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Japan: Abe Snapshot

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  • Japan: Abe Snapshot

    Since Adam Smith promoted the division of labor as the path to “universal opulence” in the 17th century, it has been the engine of productivity and a major determinant of social structure. Changes in the division of labor portend changes in the division of property, power, and social honor. For most of the post-World War II period, Japan’s most significant division of labor has been between regular正規employees, unlimited in duties or duration of work (i.e. permanent or “lifetime employment,” more common for males in larger enterprises), and non-regular 非正規employees (various kinds of limited term contracts or hourly wage jobs, generally more common for women and in smaller firms). The social order created by this division of labor was seen as a fair reflection of results of meritocratic educational competition and taken-for-granted gender roles; perceived fairness contributed to Japan’s postwar social stability.

    In the early 1990s, Japan executed a managed drawdown of regular employees as firms struggled to cope with effects of the collapse of the famous asset bubble. The concurrent, sharp rise in non-regulars -- from about 10% in 1990 to about 40% of the labor force today (and more than 50% of younger workers (Morioka 2013)) -- has given rise to insecurity and anxiety.1 Competition for good regular posts is intense; some posts, while regular, are not good, and about a fifth of non-regulars want regular employment but can’t find it (MHLW 2013, 30-32). Only 41.5% of available jobs are regular positions (Mainichi Shinbun 2014). Meanwhile, regular workers may face demands for increased productivity that diminish the status advantages of regular employment. The status gap between workers in the two types of employment, however, still represents differential life chances – time binds and work-life imbalance for better compensated regulars, and underpay and poor career possibilities for non-regulars, who get less respect and may receive less than a living wage for a nearly 40-hour workweek. The relative poverty of the working poor is linked to delays in marriage and consequent birthrate declines. This growing imbalance in (and between) the lives of regular “core” and non-regular “peripheral” workers is starting to threaten social reproduction and Japan’s long-term social stability.

    Prime Minister Abe has proposed reforms to create within five years “a society with flexible and varied ways of working,” and “World Top-Level Employment Environment and Workstyle” as part of his economic stimulus plan known as “Abenomics.” Comprised of “three arrows,” the goal of Abenomics is to free Japan from the grip of deflation. Having more or less hit the mark with the first two arrows of fiscal and monetary stimulus (business profits and the stock market rose dramatically, while the value of the yen fell by about 20 percent against the US dollar), the government is now readying the third arrow, a legislative package of more than 30 structural reforms, that experts say are needed to consolidate and continue the recovery. These reforms include labor deregulation intended to diversify employment possibilities through development of a more fluid labor market. That is, an historic shift from support for employment stability to support for mobility. To some extent this is already being realized. There are today about as many jobs as job seekers in Japan and the main measure of unemployment puts it at around 4 percent. Employers foresee labor shortages, which may force them to raise wages. To remain competitive firms want greater flexibility to allocate labor as needed by dismissing some workers and making increased use of less costly non-regulars. But, at the same time, they do not want to lose the high level of dependable commitment that they have been able to get from their regular, core workers, whose “lifetime employment” binds them to the firm. Their continued existence also constitutes the bedrock of workplace hierarchies through which power is exercised.

    Limited regular employment (gentei seiki koyou限定正規雇用)2 is offered as a solution that fits the needs of both workers and employers. This paper offers a preliminary analysis of this proposed labor reform, which is expected to pass through the Diet during debate on labor laws and the establishment of special economic zones that are part of Abenomics in the summer of 2014. A hybrid solution to the growing gap between regular and non-regular work, there is as yet no consensus about gentei, but just over half of larger firms (300 or more employees) already have such employees and the trend is spreading (Hokkaido Shinbun, 2013). In legitimizing this intermediate category in the division of labor by setting rules for gentei work, the debate will have important implications for employment ethics, contractual norms, and relations in production, as well as for the lives and careers of people in Japan and the viability of Japanese companies. Following a brief overview showing where gentei employment fits in the recent history of employment practices, this paper outlines six key viewpoints in the debate and discusses the interplay of their positions. Conflict between these six camps represents the common alignment of forces on many emerging labor and social issues in Japan. Limited regular employment is thus a window on the relative influence of social forces determining Japan’s trajectory, their implications for social structure and fairness, and the possibilities for economic revitalization.

    Japan’s Dual Employment System: Core and Periphery

    The stereotypical image of postwar Japanese companies is that they are communities organized for their members’ mutual benefit (Rohlen 1974). However, Japan’s core employment, the famous “lifetime employment” or “permanent employment,” did not represent employer ideals. It was actually a temporary expedient that companies used to retain skilled labor during the high-speed economic growth period (1955-1973). Its prevalence has been consistently overstated. That firms recruited employees only from new graduates was also a myth. Even in the heyday of this notion, 50-80% of hires were experienced workers, and, while larger firms recruited new workers straight out of school, smaller ones could not do so until after the 1980s boom in college graduates (Levine 1983, 26). Despite labor force growth, the external job market was relatively underdeveloped. Still, three or more changes of employer were the lifetime norm in Levine’s somewhat speculative calculation in the early1980s (Levine 1983, 27) and Cole (1979, 88-90) also reported separation to be far more common than staying with a single firm throughout a career. The stability of the system was the result of expanding job opportunities inside firms due to rapid economic growth and accompanying labor demand. These career opportunities were available almost exclusively to men.

    Although unlimited lifetime employment with a single employer did not describe most Japanese careers, in time it came to inform ideals about social and productive relations between labor and capital (and men and women) in Japan. Focusing on practices of larger firms, foreign and domestic scholars promoted these ideals as sources of Japanese competitiveness and strength. “Theory Z” Japanese-style management spawned imitations in the West in the 1980s, but no longer. As the economic growth and expanding job opportunities that sustained pursuit of the Japanese ideal disappeared, Japanese managers increasingly adopted America’s neoliberal creed. Forms of contingent employment expanded rapidly after a wave of labor market deregulation in 1994. Companies today are continuing to rapidly dismantle costly traditions of employment security. The dilemma they face is how to get more use out of non-regulars and move away from a system of seniority and continuous tenure, still accepted by most workers as the non-contractual basis of contracts, without destroying the moral authority of workplace power relations rooted in age-graded (and gendered) hierarchies. Moreover, courts have interpreted existing laws according to the “common sense of society” that, in exchange for worker loyalty and obedience, employers are responsible for worker well-being and social stability. Legislating social stability from the bench has severely restricted both employers’ legal right to dismiss workers and regular employees’ ability to resist even extreme employer demands (Foote 1996; Yamakawa 2007; Upham 2011).

    Consequently, employers have sought flexibility through more intensive use of regular workers (whose commitment and obligations are unlimited) and increased use of heretofore marginal, cheaper types of labor, such as fixed-term or occupationally restricted contract workers, temporary agency dispatched workers, and expanded use of part-timers, including the oxymoronic “full-time part-timers.” Issues arising from ad hoc reshaping of employment categories, rules, and practices at the firm level are reflected in resulting legal challenges. Typical are:

    -suits claiming contracts were illegally terminated
    -suits over the status and duties of dispatch workers
    -suits about unpaid overtime
    -suits claiming wage discrimination
    -suits about death from overwork (karoshi)
    -suits about suicide and depression caused by overwork
    -suits involving exploitation of trainees, many from China
    -suits resulting from American-style “lockout firings”
    -suits related to “black corporation” practices, including harassment, abuse, and false promises.

    Abenomics and Employment Reforms

    The Abe government’s proposed employment reforms are the work of a policy incubator called the Industrial Competitiveness Council (産業競争力会議), which Mr. Abe chairs. Its proposals are a big part of a package of 30-plus new laws for economic revitalization being developed under the Nihon Keizai Saisei Honbu Japan Economic Revitalization Taskforce (日本経済再生本部), a cabinet-level gathering also under the prime minister’s leadership. The overall name for these policies is “new growth strategy” (新成長戦略), dubbed Abenomics, a label the Prime Minister and his party have propagated and embraced. Early successes allowed Abe to announce to the world that, “Japan is back.” He now says the reforms are at a critical point and he is calling on the legislature to become a “Favorable Environment Realizing Diet”3 that will pass the “third arrow” package of laws and show the world that Japan is making concrete progress on long-standing structural issues.



    The three arrows of Abenomics (Source: Office of the Prime Minister)
    How the legislative process will play out will be interesting to watch, but Mr. Abe’s coalition government controls a legislative majority, and the general outline of his plan is clear enough in documents from Abe’s Industrial Competitiveness Council. Composed of politicians, academics, and business leaders, the Council has no labor representatives. The plan calls for strengthening competitiveness through a rush of changes that will correct distortions – under-investment, over-regulation, and excessive competition – to give Japan ability to win in global competition. The Council’s discussions have given prominence to a number of long-simmering business community demands intended to boost the international competitiveness of Japanese exporters and resolve thorny employment issues that have been grounds for domestic legal action. Taken as a whole, the employment reform aspects of Abe’s 3rd arrow aim to normalize and support existing employer practices, including rewriting work rules and employment contracts to permit “varied types of regular employment.”

    In the run up to parliamentary debate on the legislation some “trial balloons” have been floated to test the strength of the opposition. For example, reforms to Article 16 of the Labor Standards Law, the portion that regulates dismissals, were suggested, but it appears they may not be part of the final package at this time.4 The proposal for an American-style system of separation payments drew particularly harsh criticism. Nor it seems will there be separate labor contract rules in special economic zones that Mr. Abe has proposed. One incarnation of that idea would have allowed practices introduced by companies having headquarters in special economic zones (Osaka, Tokyo, and Nagoya were mentioned) to be introduced in all of the firm’s locations throughout the country. This was shot down by the Ministry of Health, Labour and Welfare (MHLW), which refused to countenance drafting and enforcing a dual labor regulations regime (Nikkei Shinbun 2013b).

    Now that the plan has been streamlined for easier passage through the Diet, what will it look like? An overview taken from the most recent report of the Industrial Competitiveness Council entitled, A Society Where Everybody Participates (全員参加型社会), simultaneously conveys feelings of “total mobilization” and equality of opportunity. The elements below relate to employment system reforms and “strengthening of human resources” (Prime Minister’s Office 2014).

    1. Labor mobility without unemployment. Construction of a society with employment opportunities such that young people, women, and the elderly can be active and their abilities exercised to the fullest extent. Funds previously paid to firms to support employment stability will be used to help workers move between jobs without gaps. Between jobs, workers will take training courses offered by personnel businesses created by the new system. Funds may also be used for on the job training. The aim is to redeploy workers to areas of the economy where labor demand is growing.
    2. Reform the employment insurance system to provide up to 60% of the cost of retraining and enable young and unemployed workers to “career up” or change careers. By 2016 the budget for these training and mobility funds will exceed the current budget for employment adjustment support (雇用調整助成金).
    3. Make available to private sector personnel businesses jobs information formerly available only through the MHLW’s “Hello Work” employment centers.
    4. Change the dispatched worker law, eliminating almost all limits on using temp staff. Emphasize matching of supply and demand rather than worker protection.
    5. Revise from 5 to 10 years the period of time before which non-regular workers with specialized ability and or high salaries of a certain level have the right to apply to transition to regular worker status.
    6. Expand the portion of the short-hours labor force that is protected from discriminatory treatment (by eliminating the requirement of an “unlimited” contract as prerequisite for receiving legal protection).
    7. Admit more skilled foreigners under a point system.
    8. Realize Japan as a place where women can shine. Improve childcare options; create a neutral tax and social benefits system to allow choice of workstyle; lead through the PM’s office by establishing therein an office of “information dissemination.”

    9. A three-part set of employment rule and work hour reforms to create varied ways of working (三位一体の労働時間改革). These provisions would limit working hours for some workers, strengthen efforts to get workers to take paid leave, and expand discretionary labor for workers in occupations where hours are difficult to calculate. This includes exempting employers from having to pay overtime premiums to discretionary hours workers and simplifying procedures for registering workers as exempt from work hour regulation.

    Reform in these areas will reduce employer uncertainty and associated hesitancy about expanding the hiring and use of workers who are neither regular nor non-regular. In fact, about 50% of larger firms have already introduced some form of limited regular employment. Common examples include: employment limited by location (limited to one location, no transfers); by job (duties are limited); and by hours of work (no or low overtime).5 Workers who want to limit their commitment, avoid transfers, escape unlimited demands, and avoid long hours, especially unpaid overtime, embrace gentei employment. This group includes married women and mothers, young people, and some older workers whose pensions are inadequate or who want to remain active in later life.

    Mr. Abe thus proposes a framework of legal rules to support what many firms are already doing. Why then is it attracting so much attention and comment? Establishing a clear legal framework for gentei seishain will stimulate expansion of this more flexible and profitable form of employment, creating a potential win-win-win situation for firms, workers, and the nation. But at the same time, gentei seishain employment legitimates a semantic contradiction that threatens to corrode the concept of employment. Heretofore, seishain – regular employee – has impliedmugentei “unlimited” or “permanent” employment akin to family membership. Gentei seishain – “limited regular employment,” with termination or departure rather than permanence expected – directly contradicts the established common sense of “employment.” Normalizing this contradiction is certain to create confusion, even as it papers-over the gap in life chances between core and peripheral workers. Responses to Abenomics employment reform proposals thus reflect feelings about the general direction of contemporary Japanese society, the struggle to balance economic transformation with social fairness in particular. As the legislation heads for deliberation in the Diet, what is the range of opinion about the outcome of these proposals? Will the new division of labor liberate animal spirits and renewed hopes of growth, as Mr. Abe argues? With what consequences for workers? We turn now to summarize six points of view that represent the range of opinions in the debate on this issue.

    http://www.japanfocus.org/-Scott-North/4106

    Scott North is Professor of Sociology in the School of Human Sciences at Osaka University. He is the author of The Work-Family Dilemmas of Japan’s Salarymen, in Men, Wage Work and Family, edited by Paula McDonald and Emma Jeanes (Routledge, 2012) and other papers on work and family life in Japan.


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