First, persistently long working hours are a consistent feature of the Japanese workplace. An individual’s job description is rarely clear, so higher productivity workers tend to accrue additional hours. Further, many middle-aged employees with a full-time homemaker rely on overtime payments as an important source of household income. In addition, substantial overtime carries the benefit that in recessions, an employer can minimise wage costs by reducing overtime hours rather than laying people off.
But such a practice is unfavourable to married couples raising small children while also working full-time, which has resulted in falling fertility rates and a comparatively low proportion of female managers. Recent proposals by the government council in charge of reforming labour markets indicate that the establishment of a clear ceiling on overtime hours worked and a penalty to employers who breach the ceiling could soon be implemented. This would be an important step towards attaining a reasonable work–life balance.
Second, the prevalence of unequal pay for equal work in Japan looks strange to many people outside Japan. But rectifying the situation is not straightforward in Japan’s labour markets, which are characterised by unionisation at the firm level. As a result, both blue and white-collar employees often belong to the same union, and there is a large wage gap between those regular employees granted seniority-based wages in the firm and those non-regular employees with market wages determined outside the firm.
This discrepancy is a significant source of growing income inequality in Japan. Solving the issue looks to be as simple as setting a clear rule that an employer has to pay equal wages for equal work, regardless of the employment contract signed. But this would necessitate a difficult transition away from traditional seniority-based contracts, as a major source of the wage disparity lies within the seniority-based wages of regular employees rather than between non-regular employees (who are mostly already paid equal wages).
One suggested remedy by the council is that an equal wage be guaranteed to non-regular employees who have the same working experience as regular employees, as the quality of the work is considered to be based on one’s work experience. But ubiquitous and rapidly spreading IT technologies may well make the skills formed by on-the-job training obsolete, so this assumption is increasingly dubious.
Further, the average experience in the same firm of non-regular employees with a fixed term contract is much shorter than regular employees, so such a rule would rationalise the current lower wage of most non-regular employees. Hence, the principle of equal pay for equal work cannot be achieved without changing the current seniority-based wage system — but that involves fighting both labour unions and employers’ associations.
Third, a rule for monetary settlement in dismissals is needed. Contrary to the widespread view that Japan’s regulation on dismissals is too strict, the Labour Standard Law only obliges an employer to pay 30 days’ wages on dismissals, unless clearly prohibited by a specific law.
But the current Japanese labour regulations are not consistent with the general practice of employment protection in Japanese firms. In an attempt to align the two, the Labour Contract Act was enacted in 2003. Included in this act was a clause that made ‘unjustified dismissal’ invalid. The law notably does not clearly specify the criteria for unjustified dismissals, which is a copy of the case law based on the interpretation of judges. This causes two problems.
In addition to making hiring costs harder to judge — which can discourage investment — this law entrenches inequality between employees who can appeal in court and those who cannot. Once an employee can get a judgement of unjust dismissal, they can get reasonable monetary compensation in the following reconciliation process with the employer. But where an employee cannot afford to appeal, the employee is limited to only the minimal compensation. Hence, it is necessary to establish a clear rule for monetary compensation based on the years of service to a particular firm. In this way, administrative procedures for dismissals would be streamlined and equalise the process between employees who could and could not appeal in court.
These labour market reforms are prospective challenges for policymakers — they are in conflict with the middle-aged employees in large firms who are beneficiaries of the current employment security and seniority-based wages. But to fix systemic issues in the Japanese labour market for the benefits of the less advantaged employees and aid Japan’s ailing economy, the government cannot afford to avoid remedies to labour market woes.
Naohiro Yashiro is the Dean of the Global Business Department at Showa Women’s University, Tokyo.
Perhaps it was a lack of space but the author of this piece failed to note some significant aspects of the excessive overtime situation in Japan. Every year some workers die from chronic overtime. This is called ‘karoshi’ in Japanese. A recent case was a 24 year old woman who got exhausted, depressed, and committed suicide.
The public outcry over this particular case was a large factor in motivating PM Abe to set up the council to make recommendations about changing overtime practices. The author’s characterization of the ‘ceiling’ being considered is overly optimistic. A close reading of accounts about it suggests that it will still allow for as many as 80 hours of overtime per month. This is going to be an ‘improvement?!?’
The issue of non-regular workers receiving significantly less pay more heavily falls on women than men. The author fails to note that many large corporations have accumulated huge amounts of cash in the last few years because of the devaluation of the yen. Instead of sharing that with their workers in the form of bonuses if not pay raises they hoarded it into huge cash reserves.PM Abe has done nothing about this: no tax incentives or even jawboning to try to get these companies to share some of their wealth.
Given these labor conditions it should come as no surprise that Japanese young people are reluctant to get married. Nor that the birth rate in Japan is 1.4. Why get married or have many children when the prospects for economic success are so dim? PM Abe has been in office now for many years. He has yet to tackle these issues with any concrete, realistic proposals. His so called Abenomics has been largely all talk and very little action about these and/or other ecomomic issues facing the country.
The author also forgot about the lost generation of Japan that began in the 1990s having trouble getting full-time, permanent jobs during the economic meltdown in Asia and even had trouble getting those kinds of jobs even when the economic recovery 10 years later.
These Japanese companies must have finally adopted the American style of management that William Edwards Deming had warned us for decades since you pointed out Mr. Solomon that they are not giving out raises and bonuses.