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Dispatched Workers in the Manufacturing Sector
- The responsibility of temporary worker dispatching agencies and worker protection -

Hiromasa Suzuki
Faculty of Commercial Science, Waseda University

Up until last September, we thought the U.S. financial and economic crisis was just "fire on the other side of the Pacific." Now we know otherwise: this America originated crisis is striking Japanese corporations directly. The Japanese manufacturing sector had been leading the Japanese economy; but exports, particularly those related to autos, having played a key role, have dropped drastically and corporations are slamming the door on production. Large numbers of temporary and seasonal workers that are being fired or simply not being hired are becoming an object of grave public concern. In particular, the focus of controversy is the problem of regulating dispatched workers in the manufacturing sector. I'd like to present some ideas on how to handle the regulation of dispatched workers in the manufacturing industry.

Drastically increased dispatched workers in the manufacturing sector

For many years, Japan had prohibited the employment placement business. It was a fundamental concept that free-of-charge employment placement was a government responsibility. In the 1980s, the government started to allow fee-charging employment agencies following the global relaxation of labor laws. In 1986, the government approved the manpower dispatching business only for certain types of professional or specialized jobs. Since then, the Manpower Dispatching Business Law has been amended several times, gradually expanding the job types under which those agencies can dispatch workers. In 2004, permission was given to allow temporary workers to be dispatched to the manufacturing sectors. The contract period for temporary workers was also extended to a maximum of three years; the number of dispatched temporary workers has rapidly increased because these workers are an "easy" and "economical" labor source for corporations. According to the Health, Labor and Welfare Ministry, as of June 2007 the number of dispatched workers in the manufacturing sector increased to more than 460,000. During this period, the economy was expanding, so only this expansion of employment opportunity by increasing the number of dispatched workers caught everyone's attention and the negative aspects were mostly ignored. From an international point of view, the Japanese Manpower Dispatching Business Law is a lax one with no regulations on contract renewal and just a few stipulations on dismissal compensation and job protection. (The Manpower Dispatching Business Law is a business law, not a Worker Protection Law.)

Corporation - no employment contract

When dispatching temporary workers to the manufacturing sector was first allowed, fee-charging employment agencies quickly sprang up (said to be more than 15,000 now). If the agencies are the "registration" type and have lists of workers, they can dispatch any number of workers to clients who make requests. Clients have an advantage in that they can draw dozens of workers by a simple phone call. Wages for dispatched workers can also be kept down partly because of aggressive competition among agencies. It is common knowledge that the cost for dispatched workers is, of course, cheaper than for regular employees but also, in many cases, cheaper than seasonal workers. This has meant that the number of dispatched workers has drastically increased on the manufacturing front lines. The current phenomenon is that the reverse of this dispatched worker explosion is becoming a reality at an incredible speed. The decline of consumption in the US directly hit export-oriented Japanese corporations; Japanese corporations have no choice but to cut production. In a domino effect, the automobile manufacturers and their suppliers that have been hiring such volumes of dispatched workers are cancelling contracts with temporary help agencies. Since dispatched workers do not have contracts directly with manufacturers and suppliers, most usually do not receive any dismissal compensation.

The global financial and economic crisis has spread at unimaginable speed. The situation is so serious that even Toyota, which had boasted of huge profits of one trillion yen or more, is expecting a deficit in March of this year. Corporations are forced to reduce production for their own survival. Employment is a derivative demand from production activities of these corporations. If production decreases, employment must also be curtailed. Japanese corporations are scrambling to downsize the labor force because it is an easy option. The target of labor reduction is temporary workers, particularly dispatched workers. Big companies such as Cannon and Toyota can easily reduce their labor force since they have no direct contract with dispatched workers. This is why many dispatched workers who were making a living (including many of Japanese descent who came to Japan for work) have suddenly ended up, literally, on the streets. The Health, Labor and Welfare Ministry recently estimated the number of temporary workers who have lost jobs by March of this year to be about 85,000, two-thirds of these are dispatched workers.

Need for comprehensive temporary business law and dispatched worker protection law

In an environment where large numbers of dispatched workers are being fired en masse, discussions focusing on how to regulate a manufacturing sector that employs dispatched workers needs to be the first order of business. According to some newspaper reports, the Democratic Party and automobile labor unions are proposing to restrict dispatching workers to the manufacturing sector. My feelings are that it is not practical to totally forbid dispatch workers in the manufacturing sector. (Corporations can surely find alternate labor sources.) The problem, rather, lies in another area: the current dispatched worker law does not stipulate the responsibility of the temporary help agencies; dispatched workers contract with the agencies. It becomes necessary to stipulate by law what an agency's responsibility should be. The stipulation must define, for example, the employment period, employment conditions (e.g., dismissal compensation, social insurance enrollment), right to education or training, etc. Looking at trends in EU nations as a whole, there is movement to try and improve the quality of dispatched work by expanding equal treatment and employer responsibility instead of restricting dispatched work. Japan should clarify the responsibility of employers (i.e., the users of temporary worker agencies) to protect workers. It is also necessary to further restrict the short-term employment of dispatched workers (this problem is currently under discussion) to further enhance their protection. This can be done by comprehensively amending the related laws and regulations, i.e., the temporary help business law, dispatched worker protection law, etc. If the massive dismissal of dispatched workers presents an opportunity to overhaul these laws, it can turn a potential disaster into a big advantage.

Hiromasa Suzuki
Professor, Faculty of Commercial Science, Waseda University

1964: Graduated from Faculty of Political Science and Economics, Waseda University
1969: Completed the Doctorial Program, University of Rouen
1970 - 1986: Worked in the International Labor Organization (ILO), Involved in the research as the researcher specialized for wage problems.
1986: Assistant professor, Faculty of Commercial Science, Waseda University.
1991: Professor, Faculty of Commercial Science, Waseda University.
Specialized in labor economy and labor-management relations.