VoxEU Column Labour Markets

Does initial job status affect midlife outcomes and mental health? Evidence from a survey in Japan

Starting one’s working life in an irregular job can lead to a fruitful career or to long-term stagnation. While studies of European labour markets support the stepping-stone hypothesis, this column presents evidence that irregular jobs lead to negative midlife outcomes in Japan. Future jobs are less stable, pay less, and psychological distress is higher. Such problems suggest a role for policy to reduce economic and social disadvantages of non-regular workers.

Does starting working life with non-regular jobs decrease the odds of success in later life? There has been debate about the long-term consequences of flexible market entry across European countries (Scherer 2004, 2005). On the one hand, the entrapment scenario argues that once an individual begins his or her working life with a non-regular job – such as one with fixed-term contracts – entrapment in such jobs is inevitable. On the other hand, the stepping-stone scenario argues that flexible entry offers workers the opportunity to gain experience, thereby allowing them to catch up with other entrants over time. Empirical studies in European countries have largely supported the stepping-stone scenario (e.g. Booth et al. 2002, Gebel 2010, McGinnity et al. 2005, Steijn et al. 2006). Initial disadvantages due to fixed-term contracts and other unfavourable conditions tend to disappear eventually – albeit to different degrees based on gender, educational attainment, and country.

In contrast to many European countries, the entrapment scenario appears to be prevalent in Japan. Kondo (2007) observes that failure to obtain regular employment at graduation has an adverse impact on subsequent employment status in Japan. In addition, Esteban-Pretel et al. (2011) show that beginning working life as a non-regular employee may imply lower long-term welfare for a Japanese worker. At the same time, the concept of unstable job status has attracted more attention in Japan in recent years, because it led to income inequality and poverty risks during the prolonged recession. Recently Japanese firms have been employing more lower-wage, non-regular employees to reduce labour costs and compete with other Asian countries (Hashimoto and Higuchi 2005).

The validity of the entrapment scenario has become an important social policy concern in Japan. We address this issue using micro data collected from an online survey conducted from November to December 2011 (sample size 5,935). We estimate the impact of unstable initial job status on six midlife outcomes: unstable current-job status, career instability, low household income, unmarried status, and two levels of psychological distress. We measure the latter with the Kessler 6 (K6), a standardised and validated measure of non-specific psychological distress (Kessler et al. 2002). We calculate the total score (range 0–24) and adopt an indicator of ≥ 5 for mood/anxiety disorder in Japan (Sakurai et al. 2011). Similarly, an score of ≥ 13 indicates serious mental illness (Kessler et al. 2010). We address potential endogeneity of unstable initial job status by estimating the auxiliary equation that predicts unstable initial job status according to the prefectural job openings-to-applicants ratio and the nationwide proportion of non-regular employees in the year of graduation.

Table 1 presents the main results, providing estimated marginal effects of unstable initial job status on each midlife outcome. For men, unstable initial job status increased the probabilities of career instability, low household income, unmarried status, and psychological distress (K6 ≥ 13), as well as unstable current job status and mood/anxiety disorder (K6 ≥ 5). We observe similar results for women, except for low household income, which was not associated with unstable initial job status. The impact of unstable initial job status on the probabilities of career instability and serious mental disorder (K6 ≥ 13) was much higher for women. The impact on the probability of staying unmarried was somewhat higher for men. Another difference between men and women was that the impact on K6 ≥ 13 was much lower than on K6 ≥ 5 for men, while the former was slightly higher than the latter for women.

Table 1. Estimated marginal effects of unstable initial job status on socioeconomic/marital status and psychological distress

Note: Standard errors are in parentheses.
***p < 0.001, **p < 0.01, *p < 0.05

Table 2 summarises the estimated impact of unstable initial job status on psychological distress (K6 ≥ 5) for men (top panel) and women (bottom). We use model 1 – which includes no current socioeconomic or marital status – as a benchmark for comparisons. Models 2, 3, 4, and 5 include current unstable job status, career instability, low household income, and unmarried status respectively. Model 6 includes all four variables.

Table 2. Estimated marginal effects of unstable initial job status on psychological distress (K6 ≥ 5), obtained from the bivariate probit modelsa

Note: Standard errors are in parentheses.
***p < 0.001, **p < 0.01, *p < 0.05

For men, Models 2, 3, 4, and 5 indicate that the impact of unstable initial job status is somewhat attenuated with the addition of each variable of socioeconomic/marital status, although it remains highly significant. This result suggests that socioeconomic/marital status has limited mediation effects. Even when including all variables in Model 6, the impact of unstable initial job status remains highly significant. Model 6 further shows that the association of psychological distress with career instability is insignificant, probably reflecting the close relationship with current job status and household income.

Results regarding women presented in the bottom part were similar to those of men. The impact of unstable initial job status on psychological distress is attenuated with the addition of the variables of socioeconomic/marital status, but remains significant. Unlike in men, psychological distress in women is not associated with unstable current job status or career instability. We also observe that the impact of an unstable initial job is larger for women than for men in all models. These results suggest the impact of an unstable initial job status is larger and less mediated for women than for men.

Our estimation results show that initial job status as an irregular employee reduces opportunities for success in later life in Japan. This finding contrasts with observations from previous studies in European countries, where beginning working life with fixed-term contracts and other non-regular job statuses does not necessarily signal a bad start. Further, the current study highlighted the traumatic impact of initial unstable job status on mental health; influence of this status is not fully mediated by socioeconomic/marital status. We can argue that policy measures are needed to reduce economic and social disadvantages of non-regular workers in Japan.

Editor's Note: The main research on which this column is based (Oshio and Inagaki 2014) first appeared as a Discussion Paper of the Research Institute of Economy, Trade and Industry (RIETI) of Japan.


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