One of the main policies Japan’s Prime Minister Shinzo Abe said he would push upon assuming office was the reform the country’s employment law. As things stand, companies that grant seishain permanent status basically find it impossible to fire their employees. Sound great? In some circumstances it is. By giving employees jobs for life in the postwar period Japan Inc. boomed, instilled a loyalty in its workforce and created the salaryman.
Then came the bursting of the bubble, economic ennui and the “Japan in crisis” that we have come to know through media over the last two decades. The scale of Japan’s crisis and role of permanent work in exacerbating it are points for debate. But the risks of permanent employment are there. Here are six:
An illiquid job market
Many Japanese go to university, search for work, enter companies and that’s it. Those that choose a different path often suffer. The nation’s biggest corporations believe in the jobs-for-life structure of the worplace, and therefore mass hire every April. This means grabbing the grads fresh out of university and keeping them.
The cost for this on an individual level for Japanese youth will be clear to anyone that has traveled or partied as a part of their adult development. For society, it has the additional cost of creating generations unable to compete in a globalizing world.
A stagnant workplace
If a person has permanent employment, that person is under no obligation to do their best. They can do as they choose in the workplace, with little fear of the consequences. This is obviously not a problem with younger, ambitious workers.
But what happens when a person gets overlooked for a position they feel they deserved? How do people react to being transferred to positions they do not want? When departments become tense because of personality clashes, is everybody expected to react with a professional attitude?
Of course, these problems are rampant in Japanese companies, and have been for decades. That has led to tense offices, stress and a lot of people working at less than 100%. Job satisfaction falls.
In such circumstances, many will lose their ambition and coast. Those coasting along have a negative effect on the more ambitious young employees and a downward cycle starts.
Recessions in countries without a jobs-for-life system lead to dismissals and employment falls. In places where permanent employment exists, wages stagnate or fall during difficult economic circumstances. If prices rise, that adds a further problem. The seishain, in other words, move through their careers without seeing any reward for experience gained or skills learned unless the national economy is in good shape.
New employees are often paid less than those in companies, which creates a further problem: Those unfortunate to have had to join the workforce during testing times cannot expect to receive the same compensation for hard work as those lucky enough to have entered the company during good economic times.
A two-tiered society
One of the ways Japan has coped with the end of the bubble era is to loosen labor law and allow companies to employ temporary workers. These staff who are not guaranteed employment give companies an opportunity to hedge against the possibility of a recession. When shockwaves from the bankruptcy of Lehman Brothers hit Japan, companies didn’t hesitate to lay off temps, leading to suffering for many in this new underclass of contracted workers.
In better times, there are other problems. In workplaces, temps may be treated differently to permanent workers because of their job status. They shouldn’t be, and this shouldn’t happen, but society being what it is, a contract can be as much of a status symbol as a sports car in certain circumstances.
Japan’s work system guarantees jobs for life, making the work of those in human resources looking to dodge hard graft easy. People that enter companies are likely to be there a while. The consequence tends to be the erosion of meritocratic company HR policy in favor of a seniority system.
One clear advantage of that system for the lazy is that it means nobody has to think about performance. But the disadvantage, that those with the best skills go ignored, is much more worthy of attention. Koichi Tanaka of Shimadzu Corp. was promoted to management only after winning a Nobel Prize.
Service values get eroded
Japan has long been admired for its service. And any resident will tell you there are still problems. The restaurants and shops are great: They empoly people on loose contracts. The Internet providers, cellphone networks and manufacturers supplying products? Not so much.
Sony’s struggles over the last few years are well documented. Reverence to the boss was all too clear when Michael Woodford blew the whistle on his fellow executives at Olympus. Tepco’s lack of reverence to the customer should be obvious.
In an initial office environment where the person sat next to you will probably spend more time with you in the coming decades than your spouse, how can the customer always be right?