Drastic steps needed to rework Japan's employment system
AKIRA YAMAGUCHI, Nikkei senior staff writer
TOKYO -- Fresh off a decisive victory in last month's lower house election, Prime Minister Shinzo Abe and his government are expected to tackle job market reform. But revamping Japan's rigid employment system will require drastic steps, such as changing the way corporate jobs are structured.
Proposed reforms include scrapping the three-year limit on temporary positions, as well as doing away with the so-called white-collar exemption, which paves the way for employers to pay white-collar workers by results rather than by hours.
Businesses hold that these reforms will boost competitiveness and enable them to respond more flexibly to workers' diverse needs. Labor unions and employees disagree, arguing that such changes will increase the number of temporary positions with no job security, as well as overtime.
The traditional labor system makes getting hired by a Japanese company more akin to becoming a member of an institution, argues Keiichiro Hamaguchi, research director at the Japan Institute for Labour Policy and Training, in his book "Wakamono to Rodo" ("Young People and Labor").
Once employed as a full-time worker, the person assumes the obligation to do any job, anytime and anywhere, as ordered by the company. Job security until retirement and seniority-based pay are offered in return, effectively setting the person up for life.
A company serving as an in-house job market is another characteristic of Japan's lifetime employment, according to Hamaguchi. Workers are hired as members of the company rather than for specific tasks, so they can be transferred and reassigned as management sees fit.
New paradigm needed
This system worked to support Japan's rapid economic growth after the war, with full-time male workers as the backbone of the nation's labor force. It then began to collapse following the bursting of the bubble economy in the late 1990s. Yet the framework remains dominant, which in turn has exposed fissures as full-time jobs disappeared and those managed to remain employed faced long overtime hours.
One way to breathe new life into the system is for companies to start hiring workers for specific tasks not necessarily intended for long-term employment. This will increase the frequency of job losses, since it will spell an end to the internal market. But it will also likely help put in place a wage system based on work done rather than years at the company.
Another path to boosting the economy's growth potential is to bolster the ranks of the self-employed.
This group, including those at family businesses, accounted for roughly half the worker population in Japan until the 1950s. The share has continued to fall since then and stands at around 10% today.
The economy benefits greatly from helping and nurturing those who choose the path of working for themselves. A stronger entrepreneurial spirit will likely lead to more people starting businesses and creating innovations.
And since the self-employed tend to work from home or locally, it will also likely help build more vibrant communities.