shimazaki
Hanako Shimazaki
Professor Owen
Theme Writing
Feb 2008
Professor Owen
Theme Writing
Feb 2008
Current changes in the Japanese employment system
Ⅰ. Introduction
The Japanese employment system is strictly peculiar to Japan and difficult from employment systems in other countries. For Japanese people it is usual to work in one enterprise permanently and to increase their wage in proportion to their age. The Japanese employment system was fixed in rapid economic growth period. Although the traditional Japanese employment system was rational in the rapid economic growth stage, there are many problems under the present Japanese social situation, therefore Japanese government and companies must adapt to changing conditions. After examining current problems stem from Japanese employment system, this paper would try to provide possible solutions for these problems. Japanese social situation have changed in recent years, therefore traditional Japanese employment system must change and adjust to a current social situation immediately.
Ⅱ. Explain 3 main points of the Japanese employment system
There are three features typical of the employment systems.
A. Permanent employment
The permanent employment system has long been one of the three core employment practices in Japan. In general, permanent employment means that a person who joins a company immediately after graduation from school will work for the company until worker mandatory retirement age, during which time the employee has almost no fear of dismissal. Therefore, most Japanese workers carry on with their work by worker mandatory retirement age. For, enterprises, especially large Japanese enterprises, employ workers on the premise that permanent employment. It is because enterprises do so that Japanese government controls companies by the law such as company can not fire employee without effort to avoid redundancies by taking measures such as cutting overtime, hiring freezes and so on. On-the-job training or firm-specific training is one of the constituents of Japanese permanent employment. Japanese companies emphasize the training and retraining of workers, and much of the training is specific to the company. Most of the companies prefer to hire new graduates and train them within their organization. In addition, in company there is job competition among workers. Due to the growth of firm-specific skills, the tenure-earnings profile of the workers becomes steeper, which results in longer attachment between the workers and the company as in the given below.
B. Seniority-based wage system
Permanent employment and Japanese enterprise pay system are closely linked, and it would be easy to understand to consider them together. This section discuss about Japanese traditional unique seniority-based wage system. In general, the seniority-based wage system is a system in which an employee’s wages rise in proportion to the length of worker’s employment and age. There are three sets of explanations for why wage increases with job tenure. The first is that workers are paid wages equal to their marginal product, and their wages rise because their productivity increase. The second explanation is given by the firm-specific human capital hypothesis. The third explanation is given by the incentive hypothesis. Companies give workers an incentive to work harder by delaying their compensations until later in the work cycle. For, young workers can not get wage fit their productivity. Through this pay system, enterprises enable keep to hold their workers until worker mandatory retirement age.
C. Enterprise-based union
Finally, it is enterprise-based unions. Japanese labor unions are based in the enterprise. In America and EU, union is organized occupation-based. Under the occupation-based union, it can be practiced that wage is classified by occupation because there is no firm-specific training as mentioned above. Moreover, these countries do not have system such as permanent employment because it is not need to keep holding worker permanently. In other words, workers reap the wage of their work. In such countries, only workers ability decides their wage. The reason why this wage system is possible is that there is no firm-specific training and there is circumstance worker can change their work easily. On the other hand, in Japan, unions are divided by enterprise therefore closed enterprises practice firm-specific training differently. As mentioned in the explanation of permanent employment, firm-specific training enables to practice the permanent employment. In brief, enterprise-based union effect to other systems.
Actually, three systems connect tightly and these are called Japanese employment system.
Ⅲ. Current socio-economic situation in Japan and related problems
A. Inherent Problems
1. Overwork
As mentioned in explanation of permanent employment system, companies can rarely fire employee and have to try to not fire their employees by some means. As one of means is cutting overtime, companies use overtime for one of tools to avoid redundancies. In other words, when company is quite good condition, company would increase worker’s overtime and when company is bad condition, company would decrease their overtime instead of dismissal. Although it seems that this overtime as means is satisfactory to employees, it is misunderstanding. Actually overtime problem is one of the serious problems in the Japanese labor market. The Labor Force Survey reported that the average Japanese in non-agricultural industries worked 46.1 hours per week in 1990 and 42.4 hours in 2001. Widespread working of overtime is partly due to the weakness of the labor union, but is also a direct consequence of the competitive tournaments that are used to determine promotions in Japan. Although overtime is necessary system to keep permanent employment, there is a situation that some people die due to work too much. Moreover, karoshi, death from overwork, is one of Japan’s serious social problems related to overtime. Furthermore, it is not good for children to not spend time with their parents. This overtime problem should be improved soon.
2. Difficult for non-new graduates to get a job
According to study of OECD, the length of employment for Japanese male workers is longer than in other developed countries (OECD employment outlook). Japanese worker rare left their first employer because although it is a well-organized entry market for new graduates to obtain jobs, for non new-graduates it is quite difficult to obtain new job.
The Japanese employment system is strictly peculiar to Japan and difficult from employment systems in other countries. For Japanese people it is usual to work in one enterprise permanently and to increase their wage in proportion to their age. The Japanese employment system was fixed in rapid economic growth period. Although the traditional Japanese employment system was rational in the rapid economic growth stage, there are many problems under the present Japanese social situation, therefore Japanese government and companies must adapt to changing conditions. After examining current problems stem from Japanese employment system, this paper would try to provide possible solutions for these problems. Japanese social situation have changed in recent years, therefore traditional Japanese employment system must change and adjust to a current social situation immediately.
Ⅱ. Explain 3 main points of the Japanese employment system
There are three features typical of the employment systems.
A. Permanent employment
The permanent employment system has long been one of the three core employment practices in Japan. In general, permanent employment means that a person who joins a company immediately after graduation from school will work for the company until worker mandatory retirement age, during which time the employee has almost no fear of dismissal. Therefore, most Japanese workers carry on with their work by worker mandatory retirement age. For, enterprises, especially large Japanese enterprises, employ workers on the premise that permanent employment. It is because enterprises do so that Japanese government controls companies by the law such as company can not fire employee without effort to avoid redundancies by taking measures such as cutting overtime, hiring freezes and so on. On-the-job training or firm-specific training is one of the constituents of Japanese permanent employment. Japanese companies emphasize the training and retraining of workers, and much of the training is specific to the company. Most of the companies prefer to hire new graduates and train them within their organization. In addition, in company there is job competition among workers. Due to the growth of firm-specific skills, the tenure-earnings profile of the workers becomes steeper, which results in longer attachment between the workers and the company as in the given below.
B. Seniority-based wage system
Permanent employment and Japanese enterprise pay system are closely linked, and it would be easy to understand to consider them together. This section discuss about Japanese traditional unique seniority-based wage system. In general, the seniority-based wage system is a system in which an employee’s wages rise in proportion to the length of worker’s employment and age. There are three sets of explanations for why wage increases with job tenure. The first is that workers are paid wages equal to their marginal product, and their wages rise because their productivity increase. The second explanation is given by the firm-specific human capital hypothesis. The third explanation is given by the incentive hypothesis. Companies give workers an incentive to work harder by delaying their compensations until later in the work cycle. For, young workers can not get wage fit their productivity. Through this pay system, enterprises enable keep to hold their workers until worker mandatory retirement age.
C. Enterprise-based union
Finally, it is enterprise-based unions. Japanese labor unions are based in the enterprise. In America and EU, union is organized occupation-based. Under the occupation-based union, it can be practiced that wage is classified by occupation because there is no firm-specific training as mentioned above. Moreover, these countries do not have system such as permanent employment because it is not need to keep holding worker permanently. In other words, workers reap the wage of their work. In such countries, only workers ability decides their wage. The reason why this wage system is possible is that there is no firm-specific training and there is circumstance worker can change their work easily. On the other hand, in Japan, unions are divided by enterprise therefore closed enterprises practice firm-specific training differently. As mentioned in the explanation of permanent employment, firm-specific training enables to practice the permanent employment. In brief, enterprise-based union effect to other systems.
Actually, three systems connect tightly and these are called Japanese employment system.
Ⅲ. Current socio-economic situation in Japan and related problems
A. Inherent Problems
1. Overwork
As mentioned in explanation of permanent employment system, companies can rarely fire employee and have to try to not fire their employees by some means. As one of means is cutting overtime, companies use overtime for one of tools to avoid redundancies. In other words, when company is quite good condition, company would increase worker’s overtime and when company is bad condition, company would decrease their overtime instead of dismissal. Although it seems that this overtime as means is satisfactory to employees, it is misunderstanding. Actually overtime problem is one of the serious problems in the Japanese labor market. The Labor Force Survey reported that the average Japanese in non-agricultural industries worked 46.1 hours per week in 1990 and 42.4 hours in 2001. Widespread working of overtime is partly due to the weakness of the labor union, but is also a direct consequence of the competitive tournaments that are used to determine promotions in Japan. Although overtime is necessary system to keep permanent employment, there is a situation that some people die due to work too much. Moreover, karoshi, death from overwork, is one of Japan’s serious social problems related to overtime. Furthermore, it is not good for children to not spend time with their parents. This overtime problem should be improved soon.
2. Difficult for non-new graduates to get a job
According to study of OECD, the length of employment for Japanese male workers is longer than in other developed countries (OECD employment outlook). Japanese worker rare left their first employer because although it is a well-organized entry market for new graduates to obtain jobs, for non new-graduates it is quite difficult to obtain new job.
The reason why Japanese enterprises tend to not accept non-new graduates is that as mentioned above in Japanese company it is quite important to do firm-specific training. Enterprises believe that by going through various trainings, employees become ace workers. Therefore, it is convenient for enterprises to employ young workers in one time. Thus, this system is disadvantageous for non-new graduates. In fact, people who lived from 1993 to 2004, generally these days is called shushoku hyougaki, when they were new-graduates, confronted difficult condition to get job. This generation continues to experience the same problem in now days because of limited of employment. Under the permanent employment, most workers tend to not quit their job. It means it is difficult to shift their job. In Japan, there is guarantee on permanent employment for existent workers. However, there is no such guarantee for non-new graduates and non-existent workers. In the near future, a widening gap between rich and poor is more serious problems than ever. Government and companies must consider to this generation and should act to solve this problem.
B. Recent socio-economic situation
Above two problems have existed even in old days. However, there are several problems connect to current social situation. Between 1950 and now, Japanese social situation extremely changed. There are two current social situation and these cause following problems.
Recently, the social status of women rises gradually. Female worker have increased in number in labor market. According to The center for the advancement of working women, although female worker was 1703(ten thousand persons) in 1955, it increased to 2725(same unit) by 2006★. This phenomenon is good for Japanese economy, and for female. Although female worker increase, many female worker quit her job before forced retirement because of marriage and pregnancy and child care and so on. In fact, the reason of female worker retirement is that marriage is 33%, pregnancy and child care is 30%★★. As seeing this data, it is clear that it is unpleasant working environment for female worker to keep her job. This problem relate to Permanent employment. As mentioned above, on the job training is important for promoting to worker’s rank, VMP and wage.
In generally, personnel departure tends not to let female-worker to hold important position because the departure has stereotype that female-worker would quit job soon. For personnel departure man is more important as labor force than women because most men work one enterprise permanently.
As result, ex-female worker tend not to return labor market. Why only female should quite job for household? In the past, most of Japanese people believe that women have to do housework and support her husband. However times have changed and people must get rid of their gender stereotype. Moreover, Japanese company and government should be female worker-friendly.
In addition, there is another problem. Declining birth rate and aging is one of serious problems Japan have. Dannkaino sedai, baby boomer who was born in 1940s, is going on retirement age. They quit job gradually and then Japanese worker supply will decrease sharply. Recent 60 ages is fine through advances in medical techniques, therefore retirement time should extend and the circumstance should be made that even more 60 can work. However, if retirement age can be extended, a new problem occurs. The problem results from seniority-based wage system. In short, it is impossible to practice this extending-retirement age scheme without abolishing seniority-based wage system. Enterprises will fail if they practice both systems. Seniority-based wage system can work with force retirement. Therefore, for extending force retirement age, permanent employment system must be abolished.
Ⅳ. Possible solutions
This section supposes possible solution of above problems. It is government and company responsibility to create convenient environment for all employee. Therefore they must solute above problems by changing traditional Japanese employment system. As solution of overtime, permanent employment should be abolished and introduce lay-off system. As mentioned above, overtime is used as one of method to avoid redundancies. If permanent employment is abolished, worker does not have to do irregular work. In short, worker faces fire instead of overtime. However, through enterprises make lay-off system, this worry can be solved. When enterprises must fire workers, enterprises have to give money and something to ex-worker in compensation for lay-off. The lay-off system is that while worker gets money from ex-enterprises, worker can look for new job.
In addition, labor union should administer circumstance of labor.
Second, here is solution of discrimination of non-new graduates. Permanent employment and seniority based wage system is obstacle to make comfortable circumstance for non-new graduates. For, through accepting pay system based on workers ability, enterprises try to employ efficient workers. It is good for enterprises that efficient worker work rational work within own enterprises.
1. Reduce irregular working hours(accept lay-off system)
2. Achieving a non-age-limit employment system
3. Provide opportunity for job training
4. Employ non-new graduates
5. company should estimate ability of each person
6. Improve day-care(female friendly)
7. Change working style(accept to work outside)
It is solution of wage problem stemmed from wage system based on seniority and lack of workers under declining birth rate and aging society that enterprises abolish permanent employment and seniority-based wage system. The delayed compensation model of Lazear (1979) rather explains why mandatory retirement is necessary. It argues that VMP (the value of marginal productivity) of a worker is greater than worker’s wage when the worker is young. As the worker stays in the company longer, worker’s wage grows faster, eventually exceeding worker’s VMP. Lazear notes that this delayed compensation contract with a steeper age-earnings profile gives workers an incentive to stay longer since they would not want to quit before the receiving the wage premium. In other words, by abolishing permanent employment, this wage system does not need. Solution is to abolish permanent employment and wage system based on seniority and then extending retirement age and converting traditional pay system into piece rate.
Ⅴ. Conclusion
In conclusion, although traditional Japanese employment system has practiced for long time, it is time to change the system now. Japan will collapse unless enterprises and government do something. There are many serious problems in Japan; death from overwork, discrimination of non-new graduates, non female-friendly and lack of labor force. However, these problems can be solved by changing traditional Japanese employment system. Now, it is time to change Japanese employment system and adapt it to the new circumstance.
(2003words)
Works Cited
Naohiro Yashiro nihonnteki koyoukankou no keizaigaku, Japan: nihon keizai keizaisha, 1997．
B. Recent socio-economic situation
Above two problems have existed even in old days. However, there are several problems connect to current social situation. Between 1950 and now, Japanese social situation extremely changed. There are two current social situation and these cause following problems.
Recently, the social status of women rises gradually. Female worker have increased in number in labor market. According to The center for the advancement of working women, although female worker was 1703(ten thousand persons) in 1955, it increased to 2725(same unit) by 2006★. This phenomenon is good for Japanese economy, and for female. Although female worker increase, many female worker quit her job before forced retirement because of marriage and pregnancy and child care and so on. In fact, the reason of female worker retirement is that marriage is 33%, pregnancy and child care is 30%★★. As seeing this data, it is clear that it is unpleasant working environment for female worker to keep her job. This problem relate to Permanent employment. As mentioned above, on the job training is important for promoting to worker’s rank, VMP and wage.
In generally, personnel departure tends not to let female-worker to hold important position because the departure has stereotype that female-worker would quit job soon. For personnel departure man is more important as labor force than women because most men work one enterprise permanently.
As result, ex-female worker tend not to return labor market. Why only female should quite job for household? In the past, most of Japanese people believe that women have to do housework and support her husband. However times have changed and people must get rid of their gender stereotype. Moreover, Japanese company and government should be female worker-friendly.
In addition, there is another problem. Declining birth rate and aging is one of serious problems Japan have. Dannkaino sedai, baby boomer who was born in 1940s, is going on retirement age. They quit job gradually and then Japanese worker supply will decrease sharply. Recent 60 ages is fine through advances in medical techniques, therefore retirement time should extend and the circumstance should be made that even more 60 can work. However, if retirement age can be extended, a new problem occurs. The problem results from seniority-based wage system. In short, it is impossible to practice this extending-retirement age scheme without abolishing seniority-based wage system. Enterprises will fail if they practice both systems. Seniority-based wage system can work with force retirement. Therefore, for extending force retirement age, permanent employment system must be abolished.
Ⅳ. Possible solutions
This section supposes possible solution of above problems. It is government and company responsibility to create convenient environment for all employee. Therefore they must solute above problems by changing traditional Japanese employment system. As solution of overtime, permanent employment should be abolished and introduce lay-off system. As mentioned above, overtime is used as one of method to avoid redundancies. If permanent employment is abolished, worker does not have to do irregular work. In short, worker faces fire instead of overtime. However, through enterprises make lay-off system, this worry can be solved. When enterprises must fire workers, enterprises have to give money and something to ex-worker in compensation for lay-off. The lay-off system is that while worker gets money from ex-enterprises, worker can look for new job.
In addition, labor union should administer circumstance of labor.
Second, here is solution of discrimination of non-new graduates. Permanent employment and seniority based wage system is obstacle to make comfortable circumstance for non-new graduates. For, through accepting pay system based on workers ability, enterprises try to employ efficient workers. It is good for enterprises that efficient worker work rational work within own enterprises.
1. Reduce irregular working hours(accept lay-off system)
2. Achieving a non-age-limit employment system
3. Provide opportunity for job training
4. Employ non-new graduates
5. company should estimate ability of each person
6. Improve day-care(female friendly)
7. Change working style(accept to work outside)
It is solution of wage problem stemmed from wage system based on seniority and lack of workers under declining birth rate and aging society that enterprises abolish permanent employment and seniority-based wage system. The delayed compensation model of Lazear (1979) rather explains why mandatory retirement is necessary. It argues that VMP (the value of marginal productivity) of a worker is greater than worker’s wage when the worker is young. As the worker stays in the company longer, worker’s wage grows faster, eventually exceeding worker’s VMP. Lazear notes that this delayed compensation contract with a steeper age-earnings profile gives workers an incentive to stay longer since they would not want to quit before the receiving the wage premium. In other words, by abolishing permanent employment, this wage system does not need. Solution is to abolish permanent employment and wage system based on seniority and then extending retirement age and converting traditional pay system into piece rate.
Ⅴ. Conclusion
In conclusion, although traditional Japanese employment system has practiced for long time, it is time to change the system now. Japan will collapse unless enterprises and government do something. There are many serious problems in Japan; death from overwork, discrimination of non-new graduates, non female-friendly and lack of labor force. However, these problems can be solved by changing traditional Japanese employment system. Now, it is time to change Japanese employment system and adapt it to the new circumstance.
(2003words)
Works Cited
Naohiro Yashiro nihonnteki koyoukankou no keizaigaku, Japan: nihon keizai keizaisha, 1997．
Naohiro Yashiro koyou kaikaku no jidai, Japan: chuukoushinsho, 1999
Naohiro Yashiro, et al. Japan’s Economy in the Year 2020, Japan: nihon keizai shinbunsha, 1995.
Subocz, Victor. “Training the Japanese Way.” Management Decision 26.1(1988): 59. Academic Research Library. ProQuest. ICU. 31 Dec. 2007
http://othmer.icu.ac.jp:2135/
★The center for the advancement of working women. 27 Jan.
http://www.stat.go.jp/data/roudou/longtime/zuhyou/lt01-01.xls
★★Ministry of health, labor and welfare. Figure 9. 27 Jan.
http://www.mhlw.go.jp/toukei/itiran/roudou/koyou/doukou/05-2/gaiyou.html
Subocz, Victor. “Training the Japanese Way.” Management Decision 26.1(1988): 59. Academic Research Library. ProQuest. ICU. 31 Dec. 2007
http://othmer.icu.ac.jp:2135/
★The center for the advancement of working women. 27 Jan.
http://www.stat.go.jp/data/roudou/longtime/zuhyou/lt01-01.xls
★★Ministry of health, labor and welfare. Figure 9. 27 Jan.
http://www.mhlw.go.jp/toukei/itiran/roudou/koyou/doukou/05-2/gaiyou.html
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