Temporary Employment in Japan and the Economics of Happiness

Since temporary agency work has been largely deregulated in 1999 the number of agency workers grew rapidly up to 1,4 million in 2008. Although this growth was slowed down due to the economic crisis in 2009, it is expected that the trend will continue as soon as the economic situation recovers. Given the fact that the size of the temporary staffing industry has already reached a stage where it has become a significant political issue, the question arises of which regulatory policies should be applied. Especially with regard to the attempts brought forward by the DPJ coalition to strengthen the temporary employment legislation it is called into question whether this kind of protective measures will contribute to the realization of a least unhappy society (saishō fukō shakai no jitsugen) or whether the phenomenon of temporary employment is caused by deeper-lying structural problems of the Japanese labor market which should be addressed instead.

In a first step, this project analyses the macroeconomic relationships between the dere­gulation of temporary employment legislation, the existence and the configuration of unemployment insurances and the unemployment rate. It is assumed that temporary employment reduces the unemployment rate, while the height of the unemployment insurance will on the one hand diminish incentives to work, but on the other hand it will as well alleviate to some degree the dysfunctional effects of income insecurity caused by temporary employment. In a next step, the life satisfaction of temporary and permanent employees as well as of unemployed persons is compared and the underlying happi­ness determinants of each group are identified. It is expected that temporary employees are happier than unemployed persons, but that they fall short behind the life satisfaction of permanent employees. By combining those two approaches it is possible to evaluate the overall effects of the re-regulation of temporary employment legislation on life satisfaction. Alternative or additive policy measures, like higher unemployment benefits, can then be evaluated in a similar way.