The Japanese employment system

TABLE OF CONTENTS

1 PREFACE

2 SUBJECT OF ANALYSIS

3 THE JAPANESE EMPLOYMENT SYSTEM AT A GLANCE
JAPANESE UNIONS AND THEIR IMPACT
THE GENESIS – 1920 S 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

1 PREFACE

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.

2 SUBJECT OF ANALYSIS

This paper predominantly covers the development of the Japanese employment system since the early 1920s and tries to give an interpretation of recent trends. As the latest substantial alteration I will discuss the "collapse of the bubble“ in the year 1990, when both the workers and the employers suffered painful cuts altering the traditional lifetime employment and seniority wage system.

It is quite difficult to estimate the influence of trade unions on the development of the employment system. Unions´ history and impact, marked by controversies and disagreements, would go beyond the scope of this paper. Chapter 3.1 shall introduce the Japanese unions as a special phenomenon.

Furthermore, the limited range of this seminar paper made it necessary to omit some important facts of the Japanese history, especially during the post-war era, in order to set a clear focus on the development of the employment system.

3 THE JAPANESE EMPLOYMENT SYSTEM AT A GLANCE

This chapter works out the details of what is meant by the "Japanese Model“. On the one hand it will discuss the characteristics and the historical development, on the other hand it lays a focus on the permanent changes during this development in order to build up a differentiated image of the Japanese employment system.

Japanese Unions and their Impact

According to western countries, the formation and organisation of unions, along with heavy strikes and demonstrations, lengthly bargaining meetings between the enterprise and the employees are still crucial for the development of the western-style employment system. Contrary to this, the Japanese independent unions have never been as well organised as the western unions have. In the pre-war era, they were never accepted as an legitimate organ and were seen as disrupting the harmony of the communal entity³. The right to organize in unions first came with the new constitution after the Second World War. Even though the unions gained power through new members in times of depression and unemployment, especially in the post-war era, it is still controversial whether and how intensive union’s policy has affected the management decisions in terms of employment and salary.

The unions never formed an independent and inter-company organisation like their equivalents in western countries did. The employees of small and medium-sized enterprises are seldom members of unions, and each company has its own enterprise union. By setting up these more co-operative enterprise unions, the Japanese entrepreneurs as well as the government and the US Occupation authorities made efforts to minimise political labour movements⁴. But it also has to be mentioned that Japan had a density rate up to 65 per cent among the enterprise unions.

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¹ Mayer/Pohl, 1997, p.32 and Sato, 1999, p.6

² The Statistical Handbook of Japan, 2005 gives numerous further reasons to explain the rapid growth, e.g. the expansion of capital investments, abundant supply of high-quality workers and the adopting and improving of foreign technologies.

³ International Journal of Japanese Sociology, 2005, P.73

⁴ Eccleston, 1989, pp.80