Economic Analysis Series No.202THE ECONOMIC ANALYSIS

June, 2021
(Editorial)
Final Reports of Working-Group for the Sustainability of Security of the People and Related System after 2025 in Japan.
Special Editor Shinji YAMASHIGE
(Articles)
Part 1: Strengthening Healthcare and Long-Term Care Sector
Considerations Regarding Work System Reform in the Situation of Uneven Distribution of Doctors
Tai TAKAHASHI
Effects of Local Physician Concentrations on Physician Labor Supply and Career Trajectories: Evidence from Longitudinal Microdata in Japan
Yuji MIZUSHIMA, Haruko NOGUCHI, and Akira KAWAMURA
Aging and Wages of Long-term Care Workers: A Case Study of Japan, 2002-2017
Atsuhiro YAMADA and Kayoko ISHII
Population Aging and the Impact on Industrial Structure in Japan from a Multi-Sector OLG-CGE Model Perspective
Shin KIMURA
Part 2: Strengthening Families and Workforce
The Effects of Providing Childcare on Grandmothers’ Employment and Mental Health in Japan
Yuko UENO and Emiko USUI
An Analysis of the Labor Supply of Childcare Providers
Yukiko ASAI and Akiei JIBIKI
Households’ Responses to Childcare Fees: Childcare Usage and Parental Labor Supply
Taiyo FUKAI and Ayako KONDO
Endogenous Fertility and Social Security
Masaya YASUOKA
Foreign Workers, Skill Premium and Fiscal Sustainability in Japan
Sagiri KITAO and Tomoaki YAMADA
Part 3: International Perspective
Increasing the Sustainability of Long-term Care in an Ageing Society: Lessons from the Netherlands
Frederik T. SCHUT
A Cross-National Snapshot of Family Policy and Women’s Economic Participation
Willem ADEMA
Making Japanese Society More Resilient: To Improve Sustainability of Social Security in Japan
Shinji YAMASHIGE

(Abstract)

Considerations Regarding Work System Reform in the Situation of Uneven Distribution of Doctors

By Tai TAKAHASHI

The number of younger doctors who put thought into their work-life balance is rapidly increasing due to the new clinical training program that started in 2004. As a result of this condition being left unsolved for more than 15 years, the uneven distribution of doctors and clinical departments has progressed. This research aims to clarify how the uneven distribution of doctors has progressed and to consider the effect of the work system reform for doctors planned to start in 2024, based on the results.

This research reveals changes in the composition of doctor groups of the past 20 years and computes the transitions in the number of doctors by gender, age group, clinical department, place of work, type of workplace (hospital/clinic) using individual form data of the “Survey of Physicians, Dentists and Pharmacists” between 1996 and 2016 and processing data to cope with changes in names of clinical departments or district division.

As a result, three facts have been brought out. First, the total number of doctors increased 33% from 1996 to 2016, however, the number of doctors under 40 years-old did not increase and this is mainly due to the increase in the number of doctors over 50. Secondly, younger doctors in their 30s tend not to work in depopulated areas. Thirdly, it is remarkable that younger male doctors are not likely to choose surgical departments.

The work system reform planned to start in 2024 will have an influence in mostly surgical and emergency doctors, as well as late-stage doctors-in-training working at university hospitals or local base hospitals. As foreseeable conditions resulting from the above, firstly, there will be a significant decrease in the number of medical institutions that accept patients during night time. Secondly, there will be significant extension in the waiting time for surgeries and examinations for cancer and others. Paradoxically, in order to avoid this situation, it is necessary to improve the work system reform, enhance the productivity on-site through digital transformation of medical care or development of the team structure, and to rapidly carry out reforms such as concentration of clinical departments in local areas, especially for surgical or emergency departments.

JEL Classification Codes: I11, I14, I18
Keywords: uneven distribution of doctors, chronological analysis, work system reform

Effects of Local Physician Concentrations on Physician Labor Supply and Career Trajectories: Evidence from Longitudinal Microdata in Japan

By Yuji MIZUSHIMA, Haruko NOGUCHI, and Akira KAWAMURA

Incumbent physicians may choose to increase or decrease their labor supply when the concentration of local physicians increases depending on the relative magnitude of income and substitution effects. We study how physicians respond to competition under Japan’s mixed FFS and all-payer rate system. Our study suggests that physicians prefer to decrease their labor supply by reducing the number of specialties they practice, limiting career progression, or choosing a job responsibility that does not involve the practice of medicine when local concentrations of physicians increase. Such effects tend to be pronounced among internal medicine physicians residing in rural areas.

JEL Classification Codes: J01, J22, I11
Keywords: Physician labor supply, income effects, substitution effects, spatial competition, machine learning

Aging and Wages of Long-term Care Workers: A Case Study of Japan, 2002-2017

By Atsuhiro YAMADA and Kayoko ISHII

This study uses Japan’s Employment Status Survey, covering approximately one million people in each of four survey years from 2002 to 2017, to identify the basic characteristics of long-term care (LTC) workers, the reasons for leaving their job, labor mobility between other occupations and industries, and to determine the level of wages that would be adequate for LTC workers in each region of Japan.

There are four main findings. First, the proportion of male care workers has increased in the past 15 years, and reached 20% in 2017, which is the highest of the OECD member countries. The median length of tenure of LTC workers rose by about one year over every five years. However, the number of female care workers aged 60 and above increased 12-fold in the same period, and LTC workers are aging rapidly.

Second, the main reason for males leaving LTC is “low wages”; while for females it is “old age.” To replace aging and retiring female LTC workers, wages must be raised to promote male LTC labor supply and to reduce their turnover rate.

Third, many care workers move back and forth within the same industry, that is, “medical, health care and welfare.” However, “wholesale and retail trade,” “manufacturing,” and “accommodations, eating and drinking services” are the most common sectors sources and destinations of LTC workers, so they could be regarded as “competing industries” for LTC workers.

Finally, the more aged the prefecture, the higher the ratio of health and welfare industry workers, but the lower the wage rate overall. In particular, for men in less aged regions, the wages of care workers are noticeably low compared to those of other industries.

JEL Classification Codes: J31, J48, J62
Keywords: Long-term care insurance, Long-term care workers, LTC unit price premium, regional wage differences

Population Aging and the Impact on Industrial Structure in Japan from a Multi-Sector OLG-CGE Model Perspective

By Shin KIMURA

One of the major impacts of population aging is the increasing demand for medical and long-term care services. With respect to the anticipated increased demand for healthcare, how social security benefits and burdens are harmonized has become an important issue. In terms of industrial activity, the healthcare industry is labor intensive, and there is the possibility of labor force shortages. Will an increase in demand for medical and long-term care services due to the aging of society increase the social burden and lead to a decrease in gross domestic product, or will the growth of healthcare industries positively affect other industries and lead to economic growth? How will labor demand in medical and long-term care industries affect other industries? To address these research questions, this study developed a multi-sector dynamic computable general equilibrium model with overlapping generations (multi-sector OLG-CGE model) to produce quantitative estimates by simulation. The simulation results showed that the increasing demand for healthcare due to population aging led to slightly lower economic growth by increasing the social burden and fiscal deficits in the long run. From the perspective of sectoral analysis, healthcare and B to C manufacturing industries grew in the short term, while other industries experienced a negative impact in the long run.

JEL Classification Codes: C67, C68, D58, E17, H51, H55, H68, I15, J11, J20, O41
Keywords: Population Aging, Healthcare demand, Industrial structure, Dynamic CGE model

The Effects of Providing Childcare on Grandmothers’ Employment and Mental Health in Japan

By Yuko UENO and Emiko USUI

In this paper, we examine the relationship between childcare given by a grandmother and her employment and mental health, using the 2005-2009 waves of the Longitudinal Survey of Middle-Aged and Older Adults, a large and nationally representative panel survey of those aged 50-59 in 2005. We find that when a grandmother provides childcare to grandchildren under the age of 6, the probability of her being employed is reduced by 3.8 percentage points, after we control for time-invariant individual heterogeneity. For those working grandmothers, caring for small grandchildren reduces hours worked per week by just 0.79, and days per week by just 0.069, reductions that are small in magnitude. We also observe that caregiving for small grandchildren is insignificantly related to any psychological distress of grandmothers.

JEL Classification Codes: J22, J14
Keywords: Childcare, grandmother, employment, work hours, labor supply, mental health

An Analysis of the Labor Supply of Childcare Providers

By Yukiko ASAI and Akiei JIBIKI

Many countries report a shortage of licensed childcare providers. To address this issue, the Japanese government gradually increased subsidies for private childcare facilities beginning in 2013, intending for the subsidies to be passed on to workers’ wages. Key to the reforms was linking subsidies to the average experience of childcare providers at the facility. In this paper, we examine survey data of licensed childcare providers in Tokyo to study the impacts of the policy and the determinants of the labor supply of childcare providers. We first estimate the pass-through of subsidies to hourly wages and find a 7% increase in the hourly wage. We next examine the impact of this increase in wages on labor supply and find that the share of childcare providers intending to separate decreased by 5 percentage points from the initial level of 26%. Our results imply a large labor supply elasticity of 2.7 and suggest that the subsidies potentially reduced worker shortages through greater retention. We next explore the average reservation wages among those still intending to separate after the reforms in order to provide additional insights into how much wages would need to increase to induce more workers to remain in their jobs. Strikingly, we find that 90% of childcare workers’ reservation wage was higher than the market wage of childcare providers. Our results suggest that many more workers could be retained with modestly higher wages.

JEL Classification Codes: J8, J21
Keywords: Licensed Childcare Provider, Labor Supply, Wage, Subsidy

Households’ Responses to Childcare Fees: Childcare Usage and Parental Labor Supply

By Taiyo FUKAI and Ayako KONDO

We examine the response of households with preschool children to the fee of accredited childcare centers. Exploiting the fact that the fee is determined by a step function of the municipality resident tax, we identify the effects of the increased fee on the use of childcare centers and parental employment by the regression discontinuity design. After confirming the substantial jump in the childcare fee charged to the households, we show no discernible jump in the use of childcare centers or the fraction of mothers with positive pretax salary income.

JEL Classification Codes: J13, J22, H40
Keywords: Childcare demand; Childcare cost: Maternal labor supply

Endogenous Fertility and Social Security

By Masaya YASUOKA

Whether those of working age find employment depends on general economic conditions. Some will be unemployed, and it is impossible to forecast economic events perfectly. This uncertainty provides the motive for precautionary saving. Even if young households could afford to pay for childcare, they do not do so because of precautionary saving. Thus, policies to reduce precautionary saving are effective for raising expenditure on childcare. This paper develops an endogenous fertility model with uncertainty regarding future income in middle age and old age and examines how such uncertainty affects fertility. The results obtained in this study show that an increase in unemployment benefits can raise fertility in the model with uncertainty. No such result is derived in a model without uncertainty. In the model with uncertainty, income transfer policies have the same effect on fertility as child allowances. Moreover, this study shows that uncertainty with regard to labor income in old age also reduces fertility. Therefore, a decrease in uncertainty with regard to future income raises fertility.

JEL Classification Codes: J14, J13, J26
Keywords: Elderly labor, Fertility, Precautionary saving

Foreign Workers, Skill Premium and Fiscal Sustainability in Japan

By Sagiri KITAO and Tomoaki YAMADA

Japan faces rapid and severe demographic aging and rising fiscal deficits due to increasing expenditures and shrinking tax revenues. This paper studies how an inflow or an outflow of foreign workers affects projections of macroeconomic and fiscal variables. We show that foreign workers help slow down a decline in labor force and mitigate fiscal pressures, but effects are not large enough to wipe away concerns even under a very optimistic scenario. We also evaluate effects of foreign workers on skill-specific wages in Japan and welfare consequences across heterogeneous individuals. A rapid rise in the relative size of high-skilled labor force in Japan will give strong downward pressure on skill premium and an arrival of foreign workers is shown to have large differential effects on skill prices and the trend of wage inequality, depending on their size and skill composition.

JEL Classification Codes: H50, H60, J11
Keywords: Demographic aging, fiscal sustainability, foreign workers, wage inequality, skill premium

Increasing the sustainability of long-term care in an ageing society: Lessons from the Netherlands

By Frederik T. SCHUT

The provision and financing of affordable and high-quality long-term care (LTC) to a rapidly ageing population is a major challenge for many countries. This is particularly true for Japan, which is faced with the largest share of elderly people, and the Netherlands, which has the most comprehensive and expensive public LTC insurance scheme. This paper analyzes the challenges for a sustainable provision and financing of LTC in the Netherlands and discusses which strategies are employed to meet these challenges.

JEL Classification Codes: H51, I13, I18
Keywords: Ageing population, Long-term care, Public LTC insurance

A Cross-National Snapshot of Family Policy and Women’s Economic Participation

By Willem ADEMA

Given the importance of family-formation and labour market issues, policy-makers try to promote family well-being and give fathers and mothers more choice in their economic participation decisions. However, national family policies are very different across the OECD because of political choices, historical patterns and current work and family outcomes. This short paper briefly looks at these differences, and positions Japan in an international perspective in terms of women’s economic participation with an eye on future avenues for change.

JEL Classification Codes: J16, J18
Keywords: Female labour force participation, work-life balance, family policy

Making Japanese Society More Resilient: To Improve Sustainability of Social Security in Japan

By Shinji YAMASHIGE

As the population in Japan has been ageing and declining, people have come to feel anxiety about their future. To find ways to improve sustainability of security of the people, I first provide basic facts about sustainability of social security in Japan. Then, I clarify the concept of sustainability and discuss ways to improve resilience of systems to prepare for and recover from various shocks that can collapse them. I claim that strengthening the supply side of the social security system and enhancing the resilience of the society by increasing efficiency, redundancy, diversity, and equity of the society, are the keys to improve sustainability of the social security in Japan. The argument allows us to understand, for example, why paying adequate wages to care workers, work-style reforms, and increasing diversity in the care sectors are all important for the sustainability of the social security in Japan. I also suggest, in the final section, that to improve the sustainability of the social security in the long run, it is important to foster future generations by increasing the social expenditure for families to support and strengthen families with children. The conceptual framework presented in this chapter, I hope, is useful to understand the discussion in this volume and to consider social security reforms in Japan.

JEL Classification Codes: I18, J11, P51
Keywords: Social Security System, Sustainability, Resilience