Human Resource Management Keiichiro HAMAGUCHI

Chapter 2 Historical Development of Japanese Employment System

Section 1 Long-Term Employment Practice

(1)Employment Relations at the Take-off Stage High rate of mobility characterized the employment relations in Japan at the beginning of 20 th century. Workers tended to move other factory for pay increase. The turnover rate was 100% per year. There were no “life-time commitment” or “familial relations.”

Worker’s Period of Service (Male) (%) -6 month 6m -1 year 1-2 years 2-3 years 3-5 years 5 year - Mechanic s Printers Textile workers

(2) Industrialization and Turmoil in Industrial Relations Large factories began to train workers in public technical schools in mid-1900s. Workers became student-like. Boss workers were expelled and foremen replaced them. This caused many labor disputes in the background of dismissals and wage cuts.

(3) The Development of Management Paternalism Traditional “paternalism” was restored to deal with labor disputes. Workers’ mutual relief system was established for death, injury and old age. Employers began to train workers by themselves (in- house training) to retain skilled workers. “Reared-from-juvenile” workers became majority of large factories. Turnover rate dropped and industrial relations stabilized. Management paternalism was established around 1910.

(4) The Establishment of Long-term Employment System in Large Companies Labor shortage due to WWI increased turnover rate and labor disputes again. Companies strengthened welfare facilities. Companies adopted new “regular hiring system,” where workers were hired only at fixed time (on graduation). Companies introduced new “regular pay increase system,” which resulted in seniority-based wage system. Works councils had spread in large companies. Long-term employment system was established around mid-1920s.

(5) Voluntary Retirement System and Temporary Worker System To avoid dismissals, companies invented two alternative system. Redundant workers were proposed “voluntary retirement” with large amount of retirement allowance. Works councils served as cooperative machine in soliciting voluntary retirement. Temporary workers were denied to be promoted to regular workers and became to be fired first. Temporary workers were paid lower and were denied employment security.

(6) War-time Regulation on Mobility and Long-term Employment Military government began to restrict labor mobility and to control labor allocation Employee Hiring Control Ordinance banned job changing without permission Labor Adjustment Ordinance banned dismissals and resignation without permission Skilled Employees Training Ordinance ordered employers to provide 3 years in-house training. These regulations strengthened long-term employment system (even for SMEs).

(7) The Post-war Establishment of Long-term Employment System Under the occupation, radical enterprise-based unions achieved abolishment of status discrimination between white-collar and blue- collar workers, direct participation in management, etc. Dodge’s Deflationary policy caused rationalization (including large-scale dismissals) and violent labor disputes in Radical leaders lost and were expelled, cooperative second unions won.

Company welfare-ism spread in 1950s. In reflection of anti-dismissal strikes in early 1950s, employers recognized the importance of employment security and confirmed it. It became established practice to avoid dismissals by any means, resorting to working time reduction, transfers, temporary leave with reduced pay, termination of temporary workers, stoppage of hiring and “voluntary retirement.” Courts established “doctrine on abusive dismissals” and “four requirements on collective redundancy.”