Japanese companies have generally recruited
workers immediately upon graduation from a
school or university without requiring them to
have job-specific skills, though basic ability is
essential. This is due to the fact that mass
production took rapid hold in Japanese
companies after World War II. To train
employees, companies offer hands-on
experience, or invest in education and inhouse
professional training for the newcomer.
Naturally, several years elapse until these
new employees become efficient. In
exchange, employees have been expected to
remain with the same employer until they
reach the mandatory retirement age (usually
age 60). Upon retirement, they receive a
lump-sum payment and a company pension.
EMPLOYMENT
Japan’s employment system played a central
role in the strong economic growth that the
country achieved in the second half of the
20th century. The system was supported by
three pillars: lifetime employment, senioritybased
wages, and enterprise-based unionism.
To these, a fourth pillar was later added:
community consciousness within the
company, one based on vertical relationships,
reciprocal obligations, and decision-making
by consensus.
The traditional system described in the first
section below is still considered the ideal by
many people. In the difficult economic
environment that exists in Japan today,
however, employment patterns are
undergoing significant changes. Even among
major corporations long considered
bastions of Japanese-style management,
organizations strictly following traditional
practices are becoming increasingly rare.
Meeting the challenges of the future
The Traditional
Employment System
Web Japan
http://web-japan.org/
1 EMPLOYMENT
A downtown office area
(Photo courtesy of AFLO)
industries show an increase. Employment in
primary industry fell from 32.7% of the
working population in 1960 to 4.2% in 2008.
Over the same period, tertiary occupations
rose from 38.2% of the total to 68.5%. A vast
majority of Japan’s working population is
made up of salaried workers. In 2002, 84.2%
of the total population worked at salaried jobs.
The government has declared shorter
working hours to be the most important
element in realizing an improved quality of life
for the Japanese people. Revisions to the
Labor Standards Law, a trend toward
adoption of a five-day work week, and such
measures as allowing for substitute holidays
when a national holiday falls on a Sunday
have contributed to shorter working hours.
Annual working hours, which were 2,110 in
1985, stood at 1,808 in 2012.
Women accounted for 49.3% of the workforce
in 2013. In 1986, a law stipulating equal
employment opportunities for men and
women went into effect, and in 1997 this law
was amended to explicitly prohibit gender
discrimination in job advertisements, hiring,
assignments, and promotions. In spite of this,
the average monthly salary for women in
2011 remained at about 70.6% of that of men,
and the upper-level managerial posts in major
companies were still almost entirely filled by
men. In recent years, the wage differential
between men and women has been adversely
affected by a new trend: in order to cut costs,
large companies are increasingly using lowpaid
part-time and temporary workers for
clerical functions formerly performed by older
and relatively high paid female employees.
A childcare leave system that was
implemented in 1992 has begun to show
some effect as the number of women who
take advantage of it is gradually increasing.
Nevertheless, much more needs to be done
to improve the working environment and
childcare infrastructure for women who want
to have children while continuing to work. This
is an area that has received increasing
When business is depressed, regular
employees are dismissed only as a last resort.
Wage increases and promotions are
primarily governed by the employee’s age
and length of service in the company. This
institution of seniority-based wages—devised
as a means of guaranteeing the stability of
employment to all employees throughout their
careers within a company—is closely
connected to lifetime employment as a
distinguishing characteristic of Japanese-style
management.
Japanese companies typically provide
fringe benefits that enable employees to enjoy
recreation and leisure activities, such as
athletic competitions, employee excursions,
and so on. Employees have access to the
facilities for hobbies, including sports, reading,
and board games. As for other benefits,
companies offer special allowances in
addition to the basic salary, company-owned
housing, dormitories for single workers, and
various health and welfare benefits.
In the framework of the lifetime
employment system, workers in general have
found it to their own advantage as well as to
that of their families, to demonstrate loyalty to
their company. In addition to this, they have
given precedence to company considerations
over those of their family and personal life.
Transfers to subsidiaries are quite common,
and there are many cases where transferees
leave their families behind, if it is the family’s
desire to remain in the community and/or
avoid disrupting the children’s education.
Even in the postwar decades of rapid
economic growth, however, this system was
not universal. It applied mainly to the
employees of large enterprises and to civil
servants. Workers at small companies seldom
received the same degree of benefits or job
security.
Labor distribution follows the pattern set by
other industrialized nations. While agriculture
and other primary-sector industries employ
fewer people, services and other tertiary
2 EMPLOYMENT
Working Population and
Hours
Women in the Work Force
their monthly wages to purchase shares of
company stock, reinforcing the feeling that
they have a personal stake in the company.
Most Japanese labor unions are organized
not along industry-wide job specialty or
occupational lines, but as enterprise unions
with membership restricted primarily to
regular, full-time employees working in a
single company and its affiliates. An individual
company's enterprise union generally belongs
to an industry-wide union federation, one
example being Un'yu Roren (All Japan
Federation of Transport Workers' Unions),
and that federation in turn usually belongs to
a national, cross-industry labor federation.
The largest of these is Rengo (Japanese
Trade Union Confederation), which was
established in 1989 and had 6.75 million
members in November 2012.
Japan has over 26,000 unions, but only
about one worker in five presently belongs to
a union. (The figure was approximately 35%
in 1975.) The decline is due, in part, to a falloff
in the percentage of workers in
manufacturing and other industries that tend
to be highly unionized, and, in part, to an
increasing number of young employees who
prefer to abstain from union membership.
The Spring Labor Offensive is a familiar
practice in management-labor relationships in
Japan. Held since 1956, various unions make
their demands somewhat simultaneously in
spring.
Another widely established labormanagement
practice is the joint-consultation
system, a procedure that involves a large
majority of Japan’s workforce. While there is
much variation within this system, it permits
employees and executives to work out a
management plan and decide on the levels of
salaries and bonus payments through jointconsultation.
In addition to attaching
attention in recent years as fears over the
rapid aging of Japanese society have
prompted the government to look for ways to
encourage women to have more children.
The Japanese wage system has traditionally
been closely linked to the seniority system.
Wages are often still strongly influenced by an
employee’s length of service. Salaried
workers normally receive a monthly salary
plus two seasonal bonuses. Particularly in
large companies, the bonus system plays an
important role. In 2010, bonuses amounted to
about one-third of annual base wages.
Through the diversification of society,
employment has been taking on new forms,
including the popularization of freelance
employment and the introduction of
outsourcing. In response to such changes,
the wage system has also been diversified.
The relationship between employers and
employees in Japan seeks to avoid
confrontation. While conflicts of interest
occasionally arise between executives and
workers, Japanese companies aim to create a
family atmosphere wherein consensus is
encouraged. Another factor contributing to the
sense of unity among company employees is
that within the same company differences in
income levels—between managers and
workers or white- and blue-collar workers—
are much smaller in Japan than in most other
countries.
Close teamwork has also helped advance
quality control in the manufacturing sector.
Workers who feel secure at their jobs are able
to work closely with one another and make
suggestions to management. Fair distribution
of corporate profits also provides workers with
greater incentives to improve their efforts at
quality control. Many Japanese companies
also encourage employees to use a portion of
3 EMPLOYMENT
Wage System
Labor Unions
Labor Relations
Inside a company office
(Photo courtesy of Getty Images)
to a company, there is no guarantee of
lifetime employment, young people are
increasingly willing to leave one job in search
of another offering more money, more
satisfaction, or both.
In the midst of changing economic
conditions, as well as the graying of the
population and low birth rate, the
traditional Japanese employment
practices of lifetime employment and
seniority-based pay have begun to erode, and
various new systems have emerged. Ever
since the end of the bubble economy,
companies have been hiring fewer regular
employees, while the number of contract and
part-time workers has increased.
Unemployment among those irregular
workers has become a society-wide issue in
the wake of the global financial crisis.
As of 2009, the safety nets for temporary
and other workers are being strengthened.
Under one plan, for example, people who are
out of work but cannot receive unemployment
insurance benefits are able to get a monthly
allowance of ¥100,000 to ¥120,000 while
acquiring on-the-job training in computers,
nursing care, or another occupation. As of
September 2013, the unemployment rate was
4.0%, which is relatively low compared with
current global levels.
importance to human relationships, it
encourages employees to regard themselves
as fully participating members of the
enterprise.
The traditional Japanese employment system
was well suited to the building of a modern
industrial society. It provided a stable and
skilled resource base for manufacturers as
they expanded production during the decades
of strong economic growth prior to 1990.
However, two key elements of the system—
lifetime employment and seniority-based
wages—function best in a growing economy
and have proven difficult to sustain in the
prolonged recession that followed the
collapse of the so-called bubble economy at
the start of the 1990s.
The need to cut costs and increase
efficiency is having a severe impact on
employment in Japan. Companies are
reducing hiring of new graduates, pushing
“voluntary” early retirement programs for older
workers, transferring people to lower paying
positions, and even resorting to outright
layoffs as part of their restructuring efforts. In
addition, a growing number of companies are
replacing seniority-based wages with
performance-based systems.
In any country, an employee thrown back
into the job market after working 20 or even
30 years in the same company will have a
tough time finding a new job at a level close
to the old one. This is especially true in Japan,
however, because big companies remain
reluctant to hire mid-career workers. As the
economy recovers Japan is likely to
experience growing structural unemployment
where excess workers exist in one sector of
the economy while another sector suffers
from a labor shortage. A key challenge facing
the Japanese government is to develop the
systems and support mechanisms needed to
help people obtain the skills necessary to
move into a new industry.
Changes are also taking place on the
supply-side of the employment system.
Recognizing that no matter how loyal they are
4 EMPLOYMENT
Employment in
Transition Changes in Society and
Work