Japan has been in and out of recession for around 20 years and has high levels of public debt. Yet, it also has one of the lowest unemployment rates in the developed world. Why?
See this international comparison:
http://www.economist.com/node/16432952?story_id=16432952
Not sure this is relevant, but Peter Schiff points out that Russia had zero unemployment when it was a Communist country. Everyone had a job, but no purchasing power from that job, because the economy was a disaster.
Could something like that be true of Japan?
No. It’s not a communis country.
Most countries classify part-time work as employment, even if they work as little as one hour a week. So that can’t be it. Maybe it is linked to deflation, but I don’t see how.
There are still some concerns that Prime Minister Kan, Chief Cabinet Secretary Sengoku Yoshito, and party Secretary-General Edano Yukio are all economically tone deaf.
All three have boldly stated outrageous theories in public that would ordinarily be inconceivable. Prime Minister Kan says the economy will improve even with tax increases. Mr. Yoshito says that alleviating the supply and demand imbalance will be bad for the economy. Mr. Edano says the economy will improve if we raise interest rates. The rest of the world will not take seriously public officials who make statements such as these.
Here’s an idea for Mr. Kan: Raise taxes and interest rates, see if the economy improves, leave the supply and demand gap as is, announce that the unemployment rate is fine as it stands now, and then ask the people if they believe you.
From here. There’s growing support for the minarchist “Your Party” in Japan.
http://freakonomics.blogs.nytimes.com/2009/04/22/japans-weird-unemployment-solution/
When Japanese unemployment edged up to a three-year high of 4.4 percent in February, the government started looking for creative ways to lower it. One solution: get the unemployed out of the country by offering citizenship buyouts. The program applies only to unemployed people of Japanese descent who were born abroad but now live in Japan (they’re known as nikkei). The plan pays out-of-work nikkei $3,000 to return to their country of origin, not to return until economic conditions improve in Japan. Like other strange Japanese ideas, we don’t expect this one to spread to our shores any time soon.
Employment is not a function of economic growth. The most robust economy in the world can have a higher rate of unemployment than a nation in permanent stagnation. This is unlikely, since economic growth is a function of capital and labor, but there is no 1-1 causal connection between growth and employment. Unemployment is solely a function of wage rigidity, either endogenous or exogenous. Some unemployment is actually seen as a good thing. Economists call this “frictional unemployment” and it represents a vibrant and healthy labor market.
In addition to this, and this is somewhat complicated, high rates of wage rigidity can actually reduce unemployment. This is typical of planned economies, though not always. Rather than allowing wages to adjust downwards, some nations promote wage rigidity and take the hit in output (which is a bad idea). This is a policy Hoover pursued during the great depression.
One must also remember that growing economies are not always healthy economies. Thus, there are many possible answers to your question. Japan can have a very flexible labor market, or a very rigid labor market. labor may be allocated towards unremunerative employment due to structural imbalances, or they may just be covering up the real unemployment rate (like China). It really depends.