Long Working Hours as a Buffer to Adjust Labor Costs

The Japanese government is increasingly promoting “work-style reform” and many Japanese companies are working on redressing long working hours. Several studies have suggested that long working hours play the role of a buffer to adjust labor costs when an economic negative shock occurs. However, the conditions under which long working hours are utilized as a buffer, are unclear. This study attempts to clarify what kind of industries utilize long working hours as a buffer. We calculate the contribution rate of non-scheduled hours worked to the rate of change of total labor costs and conduct correlation analysis between this rate and each index indicating industry characteristics. The results reveal that labor-intensive and growth industries utilized non-scheduled hours worked as a buffer. This suggests that there is a risk of losing such a buffer by redressing working hours, especially in these industries.