After Japan recovered from the disastrous defeat of World War II, its enormous economic
growth provided a series of questions to the world’s leading economists. With constant
growth rates over 11% on average in the 1960s, Japan had the world’s second largest
GDP.
Seeking explanations and reasons for this phenomenon, soon a couple of important
influences on the Japanese economy were found. The increased demands on Japanese
products during the conflicts in Vietnam after the Second World War (which led to the
Vietnam War 1964-1973) and the Korean War 1950 to 1953 as well as the government aid
for selected industries and protective duty accelerated its growth, which exceeded all
former expectations1.
Another important element of the Japanese prosperity was met with the Japanese-style
employment system2. What would primarily influence the image of the Japanese to the
further decades, the industrious, never sleeping blue-collar and white-collar workers,
fulfilling a life for the company in a state of mutual dependence, is the result of an
elaborate employment system.
And in fact, lifetime employment, a predetermined career path and the seniority-based
wage system were established to commit the regular workers to "their“ company, while the
temporary workers still did not reach a similar status.
This "Japanese Model“, as several authors call it, is subject to constant change. Even
though the system was never fixed, it changed its surface not before the "collapse of the
bubble“ in 1990.
Shortly after this prolonged economic recession, which forced every industrialised country
to undertake economic restructuring, Japan was able to recover very fast through strict
rationalisation and a revision of its employment system. Today, Japan has changed. Still the second largest economy of the world, it has to
confront an economic growth close to 2%. With this comes a call for a more flexible
employment system which still has to pay the regular workers who many years ago were
attracted with the seniority-based wage system reflecting the workers higher needs in
subsequent years. Furthermore, the new generation of workers is organised in unions and
knows their value to the market, and would not agree earning half the sum a senescent
worker does.
Table of Contents
1 PREFACE
2 SUBJECT OF ANALYSIS
3 THE JAPANESE EMPLOYMENT SYSTEM AT A GLANCE
JAPANESE UNIONS AND THEIR IMPACT
THE GENESIS – 1920S TO 1945
THE GENESIS – 1945 TO 1973/74
THE GENESIS – 1974 TO 1990
RECENT CHANGES
4 PROS AND CONS
IN TIMES OF HIGH GROWTH AND A LABOUR SHORTAGE
IN TIMES OF LOW GROWTH AND A LABOUR OVERSPILL
5 OUTLOOK
6 BIBLIOGRAPHIES
Objectives and Topics
This paper examines the historical development and structural evolution of the Japanese employment system from the 1920s to the early 2000s, specifically analyzing how the "Japanese Model"—characterized by lifetime employment and seniority-based wages—adapted to economic recessions and global pressures. The research focuses on identifying the transformation of corporate labor practices and the shifting role of enterprise unions in response to major economic turning points like the 1990s "bubble collapse."
- Historical evolution of the Japanese employment model (1920s–1990s).
- Role and influence of enterprise unions in labor management.
- Economic impact of the seniority-based wage system and lifetime employment.
- Adaptive mechanisms of firms during economic stagnation (e.g., shukko, Hai-ten).
- Recent labor market trends including "freeters," "NEETs," and the shift toward performance-based pay.
Excerpt from the Book
The Genesis – 1920s to 1945
Japan´s large companies are well known for hiring inexperienced workers after graduation from school and qualifying them as regular workers (sei-shain). Regular workers are comparable to full-time workers, hired for an indefinite period. Non-regular workers (hisei-shain) are workers with a short-term contract, comparable to part-time workers. Regular workers are paid through a differentiated salary system with higher salaries for senior workers (non-regular workers do not receive such advantages). To understand the demands on the Japanese economy to change the employment system in times of low growth, we have to go back to the beginning of the last century and thus to the origin of this "Japanese Model“.
Before the turn of the twentieth century, managers helped themselves finding skilled labour out of a big pool of "versatile, unspecialized artisans". Everyone could do everything. In the early 1900s, to move from one company to another oftentimes was quite popular among the workers. It was the common way to gain experience and gain new skills.
After the first machines were introduced to the firms round 1900, this employment system had to change. Managers needed to take on specified workers with special skills to control the machinery. Groups of up to 15 employees worked on those expensive machines. They relied on a leading and full-fledged foreman who co-ordinated the work. That was shortly before the end of the First World War.
As the group- and teamwork in addition to the new machines brought a substantial progress, it was necessary to persuade the former ‘job-hoppers’ to become regular workers. A couple of financial incentives, welfare and training programs were introduced in an attempt to draw skilled workers to some kind of affiliation with a company. And in fact, "...the period of a worker‘s employment at a firm began to lengthen in the 1920s”. Among these changes for the regular workers we can find some advantages, which encouraged the starting point of the famous Japanese employment system.
Summary of Chapters
1 PREFACE: Provides an overview of Japan's post-WWII economic growth and introduces the significance of the Japanese-style employment system as a pillar of this prosperity.
2 SUBJECT OF ANALYSIS: Outlines the scope of the paper, focusing on the development of the employment system since the 1920s and the impact of the 1990 bubble collapse.
3 THE JAPANESE EMPLOYMENT SYSTEM AT A GLANCE: Details the historical evolution, the role of enterprise unions, and the transformation of labor practices across different eras including the postwar recovery and the oil crises.
4 PROS AND CONS: Analyzes the advantages and disadvantages of the Japanese model for both companies and employees, distinguishing between times of high growth and low growth.
5 OUTLOOK: Discusses current trends, including the impact of an aging population, the rise of non-regular workers like "freeters," and the future viability of the traditional employment system.
6 BIBLIOGRAPHIES: Lists the academic sources and statistical references used throughout the paper.
Keywords
Japanese employment system, lifetime employment, seniority-based wage system, enterprise unions, bubble economy, labor market, sei-shain, hisei-shain, karoshi, freeters, NEETs, economic growth, structural reform, human resource management, job rotation.
Frequently Asked Questions
What is the core focus of this research paper?
The paper explores the development, characteristics, and historical shifts of the Japanese employment system from the 1920s to the mid-2000s, analyzing how it adapted to economic crises.
What are the primary themes discussed in the text?
Central themes include the lifetime employment model, the seniority-based wage system, the role of enterprise unions, and how companies managed labor during both high-growth and recessionary periods.
What is the primary objective of this work?
The objective is to provide a differentiated image of the "Japanese Model" and to interpret how its traditional structures have been pressured to change due to economic stagnation and globalization.
Which scientific approach does the author use?
The author primarily employs an economic approach, analyzing the relationship between changing market conditions and corporate employment practices, supplemented by historical and sociological context.
What topics are covered in the main body of the paper?
The main body covers the genesis of the employment system, the evolution of enterprise unions, the pros and cons for employers and employees, and the long-term impact of the "lost decade" on corporate structures.
Which keywords best characterize this work?
Key terms include Japanese employment system, lifetime employment, seniority-based wages, enterprise unions, structural reform, freeters, and the bubble economy.
What was the function of the "Densan-style" wage system?
It was an early post-war wage structure that emphasized workers' needs with automatic pay increases, which encouraged the formation of enterprise unions and helped integrate blue- and white-collar workers into the company structure.
How did Japanese companies avoid mass layoffs during the 1970s and 1990s?
Companies used alternative methods such as hiring freezes, reducing overtime, transferring workers to subsidiaries (shukko), reassigning them within the company (Hai-ten), or offering compensation for voluntary resignation.
What defines the "freeter" and "NEET" groups in modern Japan?
"Freeters" are young, non-regular employees often living with parents to save on costs, while "NEETs" are young people neither in employment, education, nor training; both groups represent a significant shift in the Japanese labor market.
What role does the "seniority-based wage system" play in the recent economic context?
The system has been losing ground and is increasingly replaced by performance-based pay systems as companies demand higher efficiency and struggle to maintain the high costs associated with traditional seniority-based remuneration.
- Quote paper
- Daniel Joachim (Author), 2006, The Japanese employment system, Munich, GRIN Verlag, https://www.grin.com/document/116050
