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Top>Research>Why doesn't the employment system change?


Teiichi Sekiguchi

Teiichi Sekiguchi [Profile]

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Why doesn't the employment system change?

Teiichi Sekiguchi
Professor of Human Resource Management, Industrial Relations and Labor History, Faculty of Commerce, Chuo University

1. Has lifetime employment and the seniority system collapsed?

The argument that systems and practice of life-time employment and seniority enjoyed by permanent employees (SEISHAIN employees) of Japan's large corporations are being consigned as things of the past can be seen everywhere. But is that really the case?

The extent to which lifetime employment can be safely applied has been greatly reduced, and we can see a change to importance being placed on results and roles in the workplace rather than seniority. But, in the case of SEISHAIN employees it is a fact that they have fairly stable long-term employment, and, for at least the first half of their career, increasing pay scales that favor age and continuous length of service remain in place. Could it be that the belief that SEISHAIN status leads to long-term employment, pay raises, promotion, career development and a high social standing, is behind students cramming the strait gate of large corporation SEISHAIN employees recruiting? This SEISHAIN employment system of major corporations, which is characterized by long-term employment and in-house career development, has shrunk and undergone slow change in the fluctuating business environment which has seen long-term stagnation in the Japanese economy since the 1990s, globalization, and the rapid development of the information technology revolution. But it continues to be as strong as ever. So, the problems such as student job-search difficulties, temp layoffs and pseudo-SEISHAIN employment (permanent employment by name only) haven't come about by the collapse of lifetime employment and seniority, the pillars of the SEISHAIN employment system. Rather, they have continued to be strong amid downsizing and change, and moreover, are involved in creating preferential openings into the SEISHAIN employment system for freshly graduated students.

2. SEISHAIN employment system and non-regular employment--The irrationality of a bipolar employment structure

Opposing the SEISHAIN employment system, which is propped up by lifelong employment and seniority, is a system called non-regular employment. Although both may possess employment stability and wage levels, a huge gap exists between the two. The gap between SEISHAIN employees at major corporations and temps working on a daily basis is so large that it can't be explained just by looking the difference in difficulty and importance of the work they do. This has remained unchanged since before the bursting of the bubble economy in the early 1990s.

In exchange for employment and a salary, SEISHAIN employees devote themselves to and work long hours for the company. For those who dislike this restriction and lack of freedom, the low responsibility and flexibility that comes with being a job-hopping part-time worker or temp may be more attractive enough to accept the poor labor conditions. But non-regular employment, for workers who have to support a family, only gives rewards which can be said to be merciless. That may be enough to pay for dessert but not enough for the main meal.

The era where most workers were male, and many of those SEISHAIN employees, is over, and in the current period, where one in three are non-regular employment, this extreme bipolar structure has lost rationality and functionality. Rather than a two-layered structure determining whether these workers are in the SEISHAIN employment system or not, wouldn't it be better to have an employment method with a smooth and continuous scale from relatively high job security to flexible employment, or high to moderate wage levels, which has no levels set in the gradation? The situation would change dramatically. For the company, labor costs and employment level control would become easier, and to the workers, the scope of selection in how they work should expand. This is clearly more rational and functional. So why doesn't reform move in this direction?

3. The irrationality of strictly for employment of new graduates

The job search difficulties facing university students are also related to problems in the SEISHAIN employment system. As one can oversee their future employment and salary, it is natural that people would want employment where they can calculate their long-term career development. But those opportunities are few. The problem here is, not only the limited of number of opportunities, but also, for most companies, those chances are limited to once in a lifetime. What I notice when looking at employment information for new graduates is that many companies set as a condition, positions strictly for new graduates. Employment strictly for new graduates means that, in the case for starting a job in April, recruitment is limited to those planning to graduate in March. Students who repeat a year are counted as new graduates, but those who graduated the previous year are ineligible. Various reasons are given for setting these narrow conditions. Some of those reasons may seem understandable, but it is difficult to find a totally rational excuse to create a strictly for new graduates criteria, and completely exclude those who graduated two or three years earlier. In a time where there is a rapidly growing necessity for securing excellent personnel from overseas, the practice of limiting employment to strictly for new graduates due to hard to understand domestic affairs, will have less meaning in the future. The Ministry of Health, Labour and Welfare is currently working towards having those who have graduated within three years be recognized as new graduates. But the general trend doesn't appear to be moving that easily.

4. The difficulty of changing a system related to employment and work

Be it the distinct bipolar employment system resulting from the SEISHAIN employment system and non-regular employees, or strictly for new graduates recruiting, both are losing the rationality and functionality that they held until a certain point. So why does this system that has lost its rationality and functionality continue to prosper?

Actually, this phenomenon which lies in the employment system is not unique to Japan. In America, a scope of my research, regardless of major changes with the times in business organizations and terms of work, systems and practices which were formed in the early stages of industrialization continue to be strong while losing rationality. For example, white-collar and blue-collar workers are strictly defined. Through technological innovation etc., it has become hard to distinguish the characteristics of both types of work on many fronts and, in our eyes, the long held tradition of paying white-collar workers salaries, and blue-collar workers wages, has lost its rationality and functionality, there is little movement towards its abolishment. Also, the practice of duty division and demarcation is strong. People working next to each other in the same work place simply won't help others if their duties differ. No matter how long the line at the customer counter is, no matter how unoccupied workers other than the person in charge of customers are, no one other than the designated person will attend to the customers. Although we know that to be irrational and not functional, there is absolutely no move toward change. Where does this resistance to change in employment and work related practices come from?

5. Why is it difficult to change the employment and work related system and practices?

First of all, there is the relationship between the employment and work systems. For example, if most companies in a country secured their personnel through new graduates and most of those new graduates were hired long-term, it would be difficult to acquire excellent personnel outside of the new graduates, thus even more companies will place emphasis on hiring new graduates, in turn giving no incentive to change the policy. It can be envisaged that each company will reinforce each other's employment system.

Also, in countries such as Japan where there is a weak social safety net, the job security of the SEISHAIN employees and the age based pay rises double as a social security function for the worker and his family, so, unless an extremely solid and secure lifestyle system can be newly introduced, there will be an extremely strong resistance to the dismantling of the basics of lifetime employment and the seniority system. Changes in the employment and social security systems are limited to changes between each other.

There is also an explanation that in the human mentality, once a tradition has been deeply set in a cultural environment, there will be strong resistance to change. For example, in the Japanese employment system, the year of starting in a company holds great meaning. There is a term in Japanese "NYUSHA-NENJI-BETSU-KANRI," which means management of workers in relation to the year they entered the company. In relation to pay rises, promotions and positions in large corporations, especially in the early to middle stages of in-house career development, the year one entered the company is an important factor. The senior and junior (SENPAI and KOUHAI) rank-consciousness continuing from school days, which can't be seen in Western society, is consistent with management systems placing importance on the year one entered a company, further strengthening the senior (SENPAI) and junior (KOUHAI) relationship. This rank-consciousness and extreme chemistry between the seniority and periodical mass recruiting of new graduates systems complement each other well. In this situation, the system becomes hard to change.

Furthermore, there are circumstances where employment and work fill in the gaps of interests of various actors. Changes in employment or work affect not only the workers, but also produces changes for those with interests in the employment and work, starting with the workers' families, owners and managers. Especially, for both the employees (workers) and employers (management), who make up the industrial relations, the influence of change in the way of employment and work is decisively large. And in fact, in a society like America where it can be conceived that the interests of the management and workers clash, in a large framework where workers and management have common interests, it can be assumed that, while dealing with policies turned out by the other party, they have both secured profitability, and the existence of an even larger framework (for example, "industrial world" or "occupational world") encompassing the two battling parties, has had limited large-scale change. Examining this hypothesis from a comparative historical viewpoint is one of my research topics.

6.Won't the employment system and practices ever change?

Finally, although change is difficult, systems and practices related to employment and work will not remain unchanged.

For example, the pre-Second World War employment system for large Japanese corporations differed greatly to the postwar system. Strong shock from outside at the macro levels of war, defeat, and postwar reform, forced great change in the employment system.

Also, there is a line of thought that, in a world where systems alongside employment and the environment are continuously changing, friction between the changed environment and employment system is enhanced, and businesspeople that recognize this friction, continuously provide pressure for reform to move in the same direction and produce change.

Furthermore, in the face of globalization, in a competition between the Japanese employment system and foreign systems which are formed on different principles, the superior system will be chosen, bringing forth the possibility of change in the employment system.

It is necessary to make clearer the actual mechanisms of these as well.

Teiichi Sekiguchi
Professor of Human Resource Management, Industrial Relations and Labor History, Faculty of Commerce, Chuo University
Brief History
Born in 1951 in Tatebayashi City, Gunma Prefecture. Graduated from the Faculty of Economics, Wako University and completed his doctoral program of the Graduate School of Commerce, Chuo University. Entered his current position in 1996. Worked as head of the Information Research and Education Center(1999-2003) and dean of Graduate School of Commerce (2005-2009).
Research Topics
Centered on Japanese and American industrial relations he is currently involved in the following projects.
(1)Comprehensive historical research on the formation and cessation of labor management: focusing on the mutual relationship with the occupational world.
(2)Demonstrative research on the formation process of the foundations of modern American industrial relations.
(3)Comparative historical research of the emergence of white-collar workers.