The Tokyo Foundation for Policy Research


The Tokyo Foundation for Policy Research

The Employment Trap: How Initial Job Status Impacts Life Outcomes

March 29, 2018

©bee32/iStock/Getty Images Plus
©bee32/iStock/Getty Images Plus

In a country once renowned for its lifetime employment system, almost 40% of the labor force now consists of temporary and fixed-term workers. A recent study highlights the long-term mental-health repercussions, which the author attributes to a combination of immobility and inequality.

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The impact of employment status on mental health is widely recognized. Studies in several countries have found that nonregular workers, such as temporary and fixed-term staff, report lower job satisfaction and poorer overall mental health than those in stable, permanent, regular positions. Facing greater uncertainty with regard to future employment and income, nonregular workers are generally more apt to feel economically insecure and vulnerable to external shocks.

That said, the degree of correlation between employment status and mental health differs substantially from one country to another and changes over time. It seems reasonable to suppose that the impact of unstable job status will be less pronounced in situations where workers move with relative ease between regular and nonregular employment; where nonregular employees are less disadvantaged in terms of job compensation, treatment, and benefits; and where the social security system mitigates economic disparities instead of magnifying them. In a recent study, Seiichi Inagaki (professor at the International University of Health and Welfare) and I attempted to quantify the impact of Japan’s relatively inflexible two-tiered employment system on long-term life outcomes.

Steppingstone or Trap?

A key factor to consider in this context is the degree to which one’s initial job status determines one’s employment status later in life. How easy is it, in other words, to transition from nonregular employment to a regular job?

This is a question that has been studied and debated at some length in Europe. On one side of the issue is the “entrapment” hypothesis, which claims that people who enter the market as nonregular employees are likely to remain stuck in that status. On the other side is the “steppingstone” hypothesis, which views nonregular work as a helpful first step in the career-building process, allowing young workers to explore career options and modes of employment while acquiring the experience and skills they need to transition to stable, permanent jobs—if that is their goal. In Europe, where year-round and mid-career hiring is much more common than in Japan, there have been a number of empirical studies that argue rather persuasively in support of the stepping-stone hypothesis.

Studies based on Japanese data, on the other hand, tend to support the entrapment scenario. In Japan, where regular (that is, lifetime) employees are typically hired en masse upon graduation, it is far more difficult to transition to regular employment if one’s first job after leaving school is a temporary or fixed-term position. In addition, disparities in compensation, treatment, and benefits are likely to persist and reverberate for years.

Measuring Long-Term Impact

Under the circumstances, it is not unreasonable to posit that in Japan, initial employment status will have a long-term impact not only on subsequent employment but also on such related outcomes as income, marital status, and mental health.

I collaborated with Professor Inagaki on a study to investigate the direct and indirect effects of initial employment status on such outcomes, using data from the Japanese Longitudinal Survey on Employment and Fertility (LOSEF) conducted in 2011. The survey sample consisted of 5,935 adults (3,117 males and 2,818 females) in their 30s, 40s, and 50s.

The table summarizes the results, disaggregated by gender. In the survey sample, 14.6% of men and 18.5% of women began their working life in an unstable job situation. Our analysis found that such individuals, whether male or female, were significantly less likely to be employed in regular (stable, permanent, full-time) positions at the time of the survey. However, the disparity was greater among men than women. This can be explained by the fact that Japanese women commonly leave work when they get married or have children and, if they return to the labor force, are apt to do so as part-time employees.

Initial Job Status and Life Outcomes

Note: Figures do not include the 7 men and 50 women in the sample who started out as full-time homemakers.

Next we compared household incomes, adjusted for family size, focusing on the prevalence of incomes below the poverty line (50% of median income, or about 1.22 million in 2012). In the case of men, those who started out with unstable employment reported annual household incomes averaging 100,000 lower than did those who started out in regular positions, and they were more than twice as likely to be below the poverty line. Among women, the disparity in household incomes was not statistically significant, probably owing to the spouses’ contribution. At the same time, the likelihood of being under the poverty line was significantly higher among women who did not start out in regular jobs, although the difference was smaller than that seen among the men.

Initial employment also has a significant impact on marital status, according to the results of our analysis. Both men and women with unstable initial employment were more likely to be unmarried, although the disparity was more pronounced among men. One may surmise that unstable employment and/or the lower income associated with it is a disadvantage when it comes to finding a spouse.

Are Nonregular Employees Damaged Goods?

We also found an association between initial employment status and current mental health. Mental health was measured according to the Kessler Psychological Distress Scale, or K6, which ranges from 0 to 24, with a higher score signaling a greater level of psychological distress. In Japan, any score 5 or higher is considered indicative of emotional stress. Among women and men alike, unstable initial employment was associated with a higher K6 score and a greater likelihood of suffering from psychological distress at the time of the survey.

These results indicate that initial employment status is a key predictor of mental health later in life. In addition, mediation analysis determined that the association was not entirely explained by the intervention of such “mediator variables” as current job status, household income, and marital status. That is, the association between initial job status and mental health later in life remained significant even after controlling for current job status, income, and marital status.

One tentative conclusion we might draw from this is that people who did not find regular positions after they left school felt permanently stigmatized as a result. In Japan, where the impact of initial employment status and the difficulty of transitioning from that status to regular employment is widely understood, people who fall short in the all-important task of finding a suitable post-graduation job are apt to regard themselves as failures. Such an experience could have a long-lasting impact on their self-esteem and mental health.

There are other possible explanations, however. Some studies conducted overseas have found an association between mental-health issues during childhood and difficulty finding stable employment as an adult. This could suggest that the midlife mental-health issues identified among individuals who started out in unstable jobs could have earlier origins.

Toward a Kinder, Gentler System

Searching for one’s first job out of college can be a highly stressful process. In Japan today, it is not uncommon for young job hunters to undergo dozens of interviews—encounters that can be demeaning and demoralizing, depending on the interviewer. Particularly in periods of intense competition for regular jobs, such as the first decade or so after the collapse of the 1980s bubble, the stress of job hunting could well cause latent mental-health issues to surface, affecting the outcome of the search.

Sorting out the cause-and-effect relationship between initial employment and mental health is difficult. But in either case, our results underscore the long-term impact of initial employment on key life outcomes in Japan. This impact stems primarily from the difficulty of transitioning from nonregular to regular employment and the magnitude of the disparities in pay, benefits, and long-term economic security.

It is well known that nonregular workers are more apt to suffer from mental-health issues than regular employees. It is time to consider the repercussions for Japanese society as a whole at a time when close to 40% of all employed persons occupy temporary, fixed-term, and other nonregular positions. We need to address this growing crisis by revamping our employment practices, including the recruitment of new graduates, and reforming our social security system to ensure that the safety net protects everyone equally, regardless of employment status.

Based on Takashi Oshio and Seiichi Inagaki, “The Direct and Indirect Effects of Initial Job Status on Midlife Psychological Distress in Japan: Evidence from a Mediation Analysis,” in Industrial Health, 2015, 53 (4), 311-21.

    • 小塩隆士 }
    • Professor, Institute of Economic Research, Hitotsubashi University
    • Takashi Oshio
    • Takashi Oshio

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