1. Commotion over employment and labor

"Work" or "labor" is a familiar activity for many people. Accordingly, discussions on the most desirable ways for corporations to utilize human resources have been held in various areas among government, labor, and management. It is widely acknowledged that constructing a system beneficial for both companies and employees is of paramount importance. While the degree of enthusiasm may vary, discussions have consistently centered on the ideal framework for the effective utilization of human resources. Nevertheless, addressing this theme presents significant challenges, as the concept of what is considered desirable can change drastically depending on the era.

Recently, the terms "job-type" and "membership-type" are frequently used. The former is introduced as a Western-style approach to human resource utilization, while the latter is introduced as a Japanese-style approach. The Japanese style of human resource management is typified by long-term employment practices and seniority-based treatment. In the 1980s, this style was highly regarded as a source of strong international competitiveness for Japanese companies and a rich economic life for workers. However, this evaluation has been reversed since the 1990s. The negative aspects of the Japanese style have come to light as the root cause of a stagnating Japanese economy, and the need for reform has been actively advocated.

2. Expectations for employment mobility

In this context, there is a movement to reform the traditional Japanese style of human resource management and revitalize the Japanese economy through employment mobility and reskilling. As shown in the figure below, the two types of employment models used in this movement are the mid-career recruitment and external procurement used in the Western countries and the new graduate recruitment and internal procurement used in Japan. These types are accepted as illustrating the difference between human resource utilization in Japan and other countries. Internal procurement is a method of human resource procurement in which the human resources assigned to take on necessary tasks are filled from the human resources within the company. The opposite of this is external procurement, which secures the necessary human resources from outside the company. As shown in the figure, the Japanese style is for people to enter the company from the lower levels, gradually move up to the upper levels, and leave the company when they reach mandatory retirement age. This type of human resource utilization is expected to lead to a long length of service and low employment mobility. The recent reforms aim to change this type of human resource utilization.

Figure: International comparison of employment systems

Source) Tanaka (1980), Figure No. 38 (reprinted by Nishimura with slight modifications)^[1]

Here's an interesting question--Is a career that involves many job changes more desirable for companies, individuals, and society than a career spent entirely at one company? Although recent discussions assert the need to dismantle the Japanese style of human resource utilization, there seems to be a lack of discussions on results produced by a new system. To put it plainly, it appears that reforms are being hastily implemented with inadequate consideration, driven by the optimistic belief that immediate changes will inevitably lead to a better future. When exploring new directions, understanding the benefits and drawbacks is a prerequisite for having discussions. In order to avoid a situation in which mobility as a means becomes the goal, it is imperative that we adopt a composed and analytical perspective on the current circumstances.

3. Japanese-style employment as a norm

Although the term "Japanese-style employment system" is used to describe the characteristics of human resource utilization in Japan, there is no common understanding of what elements compose this system. However, it seems that views of this style share common characteristics such as long-term employment practices, seniority-based treatment, in-house skill development, and internal procurement of human resources.

Nevertheless, not all Japanese companies possess (or have possessed) such characteristics. It has been pointed out that the new graduate recruitment and internal procurement model shown in the above figure is limited to a few large corporations. In fact, SMEs do not recruit new graduates and often have high employee mobility. Here, it is important to note that the employment practices of a few large corporations have been adopted as models for other corporations, including SMEs, and have become the norm governing the entire labor market.^[2] With this in mind, one point to keep in mind when considering recent employment reforms is whether there are any alternatives to the new graduate recruitment and internal procurement model.

4. What are the benefits for workers?

However, merely confirming mid-career recruitment and external procurement does not necessarily mark the beginning of an alternative employment model. Macro data such as the Survey on Employment Trends and economic research show that the labor market is becoming increasingly fluid.^[3] Can it be said that this situation is the beginning of a new employment model?

Here, attention must be paid to the practice of long-term employment, which is cited as a feature of Japanese-style employment. In addition to the length of service, the term "long-term employment practice" also implies that a worker will receive more benefits the longer they work for a company. In other words, the defining feature of Japanese-style employment is that workers are given certain benefits if they are employed at a company for a long period of time.

Keeping in mind the benefits to workers, when comparing workers who are employed at a company that utilizes its human resources under long-term employment with workers who are employed at a company that utilizes its human resources under employment mobility, the latter must be superior to the former in terms of benefits, or it must be difficult to judge which type of employment is better. If such conditions are confirmed to exist, then the employment mobility model may be viewed as an employment model with potential to replace the long-term employment model.

5. Are we witnessing the beginnings of a new employment model?

In regard to this point, based on the findings from a survey in which I participated, it has been shown that while the employment mobility model of human resource utilization has the potential to become a new employment model, it also has the potential to create new challenges. Firstly, a case study based on the mid-career hiring practices of large companies revealed that there are companies, mainly in the service sector, that engage in mid-career recruitment and external procurement.^[4] These large companies secure a certain number of personnel through hiring of new graduates, while also hiring mid-career employees from outside the company for important managerial positions. Such companies are not passively choosing mid-career recruitment and external procurement because they are unable to engage in new graduate recruitment and internal procurement. Rather, it is important to note that these companies chose to fill important managerial positions with mid-career hires, even while securing a certain number of new graduates. This suggests that the long-term employment and employment mobility models coexist even in large Japanese companies.

So, can we say that employment mobility is a new employment model? When dividing the industrial sector into a long-term employment sector (manufacturing, information and communications, etc.) and an employment mobility sector (wholesale, retail, services, etc.) based on the continuity of initial employment and then comparing the wages of full-time employees in both sectors, no significant difference was found in the wage levels of white-collar workers who are university graduates.^[5] It can therefore be stated that there is no clear superiority or inferiority between the two sectors. In that sense, white-collar workers who are university graduates and work in the employment mobility sector could become another employment model alongside white-collar workers who are university graduates and work in the long-term employment sector.

At the same time, it has been found that the wage gap between white-collar workers and on-site workers is large in the employment mobility sector, while it is small in the long-term employment sector. This suggests that the affluence of the employment mobility sector is accompanied by disparities between occupations. Although this differs from the disparities between employment types and company sizes that have traditionally been recognized as problems with the Japanese employment system, it does indicate that disparities are also an issue in employment mobility model.

The above analysis has limitations in terms of data and requires further consideration. However, in order to ensure that the means do not become the end, I believe that the current debate on employment reform requires thoughtful discussion that recognizes the benefits and drawbacks of the direction being pursued.

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[1] Tanaka, H. (1980) Gendai Koyo-ron (Modern Employment Theory), the Japan Labor Association.
[2] Sugeno, K. (2004) Shin Koyo-shakai no Ho Zouho-ban (New Law of Employment Society (Revised Edition)), Yuhikaku.
[3] Kanbayashi, R. (2016) "Nihonteki koyo kanko no susei- survey (Recent Trend in the Japanese Employment System)", Soshiki kagaku (Organizational Science), Vol. 50, No. 2, pp. 4-16.
[4] Nishimura, I., Umezaki, O., and Fujimoto, M. (2024) "Howaitokara rodosha ni taisuru kigyo no chutosaiyokodo - koyorongi niokeru ruikeikano saiteigi (White-Collar Mid-Career Hiring Behavior: Redefining Typologies in the Employment Debate)", ruikeika, Shakai seisaku (Social Policy and Labor Studies), Vol. 16, No. 1, pp. 289-301.
[5] Nishimura, I., Tagami, K., and Ikeda, S. (2024)"Koyo ryudoka jidai no yutakana rodosha towa - Futatsu no naiburodo sijyou no jinnji kannri to shokushukann chingin kakusa (Affluent Workers in the Age of Fluid Employment: Human Resource Management and Occupational Wage Disparities in Two Internal Labor Markets)", Nihon rodo kenkyu zasshi (the Japanese Journal of Labour Studies), No. 773.

Itaru Nishimura／Assistant Professor, Faculty of Commerce, Chuo University
Areas of Specialization: Industrial Relations and Human Resource Management

Itaru Nishimura completed the Doctoral Program in industrial relations in the Graduate School of Social Studies, Doshisha University. He holds a Ph.D. in industrial relations. He worked as a researcher at the Japan Institute for Labour Policy and Training before assuming his current position.

He specializes in industrial relations and human resource management. His main research themes include labor-management relations and wage systems in Japan and Sweden, as well as an international comparison of employment systems.

His main written works include Shin material jinji roumu kanri (New Databook of Human Resource Management) (Yuhikaku, co-edited and co-authored, 2023), Fukushi kokka no tenkan – Renkei suru rodo to fukushi (Transforming the Welfare State: Collaboration of Labor and Welfare (Junposha, co-authored, 2020), Sweden no chingin system – Chingin kosho no jittai to roushi kankei no tokucho (Wage Determination System in Sweden: The Reality of Wage Negotiations and the Characteristics of Industrial Relations) (Minerva Shobo, 2014, recipient of the Okinaga Award), and more.

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