary retirements.”

Some firms have started requiring all employees age 45 and older to fill out forms describing what other kind of company they might like to work for. Also, “shoulder-tapping,” or suggesting that a worker volunteer to quit, is said to be on the rise.

“Once selected for shoulder-tapping, you’ve got until the third session with your boss to accept his offer to help you find a new job,” an executive with a firm cutting its management staff said the other day. “Then, you’re out on your own.”