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Japanese Employment Practices Viewed From a Trade-Union Perspective

Kiyoshi Sasamori , General Secretary
Japanese Trade Union Confederation (JTUC-RENGO)

1. Introduction
2. Why have Japanese employment practices been maintained?
3. Why campaign for the overhauling of Japanese employment practices now?
4. Shaping the future of Japanese employment practices

1. Introduction

Over the past 55 years, labor relations in Japan have undergone many transformations. At the beginning of the postwar era, the labor movement was essentially a resistance movement. During the period of rapid economic growth, it focused on demanding higher wages and better working conditions. As the economy matured, the labor movement became more participatory in nature. Labor relations have evolved, too, progressing from conflict, through consultation and, finally, to harmony. Japan is now perceived as one of the models of economic growth, precisely because of these transformations, which hold the key to the "miracle" that has drawn so much attention to Japanese employment practices.

Today, those employment practices are once again the focus of debate. Just about every day, the news media run features about upheavals in the corporate personnel and wage systems, under sensational headlines that herald the end of lifetime employment and the seniority system.

However, according to Professor Nomura Masami of Tohoku University, there were no drastic employment-related changes in the 1990's. He describes the trends of that decade as follows: (1) average length of service at one place of employment has increased, (2) both accession and separation rates were higher during the era of rapid economic growth, and (3) there was virtually no change in the wage curve for male college graduates in 1998.

This is not the first time that we have heard pronouncements like the end of lifetime employment and seniority system. They have been voiced at every juncture in the postwar period, and on each occasion, it has been stressed that "it's really going to happen this time."

These prognostications beg the question: Why have Japanese employment practices endured, despite numerous attempts to reform or do away with them? And why have Japanese business owners suddenly lost faith in these practices, despite the fact that powers that border on the magical have been attributed to them, as in Ezra Vogel's book Japan as Number One.

2. Why have Japanese employment practices been maintained?

The term "Japanese employment practices" cannot be described simply as a set of personnel-management systems. For a full understanding of their ramifications, we must also consider the way in which they are implemented.

For instance, it is widely said that Japan's seniority-based wage system is shifting to one that is based on ability. However, according to surveys conducted by the Ministry of Labour, wage-setting policies (except where managers are concerned) still place priority on age, length of service, and education. It shows an ability-based wage system itself keeps aspects of the seniority system.

Why have Japanese employment practices been maintained? One answer is that, in principle, there is no such thing as a "job" (in the strict sense of the word) in Japan. Most company employees are generalists, not specialists. Japanese corporations customarily meet their personnel needs through the mass hiring of new graduates. Their hiring decisions are not based solely on job categories or descriptions. New employees are trained in house, and in most cases, they acquire new skills by serving in a variety of positions. They gain experience, and are eventually promoted, their salaries rising accordingly. Long-term employment, in-house training, and promotion by seniority combine to form a "package."

Of course, not all workers remain with the same employer for their entire careers. Job-hopping is more common among employees of at smaller companies. But since they cannot objectify their work experience, when they wish to change jobs, they find it difficult to describe their work experience adequately to potential employers, who in turn find it difficult to evaluate them.

The situation I have just described has more than a little bearing on the organization of trade unions. Since workers do not aim for a particular employment category or speciality, they do not directly join occupation-based or industry-based unions. The majority of Japanese union members belong to enterprise-based unions.

Most of the industry-specific trade unions in Japan are federations of unions formed at companies engaged in the same industry. Two exceptions are the All Japan Seamen's Union and the National Federation of Construction Workers' Unions, though the latter is not affiliated with Rengo.

Therefore, unless the entire framework is adjusted, tampering with parts of it will not result in any noticeable change.

Employment practices evolve within the context of the prevailing social and cultural climate. Even if we so desired, we would not be able to freely adopt another system, say, the American, German or Japanese system. According to one theory, Japanese employment practices and systems did not develop gradually. They can be traced to the legally enforced mobilization of labor in wartime, which quickly spread to all Japanese companies and took root.

Seeking long-term employment security and wage increases in line with the seniority-based wage curve, enterprise-based unions have engaged in negotiations with management over the years. In that sense, Japanese employment practices have, for the most part, corresponded to union interests.

However, our employment practices have given rise to problems, some of which are: (1) the entrenchment of the conviction that the company is all-important (employees tend to devote all their energy to their work, at the expense of their families and communities), (2) the intensification of competition among corporations and individuals, (3) discrepancies among working conditions at corporations, especially among corporations of different sizes (the absence of a social standard that transcends the corporation), and (4) discrimination against certain employment categories that affects working conditions (the exclusion of part-time and dispatched workers from company fringe benefits and the benefits of corporate labor relations).

From our point of view, these are problems that must be resolved. However, that does not mean that we are in favor of an immediate overhauling of the current systems.

The White Paper on Labour issued by the Ministry of Labour indicates that hiring workers on a long-term basis may impede altering the industrial structure of the entire economy. It also indicates that this type of hiring also makes it difficult for management to respond appropriately to changes in the economic climate, and prevents companies from shifting to another type of business. But are these really defects? These very same practices have certainly not hindered management's efforts to change the industrial structure or shift to new types of business. The real problem lies in Japan's failure to create new leading sectors. The encouragement of more flexible hiring arrangements, at this time, will only result in an increase in the number of workers who lack stable employment, in the absence of potential employers.

3. Why campaign for the overhauling of Japanese employment practices now?

The Japan Trade Union Confederation's doubts about the wisdom of overhauling Japan's current employment practices do not stem from the desire to protect vested interests, but from our realization that the theory behind this campaign is seriously flawed.

Later today Mr. Fukuoka, Director General of Nikkeiren (the Japan Federation of Employers' Associations) will be speaking to this gathering. You will notice that there is no major philosophical difference between Rengo and Nikkeiren on this point--- both organizations are fully committed to long-term hiring. But the campaign for the reform of Japan's employment practices has been embraced by so many and taken on such urgency that when the chairman of Nikkeiren articulated his belief in the importance of preserving Japan's employment practices, it seemed like a voice in the wilderness.

The reformers propose a shift to American-style management, which focuses on short-term profits and caters to shareholders--- a shift from a farsighted to a shortsighted system.

Behind this phenomenon is the recent tendency to succumb to the lure of speculative investments, which has spread like wildfire throughout the world (and wrought havoc on the currencies of other Asian nations), on a scale that far surpasses the real economy.

Executives who favor the shortsighted type insist that with economic globalization, "We won't be able to train our employees in time to meet our needs. We won't be able to beat the competition unless we apply the just-in-time strategy by hiring people when we need them and linking their wages with corporate performance."

Companies are actually using the need to cut personnel costs as an excuse to dismiss middle-aged and older workers (or encourage them to retire), and hiring part-time rather than full-time workers. Our work force is being polarized.

The Ministry of Labour White Paper, to which I referred earlier, warns that employment adjustments are on the rise, due to the demands of the global capital market. For instance, the stock prices of companies that have announced plans to drastically reduce their staffs are skyrocketing.

The questions raised by the shortsighted type of management are:
(1) Will the Japanese management system survive?
(2) How and where will the instant war potential that management is seeking be nurtured?
(3) Won't corporations risk losing their competitiveness?

It is true that there are more workers now for whom the shortsighted type of hiring arrangement is appropriate, or who even prefer it. But they are still in the minority. It would be very dangerous if management decided to make a sudden shift in that direction.

We must, once again, remind ourselves how important it is for our management principles and policies to give preference to hiring that is based on a long-term perspective.

The aforementioned White Paper states that changes in long-term hiring practices cause fewer problems in a period of prosperity than during a recession. However, the truth, in terms of policy management, is discouraging "excessive hiring" and relaxing the rules that govern dispatched work in the throes of a recession which only serve to make the employment situation more precarious.

4. Shaping the future of Japanese employment practices

The Japanese economy is currently in the midst of a lingering recession. One of the reasons for the recession is the stagnation of consumption, which stems directly from growing concerns about employment and about the future. Confidence in Japanese employment practices is rapidly eroding.

We believe that restoring faith in them is of the utmost urgency. More freedom of choice in working styles can be offered only when we have restabilized employment.

At the same time, we must make efforts to resolve the problems generated by Japanese employment practices, which I indicated earlier.

In closing, I'd like to mention several proposals that represent the philosophy of Rengo.

First of all, we would like to counter current trends that could very well result a risk-taking society populated by self-centered individuals, by working to build a work-oriented welfare society. There is nothing inherently evil in the diversification of value systems and working styles, but such diversification must be preceded by employment security and social safety nets.

Second, we would like to see the establishment of work rules and standardized wage levels. Polarization of the work force is to be discouraged, because it forces full-time employees to work long hours, and deprives part-time and dispatched workers of both job security and decent remuneration. We need to enact laws that prohibit discrimination against any type of employment, to draft wage-setting guidelines that transcend corporate frameworks, and to establish minimum-wage regulations.

Third, we would like to see meaningful consultations between labor and management at all levels. An increasing number of issues will arise that cannot be solved within a corporation, or that are not covered by existing rules. Labor-management negotiations should involve specific industries, businesses, or localities which can conclude whatever agreements are necessary.

Fourth is the corresponding reform of trade unions. In addition to the traditional enterprise-based and industry-based unions, we need new organizations that embrace new categories (geographical location, occupation, or groups of corporations).

As we attempt to reduce the preeminence of the corporation, we must be careful not to individualize labor relations. I concede that the needs and values of individuals must be given more priority than they have in the past, but group contracts and negotiations, and the establishment of fair rules, are equally important. We must find a way to make those rules work not only within the corporate framework, but in society at large.

Looking at the legal situation in recent years, laws governing labor standards have been revised, relaxing those standards, and new laws supporting corporate reorganization and personnel adjustments have come into force. Therefore, the role of trade unions in protecting employees and their rights will, necessarily, be more crucial.

At the beginning of my address, I mentioned that labor relations in Japan have made a transition from conflict to harmony. However, if policy management and business management are to change in such a way that employment security is jettisoned and labor relations play a minimal role in our society, we will have to make a serious decision. I hope that is a needless fear, and I am convinced of the need for government, labor, and management to arrive at the common recognition it is good labor relations and stable employment that will serve as the foundation for social development.