In the 50 years since the end of World War Two, the Japanese style of working life has blossomed. Throughout Japan’s high growth period, the Japanese employment system was able to provide great rewards to those who contributed to the company, and it gave rise to individual lifestyles which centred on the company. However, the circumstances underlying the Japanese employment system are undergoing change, as are the attitudes of the Japanese population towards it.
(The Origins and Spread of the Japanese Employment System)
The core elements of the Japanese employment system, namely long term employment, the seniority wage system, and enterprise unions, gradually emerged as a central facet of Japanese society from the 1920s onwards along with the large-scale modern industries first established in that period. In other words, these systems were above all introduced by large corporations in order to counter the large scale layoffs of the previous period. (See Figure I-2-1.) Their objectives were to develop a heavy chemical industry and other modern, skilled industries by promoting the widespread use of electric power and the introduction of Western, especially American, advanced technology.
The Japanese employment system therefore, given the dearth of the type of workers essential to the standardization, demarcation, and specialization of jobs in the new, large corporation, sought to foster the necessary industrial skills, and was therefore economically rational. The system became further established in the post-war years for a number of reasons, including the advent of the high economic growth era, the ample supply of young workers, the demands of catching up with the advanced economies of the West, and the high demand for skilled workers.
(The Nature of the Japanese Employment System)
The main characteristics of the Japanese employment system include ”long term employment”, where an individual works for the same company for a great many years, the ”eniority wage system”, under which remuneration rises with age and length of employment in the same company, and ”OJT (’on the job’ training)”, under which an individual learns his skills within the corporation.
Comparing trends in ”long term employment” with those of advanced Western countries, although Germany, France and others have a similar proportion of long term employees, Japan’s trend is relatively stronger due to the higher proportion of workers employed for over twenty years in the same company. These Western countries also exhibit a similar pattern of remuneration progressively rising with age group. However, the rate of increase is far higher for Japan. (See Figure I-2-3.)
(The Rationality, Merits and Demerits of Long Term Employment)
The Japanese employment system is rational in a number of ways. Long term employment makes for more effective labour force and personnel decision making, since the capabilities of a workforce can be carefully tracked over long periods of time. It also gives companies the chance to nurture company-specific skills in their workers, such as working effectively with fellow employees, mastering particular machines, and operating efficiently within a particular corporate structure or business environment. The system also helps reduce a company’s recruitment and training costs, and from the point of view of employees, the costs of looking for work. Furthermore, it facilitates the breeding of mutual loyalty between the company and its employees, stimulates the exchange, sharing and accumulation of knowledge within the corporate structure. The merit of the system from the point of view of workers is that employment is generally stable and guaranteed over a long period of time, thus removing uncertainty from their lives and facilitating lifetime planning.
On the other hand, it is pointed out that the need to compete relentlessly over much of one’s lifetime, and the ambiguity of work allocation, which are effects of the employment system, can often result in long working hours and make it almost impossible to enjoy one’s paid holiday entitlement. It is argued that these characteristics of the system give rise to the phenomenon of the "corporate servant" whose body and soul belong to the company.
(The Rationality, Merits and Demerits of the Seniority Wage System)
Many explanations have also been offered for why remuneration should increase with age and length of employment. One explanation is that remuneration rises in this way because the longer an individual works for one company, the greater his productivity, since he accumulates more skills, in particular company-specific skills. Since such a seniority wage structure builds loyalty towards the company, it is intimately linked to the long term employment aspect of the system.
A further point is that a remuneration structure where an employee receives a wage below his productivity level when young and a wage above his productivity level when old implies a borrower/lender relationship between employee and company. Thus, a young worker can be viewed as making an ”investment” in the company. As a result, if a company’s growth is slower than expected, and given that the proportion of older workers will increase over time, those older workers, whose wages are higher than their productivity, will come to constitute a burden on the company.
(Lifetime Competition and the ”Company Servant” in the Japanese Employment System)
The seniority system clearly cannot be viewed simply as, ”an attractive system from the standpoint of employees because by simple virtue of prolonged employment both remuneration and status increase.” In reality, the system promotes ruthless competition within the company. For example, in a world of internal promotion, postponing the inevitable creation of promotion and wage differences, serves only to perpetuate such competition. Such a system means that the company makes ever greater demands on the individual employee, and when taken to the extreme employee behaviour may verge on that of the ”corporate servant”. On the other hand, this ”corporate servant” behaviour may also be interpreted as rational in that, under such a competitive seniority system, employees enjoy the benefits of a steep wage curve and promotion.
(The Origins of Change in the Japanese Employment System)
The Japanese employment system took root because of its economic rationality in historical context, and persisted for that same reason. However, as circumstances change, so the system changes also.
Two major historical conditions supporting the Japanese employment system were a workforce structure with a large proportion of young people and Japan’s high growth rate. In recent years however, the Japanese workforce structure has aged noticeably, and the high economic growth of former years is not expected in the future. As a result, the appropriateness of the Japanese employment system is becoming the subject of widespread debate.
(The Nature of Change in the Japanese Employment System)
What then are the principal changes underway in this employment system?
Looking first at the seniority wage system, wage curve by age group for male university graduates working in supervisory, clerical,or technical positions has become less steep since 1970. On the other hand, there has been little change in the wage curve for male high-school graduates in production jobs. (See Figure I-2-7.) This difference is explained by the fact that production workers only ever enjoyed a relatively weak seniority wage system, whilst the steep wage curve of supervisory, clerical, and technical workers is undergoing adjustment.
An oversupply of managerial staff has emerged in the labour market (see Figure I-2-9), and promotion to manager and senior manager positions is now taking longer (see Figure I-2-10). The number of managerial positions has also been declining since 1993. (See Figure I-2-11.) From the corporate point of view, this can be interpreted as an attempt to reduce the managerial workforce to an appropriate level, whilst for individual employees it means more limited access to managerial positions.
(The Implications of Change in the Japanese Employment System)
The seniority aspect of the Japanese employment system is undergoing adjustment, with the result that, in some cases, companies are finding it difficult to repay sufficiently the ”investment” made by their employees.
These sorts of changes are reducing the expections of employees towards their employers, and may eventually reduce the centripetal force of the corporation.
On the other hand, declining expectations of traditional kinds of ”remuneration” under the Japanese employment system may also serve to erode the rationality behind ”corporate servant” behaviour.
(Attitudes toward Change in the Japanese Employment System)
Change in the Japanese employment system is also causing changes in the attitudes of employees. Companies are decreasingly able to provide ”corporate servants” with their traditional remuneration in the such forms as promotion and wage increases, and the logic of ”corporate servant” behaviour is waning.
(The Background to the Changing Attitudes of Employees)
The fact of the matter is that companies are no longer able to sufficiently satisfy the expectations of employees. If we compare the salaries of young workers when they enter a company and at a point some years later for different generations of young workers, we find that the real wages of people born between 1935 and 1939 increased by 4.8 times between the age brackets of 20-24 and 40-44, whilst the real wages of people born between 1950 and 1954 increased only twofold over a similar period of employment. (See Figure I-2-16.) Whilst real wage growth is a joint function of corporate growth and overall economic growth, it is also reasonable to assume that real wage growth in the past engendered corporate loyalty in many individuals. Now, in contrast, the younger the generation, the smaller the real increase in wages over the same period of time, which has the effect of reducing an employee’s expectations of his company.
As a result, the proportion of Japanese favouring the traditional seniority system is declining, whilst the proportion favouring a changeover to a meritocratic wage system is increasing.
(Trends in Attitudes towards Leisure)
The importance people attach to leisure activities is increasing as the attitudes of employees change and the number of working hours falls. Investigating people’s preference for either more free time or more income reveals that the proportion of Japanese emphasizing income is declining, whilst that in favour of more free time is increasing. Moreover, there is an increasing preference to spend free time away from the company. A survey of new employees asking with whom they spend their free time shows that a decreasing proportion spend it with ”company colleagues and superiors”, and an increasing trend towards spending it with ”friends from outside the company”. Thus, it is clear that Japanese employees increasingly prefer to spend their free time away from the workplace. (See Figure I-2-26.)
(The ”Company Servant” and Changing Attitudes of Working People in Japan)
The logic underlying the attitudes and behaviour of the ”corporate servant” is gradually being retreating, and many employees themselves are also rejecting this mentality. However, both attitudes and behaviour differ amongst generations. Members of the middle and older generations are confused about how to respond to the growing gap between what they expect from their companies and the benefits they actually receive.
(The "Conscientious Worker" Mentality of Japanese in their Twenties)
In contrast, the young generation is beginning to espouse a new working mentality. In the ”National Survey of Lifestyle Preferences” participants were asked for their opinion on the statement, ”I don’t mind making sacrifices in my private life for a job that I enjoy.” In the case of male respondents, the percentage answering, ”I agree” (the sum of those answering ”I agree” and ”I probably agree”) was highest for those in their 50s, declining falling for those in their 40s, and falling further for those in their 30s. However, the percentage for men in their 20s recovered to almost the same level as those in their 50s. For women, on the other hand, the proportion answering, ”I agree,” was lower the older the generation, and was highest for those in their 20s.
(See Figure I-2-27.)
In the same survey, participants were asked to respond to the statement, ”It is better to change jobs than remain with one where you cannot fulfill your capabilities or aspirations.” The proportion of 20-year olds agreeing with the statement was far higher than the proportion of 50-year olds, demonstrating that, compared to those in their 50s, Japanese in their twenties attach far greater importance to using their abilities than to simple corporate loyalty.
The Japanese employment system, born in the 1920s, was widely adopted during the high speed growth era. However, certain aspects of the Japanese employment system are undoing change, a processed mirrored in the attitudes of Japanese employees. As a result of these changes, some companies are finding themselves unable to fulfill sufficiently the expectations of their employees: there is increasingly a mismatch between what employees expect and what companies offer.
At the same time, these changes are undermining the logic of ”corporate servant” behaviour, and employees are beginning to achieve a better balance working and private lifestyles.
With the greater participation in the Japanese workforce of women and the older generation, the process of change is certain to continue. As the proportion of women and old people in the workforce rises, so also will the demand for an employment structure which offers a greater variety of working lifestyles, and which permits people to ”start again” or ”change direction”. Finally, it is important to realize that such an employment structure would also give male workers a greater choice of working lifestyle.
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