Japan’s big businesses once had a reputation for not firing workers even in hard times. Not anymore. Now major corporations are going full blast to restructure, with older workers bearing the brunt of the austerity drive. The lifetime employment system, once touted as a symbol of corporate Japan, is now in danger of collapse. So is the seniority-based wage system that forms the other main pillar of Japan’s employment system. Now an increasing number of companies are introducing a merit-based annual pay system and are trying to cancel automatic annual wage hikes that have been taken for granted for decades.
All this, of course, is causing much suffering to millions of white-collar workers who have pledged lifelong allegiance to their companies. A tragic demonstration of this occurred in mid-March at the head office of Bridgestone Corp., a top tire maker, where an angry employee committed suicide by disembowelment in protest against restructuring. In a statement addressed to the president, the worker said he “has loved Bridgestone so much and will continue to love it so.”
Japanese companies often discharge employees more harshly than U.S. firms. In America, workers are laid off on the basis of seniority. During a business slump young workers are the first to go, but older workers are rehired first if things begin to improve. In Japan, older employees are let go first, without regard for seniority, and have little or no chance of being rehired even if business starts picking up.
Japanese employers prefer young workers, not only because it costs less to employ them but also because they can be trained more easily. So even in good times it is difficult for jobless workers in their 40s and 50s to find new employment. And the few jobs that are available usually pay less than previous ones.
Under the seniority wage system, young workers start with low wages and begin to receive full wages only when they reach the upper rungs of the promotion ladder. In this sense, lifetime wages are paid on a deferred basis. Yet many older workers are being forced to leave at the very time that they are beginning to reap the fruits of their longtime service. Letting them go first may be a rational thing to do for cost-conscious employers, but it is unfair to long-term workers.
In America, which prohibits age discrimination in employment, companies cannot recruit, hire, promote or dismiss workers based on age. In Japan, however, only recently did legislation take effect that bans discrimination against women in such practices as recruiting and hiring. Older workers in general, almost all of them male bread earners, are left out in the cold.
Japan’s system of company unions — whose chief aim is to promote teamwork with management — is making them less than enthusiastic about protecting worker’s rights. A case in point is the union of the defunct Yamaichi Securities Co., which was said to be powerless at a time of crisis.
The jobless in Japan are less fortunate than those in other industrialized nations of the West. Jobless benefits, for example, are paid in this country for 90-300 days, compared with 156-832 days in Germany and 91-821 days in France. As corporate pension plans go, job hoppers here also have a disadvantage: Retirement plans are not portable as they are in America. Japanese pensioners, meanwhile, are hard hit by near-zero interest rates that generate little income from their savings. Unlike American retirees, they have few incentives to invest their nest eggs in the stock market.
Given these harsh realities, plus the severest economic slump yet in postwar Japan, it would be counterproductive to make outright job cuts American style. In today’s Japan, such drastic work force reductions would only increase worker anxiety, erode consumer confidence and further prolong the slump.
In recent years, however, the U.S. government and the American Chamber of Commerce in Japan, among others, urged the Labor Ministry to make changes to the employment system and labor laws that would lead to the demise of the lifetime employment system. How the ministry will respond bears watching.
In a recent U.S.-Japan trade white paper the ACCJ said Japan’s “overregulated labor market” stood in the way of investment and business expansion, and called for legislative changes so companies could dismiss workers more easily when introducing new technology or relocating factories and offices. In other words, the report urged Japan to adopt something similar to the U.S. layoff system. To the nation’s white-collar workers, this is disturbing, particularly at a time when troubled Japanese companies are trying to emulate the ways of booming American corporations.
U.S. bond rating services also put a negative spin on the lifetime employment system. Last summer, for example, Moody’s Investors Service downgraded its long-term debt rating on Toyota Motor Corp. following a statement by a Toyota executive confirming that Japan’s largest carmaker would stick to the lifetime employment policy. In an apparent move to stave off similar downgrades, one major firm after another came up with job-cutting plans.
European countries like Germany and France, however, impose restrictions on worker dismissals that are at least as severe as those in Japan. There is no need to make American-style layoffs a global standard. Japan, which has its own labor market and social systems, cannot go ahead and make it easier only to discharge employees while keeping other systems and practices intact.
In order to avoid tragedies involving older people thrown out of work, Japan should maintain its traditional labor practices, at least for the time being. Pressures for job reduction should be eased as much as possible through restriction of overtime work, furlough and work sharing. The government, meanwhile, should do more to expand or improve job placement agencies and vocational training facilities in order to help older workers change jobs.
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