Lesson from Japan

Apropos my earlier posting on part-time work, the Journal is also running a story about the economic effects of using temporary workers – Growing Reliance on Temps Holds Back Japan’s Rebound. One reason Japan’s rebound hasn’t gotten traction: companies’ growing reliance on temporary workers. Part-time and temporary workers are paid less and spend less – thereby dampening domestic demand. And because they are not covered under existing labor force agreements, they also do not automatically benefit from an up turn in the company’s fortunes.

Yet the heavy use of temps also has created an obstacle to the virtuous cycle typically seen in an expanding economy: When companies make better profits they eventually raise wages, which boosts consumer spending — and leads to more corporate profits.

Temps and part time workers don’t necessarily get those wage increases. Thus, consumer spending does not pick up and profits don’t go up.
Something to keep in mind as we see the US going to more of a part-time and free-lance economy.

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