Japanese Employment Practices

multinational EMPLOYMENT RELATIONS TO WHAT EXTENT THE Nipponese EMPLOYMENT PRACTICES HAS CHANGED AFTER THE ECONOMIC CRISIS? pic SINTHIA NOVA Student ID 2724881 14th may 2009 Table of Contents INTRODUCTION3 handed-down JAPANESE MODEL OF EMPLOYMENT SYSTEM4 THE CHANGING NATURE OF JAPANESE EMPLOYMENT SYSTEM5 1. Sources of change5 2. Life period physical exercise6 3. Seniority-based Pay and Promotion System7 4. Enterprise Unions9 CONCLUSION9 REFERENCES10 INTRODUCTION In the post-war period, Nipponese manufacturing companies significantly maturationd their share of the global market of automobiles (Automotive newlys-Market Data Book, quoted in Womack, Jones, and Roos 1991, 69) as well as achieving more than 50 percent of the world markets in cameras, idiot box recorders, watches, calculators, microwave ovens, motorcycles, and colour televisions (Oliver and Wilkinson 1992, 5). Much of this success was attributed to the forms of human-resource Man come onment found in Jap anese companies (Abegglen and Stalk 1987 Clark 1987 Dore 1990 Tachibanaki and Noda 2000).However, during the period of Asiatic Financial crisis and economic recession for just about of the 1990s, the true Japanese features that supported comparatively high cognitive operation until the late 1980s came in for severe criticism. Considering the high performance of the US economy in the 1990s, Neoliberals, based on the universal relevance of liberal markets, argue that the Japanese form is dead, and that Japan must (and will) adopt the US liberal market model (Lindsey and Lukas, 1998 Lin, 2001 Dornbusch, 1998 Krugman, 1996).By crease, m both theorists of institutionalism, based on contextualized efficiency and path-dependent national patterns, vociferation that Japan continues its path-dependent national model due to its unique culture taken for disposed(p) within the culture the interconnectedness of institutions and agents efforts to utilize the comparative advantages of thei r institutions (Dore, 2000 Green, 2001 Isogai et. al. , 2000 Chesbrough, 1998 DiMaggio and Powell, 1983 Hall and Soskice, 2001).However, neither the neoliberals argument for simple convergence towards a liberal market economy nor the institutionalists claim for the continuation of the original Japanese model can explain the dynamic changes happening within the Japanese model at the turn of the century. In this report, the fresh trends of Japanese employment relations will be examined. Two questions have been addressed here. First, why the tralatitious Japanese employment frame has been changed.Second, to what extent has ER system has been changed? To answer these questions we will first examine the traditional Japanese model and then after considering some issues relating to the reasons of this change, we will analysis the current trends to observe out the extent of modification in a effect of typical ER puts. A discussion of the implications of these changes is then be presen ted, followed by the conclusion. TRADITIONAL JAPANESE MODEL OF EMPLOYMENT SYSTEMJapan is a complex, dynamic society that has belowgone enormous change in the past 125 old age, converting itself from a feudal soil into a modern industrialized nation and an economic superpower. In doing so, the Japanese have been able to copy Western technology, science, education and politics, while still tutelage their unique cultural unmarriedity. One distinct feature of Japan that separated it from former(a) Asian countries was it collective culture which has been carried over to the companies (Kashima and Callan, 1994).As an employee, an individual identitys with a larger entity through which one gains pride and feeling of being part of something significant, tying an individuals prestige directly to the prestige of his or her employer. Typically, the high society is seen as a provider of security and welfare. To a large extent, loyalty to the union surpasses the family bond. The core pri nciples of Japanese employment model is the so-called THREE unnameable TREASURES (sanshu no jingi) of Japanese steering. 1)The lifetime/long term employment system (shushin koyo) The terms long-term or enduring employment are used synonymously to describe lifetime employment, which was established at many companies during the period of high economic growth during the 1960s. The concept of lifetime employment emerged as a exit of the peculiar aspects of Japanese employer-employees relations that were supported by narrow labour markets during the post-war period when Japan experienced a labour shortage for the first time in her industrial history.This system developed and was established at many large and mid-sized companies during this period of high economic growth. With rapid technology innovation and expansion of byplayes, large-sized companies hired inexperienced manpower directly from the labour market and through in-house training and development programs these proles de veloped various skills and techniques. (2)The system of seniority-based enlist and promotion (nenko joretsu) here(predicate) status and seniority are tied to length of service, rather than to job duties or deservingness.According to this system, the decisive factors determining pay are the length of service, age and educational background, not the work performed. The system goes hand-in-hand with the lifetime employment. Traditionally, the seniority-based reward system had two different aims. The first was to advance an employees career and provide financial compensation based on a gigantic social considerations and personal qualifications, such as the age and education level of employees. The second was to make gigantic use of non-cash boot benefits for employees and their families. 3)Enterprise marriage ceremonyism (kigyobetsu rodo kumiai) Another primary(prenominal) characteristic of Japanese employment relations are effort-based totalitys. In Japan, unions are organiz ed at the enterprise level, collectively bargain with a single employer, and conclude collective agreements on the enterprise level. According to Inohara Enterprise-wide unionism specifically expresses the workplace in terms of union membership. In principle, it organizes all regular employees of a company indiscriminately into one union, i. e. it is an employee agreement on the basis of where they work (company) and not what they do (occupation or skill). such(prenominal) a labor union is not dominated by the company it represents the workforce, and as such, enjoys appropriate prestige and benefits provided by the company. Relations between guidance and the union are between insiders, namely, all the members of the union are company employees. Intervention by outsiders such as industrial and national labor organizations, outside clientele agents, or attorneys is not tolerated. THE CHANGING NATURE OF JAPANESE EMPLOYMENT SYSTEMSources of change Prior to summer of 1997, the Japane se system guaranteed easy access to affordable capital and raw materials was supplied by a loyal and devoted labour force (at the time of labour shortage) which facilitated market expansion. However, the market became saturated and the economy slowed down, these hawkish advantages were turned into liabilities. Keiretsu banks found themselves saddled with bad debts from group companies, inter-group purchasing became barriers to cost reduction, and excess size of an albeit loyal labour force was viewed as a hitch to struggling companies.Japanese companies were also reacting to the data revolution and were left behind by their American counterparts. Although, most Japanese companies have found change at a quick pace too much to ask they had to adopt foreign practices and policies in order to survive. Deregulation is another force for change. It has made Japanese markets more accessible to competitors, foreign as well as domestic. In heretofore-protected industries like financial se rvices, distribution and agriculture few firms are prepared for the blast of competition and uncertainty (Lincoln and Nakata, 1997).The aging population also has clear implications for corporate employment relation practice. With an aging workforce, the permanent employment and seniority system burdens firms with wage hike numbers of higher-paid and less productive workers. Previously, these systems were more sui gameboard to employers, since the steep seniority escalator resulted in less payment for the relatively young workforce and the permanent employment norm reduced the uncertainties and costs of high staff turnover.Furthermore, the transition to a service economy combined with socio-cultural and socio-economic changes has had a profound effect on Japans employment institutions. Even though leading-edge manufacturers are still competitive, their contribution to Japanese domestic employment and income is shrinking, in favor of the emerging service sector as the next great eng ine of jobs and wealth. Employment practices of sales and service firms are different from those of manufacturing. Their younger workforce is more mobile, less committed to work and the firm.Furthermore, since the organization of work in service firms is less team based, individual performance is more easily evaluated. Also, occupational skills are valued over firm-specific skills, so that broad job experience give outs the main driver of wages and performance rather than loyalty to one employer (Debroux, 1997 Lincoln and Nakata, 1997 Ornatowski, 1998). Lifetime employment One of the distinct features of the Japanese employment relations system is lifetime employment. Japanese workers joins companies at a young age, and spend a larger portion of their life in the company compared to other countries.The figure below can show that Japanese workers in terms of length of service, average number of years and median years compared to workers in other countries was much higher . Table1 Co mparative Length of Service pic Source Adopted from Current Labour Economy in Japan. Notes 1, 2 and 3 number length of service based on OECD Report, 1995. Other figures from the respective country. From the middle of the economic crisis till 1990, there have been ongoing debates to reform the lifetime employment system.Company attitudes were gradually changing due to increasing labor costs, employees age, a growing rise in the number who unable to cope with the rapidly growing unused technology and changing globalized markets. Employers now need staff with readily usable skills and workers who have specialized abilities in order to respond to stiffer competition and cut across more complex specialized operations. The older workers employed with lifetime contacts are not able to adjust rapidly to new developing technologies typified by information technology. many another(prenominal) companies have begun to adopt more diverse hiring practices over past few years, victorious on e xperienced employees in mid-career in summation to new graduates. Employers prefer to hire mid-career and non-regular workers both in large, mid- and teensy-weensy-sized organizations. The rate of hiring of midcareer workers in non-clerical positions is higher in small businesses. Hiring mid-career workers, on the one hand, minimizes training costs and, on the other hand, companies get workers with ready-made skills who can work with developing technology.In fact, employers are now seeking staff with readily available skills and workers with specialized abilities who can portion out more complex and specialized operations so they can respond to stiffer competition. Many employers are arguing for some partial adjustment to the prevailing practice of lifetime employment. The table below shows how companies are changing their attitude toward lifetime employment practices Table 2 Companies changing their attitude toward lifetime employment practices posture Response Percentage Part ial adjustment is inevitable 40. 0 Will basically maintain the practice 36. 1 Fundamental review is necessary 15. 3 Do not have lifetime mployment practice 5. 2 No response 3. 3 Source Labour Situation in Japan and depth psychology 2004-2005, p. 26. According to the Ministry of Labour Special Survey, about 30 percent of all employees in Japan are non-regular as of 2000 (Japan Labor Bulletin, 2000 12). According to the table below, the recent trend Table 3 Changes in Regular and Non-Regular Employees during Recession (10,000) 19856 19914 19972001 Regular Non-Regular Regular Non-Regular Regular Non-Regular Female 24 15 47 64 -82 151 Male 16 2 119 10 -89 55 Total 40 17 166 74 -171 206 Source Wakisaka (2002). towards using non-regular workers is in contrast to the traditional pattern in which non-regular workers decreased during recession while regular workers maintained their jobs due to their skills accumulated through in-house training. In 19972001, the number of regular employees in Japan sharply declined by 1. 71 million, while the number of non-regular workers increased by 2. 06 million.The fact that non-regular workers are replacing regular workers indicates that Japanese companies have changed their traditional values of high skills based on in-house training and employees loyalty supported by lifetime employment, instead considering labour costs and the flexibility of the labour market. As a Joint Labour Management 1998 survey documents, workplace morale has declined as the number of non-regular workers has increased (Morishima, 2001). Seniority-based Pay and Promotion System Another important characteristic of Japanese employment relations system is the seniority-based pay and promotion system. To understand the main concept behind the seniority-based wage system it is important to make do the wage theory presented by Koike. year) where wage refer to a) salaries that increase in accordance with age and length of service b) the rewards that are not paid on the basis of the job performed and c) that are unique to Japan. The main recompense determination factors are seniority and the number of years the employee has been working at the company. stipend increase based on seniority is a general labour practice, and not a system. Japanese companies rarely evaluate academic degrees such as doctorate. Yamanouchi and Okazaki-ward had tried to explain the history and practices of the evaluation system in Japan. They argue that Japanese companies had gone through different turning points in the evaluation system for the saki of pay and promotion.The American system of job analysis and job classification was introduced as a modern, rational management system to rebuild Japanese management in the 1950s which marked the first turning point in the Japanese system. The second turning point came between the 1960s and 1970s when companies introduced a competency-ranking system which almost 64 percent of the organizations followed until 1974. The third restructuring occurred in the 1980s when the competency-ranking system did not work effectively due to the effect of an increase in the value of yen globalize business activities, deregulation, the maturation of the economy, and an aging workforce.Keeping senior employees became more costly than employing younger employees, particularly those over 40 years old in 1990 due to the recession. This was driven by the need to cut cost. In recent years, growing numbers of companies are clearly evaluating ability and performance over tenure and age in salary decision. Since the early 1990s, some companies have introduced a system of job ability-based wages focusing individual worker performance over one year compared with goals set at the beginning. This new system is quite close to a true performance-based pay system. It has been termed Annual Salary System and has been introduced by about 10 percent of large companies.This system is primarily used for managers and g eneral managers, not for lower level employees. The monetary benefits to employees, if any at all, are typically small (Debroux,1997 Lincoln and Nakata, 1997 Ornatowski, 1998). The attempt to shift to performance pay shows the dilemma between companies who worry that the resulting inequities will destroy morale and unity. Besides, most companies may be do not like to see younger people supervise older ones. Also, there are fears that individual merit pay will ruin the Japanese system of team-based production, where stronger team members assist weaker ones for the good of the performance of the team as a whole (Lincoln and Nakata, 1997).The continuities in the Japanese employment systems are as striking as the changes, especially when one looks at the depth and length of the economic recession. Based on data from 1,618 firms, Morishima (1995) highlights tercet different types of attitudes and actions of firms toward employment system reform. One group of companies tries to change th eir wage system from seniority based to performance based and these firms try at the analogous time to use the external labor market to recruit workers. Although they represent the highly publicized trend away from traditional Japanese employment practices, these companies all make up 10. 8% of the sample. Most firms (56. %) have retained the traditional employment system representing the majority force of continuity. A third group (32. 4 %) shows a mixed picture consisting of firms that are reforming the wage system, while maintaining long-term employment practices. These findings highlight the striking resilience of traditional practices as well as some important changes. Enterprise Unions Japanese unions are organized on an enterprise basis, with only permanent, fulltime employees of the company eligible to join the union. This structure has led Japanese unions to defend job security and the working conditions of their members through company-based mechanisms.The unions chances of success through such mechanisms is, at this time, somewhat diminished. This has led unions to focus on job security rather than pay increases, which has lessened their appeal to young people, and has alienated unorganized nonregular workers in large companies and the vast majority of employees in small companies (Debroux 2003a). With the decline of lifetime employment and the increase in the number of non-regular workers, not only enterprise unions but the entire union movements are now declining. For example, the unionization rate (union members divided by number of employees) declined from 34. 7 percent in 1975, to 28. 9 percent in 1985, 23. 8 percent in 1995 and 22. percent in 1998 (Shirai, 2000 20). In addition, the role of conflict resolution traditionally played by Japanese enterprise unions, also declined despite the formal existence of enterprise unions. Recently, individual labourmanagement conflicts have increased. For example, the number of cases concerning workplace disputes over daily employment and working conditions, dealt with by the Labour Standards Inspection Offices, increased to 20,000 in 1994. Similarly, the number of cases of consultation that the Labour Administration Offices and the Womens and Young Workers Offices deal with have also exceeded 75,000 and 10,000, respectively (Shirai, 2000 119).It is important to note that since the economic contribution of temporary workers is increasing, its necessary to recognize their representation in the labor market by protecting their rights. With increased cost-cut measures adopted by employers due to rising competition, there has been a substantial increase in the employment of non-regular workers in the last few years. The unionization rate of these workers is only three percent. At the same time, employers have become increasingly interested in performance-based systems on the enterprise level. These developments should influence the future role of unions in the regular wage negotiation process. CONCLUSION This report has explored the changes taking place in ER in Japanese firms.A period of sustained economic decline, increased global competition, a rigid employment and business system, a banking system on the verge of collapse, and the occurrence of the Asian financial crisis meant that the 1990s was a catalyst for change and regeneration. While these factors were influential in providing the nervous impulse for change, other factors, such as the aging population, declining birth rates, and the short-term horizons of younger workers, were also important. Overall I have found evidence of the flexibility in distinctive features of Japanese employment relations system, which are lifetime employment, seniority based system and enterprise-based unions.The number of employees under lifetime contract is now in decline as Japanese companies have started to adopt more diverse hiring practices, such as taking on experienced employees in mid-career in addition to new gradua tes, recruiting contingent workers e. g. part-time and other types of non-regular employees has overtaken employment of lifetime employees in recent years. In 1982, 84% of full-time workers were regular workers with long-term careers and good fringe benefits at one company. But 20 years later, the regular workers share had shrunk to 68%. Companies attitudes towards seniority based system have been changing as well. Many companies have changed their wage systems to reflect individual performance.They are now adopting PAY SYSTEM BASED ON PERFORMANCE, which represented by the annual salary system and JOB-BASED SALARY, which mainly focusing on people occupying managerial positions or higher. An increasing number of companies are putting a stop to their practice of periodic salary raises based on seniority and introducing systems in which bonuses are influenced by evaluations. Another important characteristic of Japanese employment relations are enterprise-based unions, which is now unde r threat because of the decline of lifetime employment and the increase in the number of non-regular workers. Moreover, given todays strict economic climate in which wage increases are difficult, the SHUNTO is shifting from its former policy of seeking wage increases as the highest priority to job security and maintenance. No matter whether it regards performance pay, the elimination of management titles, or reductions of the workforce, the change of employment practices in Japanese companies seems to be slow and incremental, carefully avoiding unexpected or shocking breaks with the past. Furthermore, they are not changing the typical Japanese model completely, trying to make it more effective by modifying them according to the new trend of highly competitive globalized market. REFERENCES Bamber. G. J, Lansbury R D, & Walies. N . (2006) International and Comparative Employment Relations Globalization and the developed market economies. 4th ed. SAGE Publications Ltd, London. BENSON, J and DEBROUX , P (2004) The Changing Nature of Japanese Human imagery Management The Impact of the Recession and the Asian Financial Crisis. vol. 34, no. 1, pp. 3251. Int. Studies of Mgt. & Org. online usable from Xpert HR. http//xperthr. co. uk Accessed 28 April 2009 Benson, J. and Debroux, P. 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