Imai - The Transformation of Japanese Employment Relations - Reform Without Labor - Palgrave Macmillan (2011) PDF

The Transformation of Japanese Employment Relations
9780230_209084_01_prexiv.indd i 11/25/2010 8:21:42 PM

9780230_209084_01_prexiv.indd ii 11/25/2010 8:21:43 PM
The Transformation of
Japanese Employment
Relations
Reform without Labor
Jun Imai
Assistant Professor, Center for the Study of Social Stratification
and Inequality, Tohoku University
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© Jun Imai 2011
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Contents
List of Tables viii
List of Figures x
List of Abbreviations xii
Acknowledgments xiii
1 Sociological Theory of Employment Relations 1

Did Japanese employment relations change? 1
Employment relations in sociological perspective 3
Contract/effort 4
Mobility 6
State-firm-labor negotiations at societal, organizational and
workplace levels 8
Societal construction of labor markets 9
Welfare- employment policies 10
Labor management practices and authority relations 11
Research strategy and the structure of the book 12
2 Employment Relations in Postwar Japan 17

Introduction 17
A brief history of employment relations in Japan 17
The postwar labor struggle and its consequences 17
The end of the rapid economic growth and belt-tightening
management 22
The characteristics of postwar Japanese employment relations 27
Contract/effort 27
Mobility 35
Summary 40
Regulations of employment relations: with or without labor 42
‘Corporatism with labor’ at work 42
‘Reform without labor’? 43
3 Political Segmentation of the Labor Market: The

Establishment and Expansion of New Employment Forms 50
The employers’ initiative for labor market reform 50
Social organization of labor markets in the postwar period 53
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vi Contents
The comparative strength of ‘flexible rigidities’ 53

Initial expansion of the external labor market 57
Deregulation of the labor markets 59
Policy shift 59
Descriptive characteristics of the labor market changes 64
Inequalities between regular and non-regular contracts 77
A high wall between contracts 82
Reconfiguration of employment contracts and job mobility 89
4 The DWS: Deregulation of Working Time and Its Impact

on the Effort-Bargain 92
Working time regulation and employment relations 92
LSA regulation and the company citizenship 93
Working time reduction and renewed interest in the DWS 98
Working time reduction for better quality of life 98
Shifted aim of the reform of working time regulation 104
The political dynamics of the working time deregulation 111
Marginalization of labor in the politics of deregulation 111
Decentralization of working time regulations 116
The DWS: a legal base for the renegotiation of effort-bargain 119
5 Re-bargaining Effort: The Introduction of

Results- Orientation at COMPUJ 122
Labor management reform and white- collar effort 122
The movement of labor management reform: the case of
COMPUJ 123
Employers’ movement to introduce results- oriented
labor management 123
COMPUJ in context 125
Initiating the results- oriented labor management 130
Management by objectives 130
Old practice of rotation, old attitude of adaptation 134
Conflict 138
Rising concerns over the new system 140
Intensification of results- orientation 142
Deliberation of the MBO and the diversification
of career track 142
Formalization of evaluation criteria:
‘competency’ management 146
Self-management under control: job announcement
and the DWS 152
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Contents vii
Marketization, formalization and individualization

of labor management 156
Consequences of the changes within COMPUJ 158
6 Conclusion: Changes and Future Directions of Japanese

Employment Relations 161
Changing employment relations 161
Contract/effort 162
Mobility 166
The declining presence of labor unions 167
Remaking employment relations: risks and opportunities
for Japanese workers 170
‘Deflation of employment’ in Japan 170
Right to a career without organizational membership 173
Appendices
A1.1 List of interviewees 176
A3.1 Major reforms of labor market regulations
in the post-WWII period 178
A3.2 Revisions of the limited-term contract 180
A3.3 Labor market changes 183
A4.1 Chronology of working time regulations 186
A4.2 Discretionary work regulations as of 2000 188
A5.1 Future principles of labor management 190
A5.2 The COMPUJ organizational chart as of July, 1994 191
Notes 192
References 210
Glossary 223
Index 225
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Tables
1.1 Domains of contention by the levels of regulation 9

1.2 The structure and regulations of employment relations 15
2.1 The ranking and qualification system 37
2.2 The characteristics of employment relations in Japan
(core regular workers) 40
2.3 The advisory council: the case of the Central
Labor Standards Council as of 2000 44
2.4 The list of deregulation committees since 1995 47
2.5 Members of deregulation committees, samples
from 1998 and 2001 48
3.1 Nikkeiren’s employment diversification strategy 52
3.2 Regular/non-regular composition of the
Japanese labor market from 1956 57
3.3 Changes in labor market structure by employment status 65
3.4 Changes in labor market structure by
employment status and firm size 68
3.5 Average hourly wages of temporary staff by
occupational category 79
3.6 Methods of wage payment by employment status 80
3.7 Mobility within the labor force 83
3.8 The number of workers who changed jobs
(1997–2002) 84
3.9 The number of workers who changed jobs (2002–7) 85
3.10 Distribution of employment status, origin and destination 86
4.1 Gradual implementation of 40-hours-per-week
(manufacturing) 99
4.2 Gradual implementation of 40-hours-per-week
(commerce) 100
4.3 Nikkeiren’s strategy for the application of the DWS 108
4.4 Summary of opinions on the expansion of
the DWS by related actors: early stage 110
4.5 Changing working time regulations for
white- collar workers 118
5.1 The chronology of the labor management
reforms at COMPUJ 129
viii
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Tables ix
5.2 The MBO evaluation sheet at COMPUJ (translation

of the performance measures by rank) 132
5.3 Required capabilities in workflow 134
5.4 Employees’ assessment of the personnel evaluation,
F Department 140
5.5 Three types of role in managerial rank 144
5.6 New categorization and definition of workforce 146
5.7 Basic competency at COMPUJ 149
5.8 Excerpts from the role-specific competency
(system engineers) 150
6.1 Changes in employment relations since the 1990s
(core regular workers) 163
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Figures
2.1 The comparison of trade surplus: Japan and

other G7 countries 24
2.2 Trend of overtime and business conjuncture by firm
size (manufacturing) 25
2.3 The Japanese employment structure 28
2.4 Unpaid overtime work (hours per year) 34
2.5 Multi-layered structure of competition 39
2.6 The trend of unionization in Japan 45
2.7 The number of labor disputes in Japan 45
3.1 The rate of economic growth in Japan from 1956
to 2008 (GDP) 51
3.2 The trend of unemployment rates from 1970 to 2004 60
3.3 Proportion of regular employee by firm size 66
3.4 Proportion of regular employment by age 70
3.5 Reasons to use paato workers 70
3.6 Reasons to use haken workers 71
3.7 Reasons to use keiyaku workers 71
3.8 Changing occupational composition of
Japanese labor markets 72
3.9 The Diffusion Index by occupation 73
3.10 Haken workers by occupation 74
3.11 Keiyaku/shokutaku workers by occupation 76
3.12 The number of yatoi-dome troubles reported by
individual workers 78
3.13 Employment insurance coverage by employment status 79
3.14 Access to the rights of company citizenship by
employment status 81
3.15 The trend in job mobility in Japan from 1962 83
3.16 The growth of the temporary help industry 88
4.1 The trends in working hours from 1960 to 2003 95
4.2 The trend in overtime and business conjuncture (economic
growth rate) by firm size (manufacturing) 96
4.3 Estimated hours of unpaid overtime work 97
4.4 The amount of scheduled working hours by firm size 101
4.5 Expanding use of various working hour systems
(large firms) 102
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Figures xi
4.6 Expanding use of various working hour systems

(all firms) 103
4.7 Changes in the proportion of firms reporting excessive
labor by occupation and firm size from 1992 to 1993
(manufacturing) 104
4.8 Employers’ reasons to introduce the DWS
(multiple answers) 107
4.9 Increasing use of the DWS (large firms) 115
5.1 Future principles of labor management
(firms with more than 5,000 employees) 124
5.2 The growing proportion of white- collar
workforce at COMPUJ 126
5.3 Organizational restructuring at COMPUJ 128
5.4 Corporate System No. 4 jigyō-bu, organizational chart 135
5.5 An overview of the organizational role 144
5.6 An overview of the ‘salary band’ for workers in
groups A, B, and C 147
5.7 An overview of promotion by tracks within group A 147
5.8 The structure of ‘competency’ 148
5.9 The composition of salary of the discretionary
workers at COMPUJ 155
5.10 Diagram of the dynamics accompanied by the
labor management reform 157
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Abbreviations
ARC Administrative Reform Committee

DI Diffusion Index
DWS Discretionary Work System
ESL Employment Security Law
ILO International Labour Organization
IWHS Irregular Working Hour System
LSA Labor Standards Act
MBO Management by Objectives
MOL Ministry of Labour
MHLW Ministry of Health, Labour and Welfare
OffJT Off the Job Training
OJT On the Job Training
TDW Law Temporary Dispatching Work Law
THA Temporary Help Agency
xii
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Acknowledgments
The research and writing of this book were made possible by the sup-
port of a number of individuals and institutions. I would like to thank
all the individuals who kindly supported my research and field work at
various sites and provided their time for the interviews. I cannot list
them here due to the ‘anonymity’ that I promised to keep. Thus I only
list the institutional support as follows.
The main body of the research presented in Chapter 3 was conducted
as a part of the project, ‘Employment Diversification in Japan: The Case
of Temporary Dispatched Work’, funded by the DFG (Deutsche
Forschungsgemeinschaft: German Science Foundation) from 2001 until
2004. The principal investigator was Professor Karen Shire, and there
were two collaborators: Jun Imai and Katrin Vitols.
The research for Chapter 4 and a part of Chapter 5 was funded by the
dissertation research grant awarded from the Matsushita International
Foundation (‘Japanese Management under the Industrial Structural
Change and the Deregulation: the Introduction of the Results-oriented
Labor Management Practices and the Discretionary Work System’). The
grant funded several months of the research trip to Japan that included
archival works and expert interviews during the period from October
2000 to September 2001.
Some data presented in Chapter 5 were collected by the Knowledge
Worker Project conducted by the group of scholars represented by
Professor Steve Frenkel and funded by Andersen Consulting and the
Australian Research Council in 1995–6. I am especially grateful to the
Japanese team of the project headed by Professor Karen Shire, with
Nobuyuki Ota and Madoka Ota as assistants. The Japanese research also
received additional funding from the Matsushita International
Foundation. The author participated in the project from the coding
stage of the collected data and materials.
The DFG and the Center for the Study of Social Stratification and
Inequality (CSSI) at Tohoku University, the JSPS Global Center of
Excellence (GCOE) program in Japan, provided funding for me to
present most of the chapters of this book at various international and
domestic conferences, which greatly helped me to refine the
argument.
xiii
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xiv Acknowledgments
This book emerged from my dissertation presented to the State

University of New York at Stony Brook, in 2006. I would like to thank
the members of my dissertation committee, Professors Michael Schwartz,
Ian Roxborough, Martin Albrow (London School of Economics) and
Karen Shire (University of Duisburg-Essen) for the valuable comments
during the course of writing the dissertation. I especially would like to
thank Karen Shire, my de facto ‘Doktormutter’ and research collabora-
tor, for her encouragement, guidance, and extraordinary patience.
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1
Sociological Theory of
Employment Relations
Did Japanese employment relations change?
The long economic recession after the serious asset deflation in the
early 1990s marked the start of a series of reform efforts developed at
various levels of Japanese society. During this period, the rate of eco-
nomic growth was constantly below that of western advanced indus-
trial countries,1 and this was seen as a clear sign of the maladaptation of
economic and employment institutions towards liberalization pressures
and industrial structural changes. Industrial policies and industrial
organizations (for example, keiretsu and the main bank system) and also
Japanese employment relations, characterized by a ‘lifelong’ employ-
ment and ‘seniority’ wage system, are particularly called into question2
(Kikkawa 2005). Against the backdrop of a struggling economy, mount-
ing distrust against these institutions within the business sector, which
had supported the rapid and stable economic growth until the end of
the 1980s, spurred society-wide reform movements. ‘Deregulation (kisei
kanwa)’ became the phrase of the period.
Employment relations were a part of the main targets of the reform
movements. Efforts were aimed at making the external labor markets
more flexible, liberalizing and deregulating temporary dispatching
work and job placement and expanding limited-term contracts in the
hope of stimulating the Japanese economy. The Labor Standards Act
underwent a major revision of working-time regulations for the first
time since its enactment in 1947. It redefined the concept of working
time by changing how it should be managed in workplaces, particu-
larly for high- end professional and white- collar jobs. Companies were
keen to use a number of regulatory changes to pursue labor manage-
ment system reform. At the core of the corporate reform movement
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2 Transformation of Japanese Employment Relations
was ‘the introduction of the results- oriented labor management system’

(jitsuryoku-shugi, seika-shugi jinji seido no dōnyū). The goal of this new
results- oriented system was to move away from seniority-based wages
and long-term employment and bring about more flexible and market-
oriented forms of employment relations.
The purpose of this book is to evaluate the magnitude of these reforms
from the 1990s on Japanese employment relations, mainly focusing on
regular core employment. The debate on the employment of regular
employees to date has found a tendency for a continuity of conventional
practices. That is, the last decade has merely witnessed a readjustment
of ‘Japanese management’ in the new environment despite the pro-
nounced reforms toward market- orientation referring to employment
security, a slight decline in the seniority wage profile (Rebick 2005) and
undiminished commitment, particularly by employers, to cooperative
labor relations (Thelen and Kume 2003). This book, however, seeks to
produce more nuanced interpretations of the continuities and changes
in relation to Japanese employment relations, viewing the reform pro-
cess as complex institutional dynamics including formal and informal
dimensions. Such a strategy, largely based on the schemes developed in
economic sociology and sociology of work, enables us to point out sev-
eral important issues and domains of conflict that may lead to a trans-
formative change of employment relations even for regular employees
of Japanese companies.
To achieve this goal, the reform process is basically understood as the
renegotiation process of the social pact in the field of employment. The
first point emphasized in this book is that employment relations are
social relations, which emerged together with factory labor/firm organ-
izations and labor markets. It was shaped in the process to define the
nature of an individuals’ involvement with these modern institutions.
In short, employment relations are historical and dynamic constructs
that coordinate the distinctive yet interconnected aspects of contract/
effort and mobility. These aspects of employment relations are shaped
by the negotiation between state, firm and labor, and the mutual asso-
ciation between these aspects produces great complexity in employ-
ment relations. Another point of emphasis is that social institutions of
employment relations, and their stability and change, are the products
of multilayered social negotiations by state, firm and labor. I argue that
employment relations are negotiated at societal, organizational and
workplace levels, and the dynamic associations of these levels of nego-
tiation contribute, uniquely, to shape and regulate aspects of employ-
ment relations.3
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Sociological Theory of Employment Relations 3
The purpose of Chapter 1 is to fully explicate why and how the con-
ceptual framework is necessary and useful in the analyses of employ-
ment relations. First, referring to the unequal nature of the labor market
and the indeterminacy of labor contracts, I will argue the necessity of
the sociological theory of employment relations that emphasizes politi-
cal and cultural construction of economic institutions such as labor
markets. Second, two aspects of employment relations will be discussed
followed by the argument how political- cultural contentions by related
actors in societal, organizational and workplace levels shape and regu-
late these aspects of employment relations. Finally, the outline of the
book will be explained that also introduces the methodological schemes
adopted in the analyses.
Employment relations in sociological perspective
Employment relations emerged at the intersection between industriali-

zation and the formation of the modern state. The key transformation
of social relations associated with these large scale social changes is the
rise of citizenship, the shift from premodern feudal servitude in which
ascribed social status defines individuals’ rights and duties to the indi-
vidualistic authority relation, namely contract relations (Bendix 1996
[1964]). The core promise of the rise of contract relations is to grant indi-
viduals property rights, including the right to freely dispose of them-
selves in every sphere of life. ‘Employment’ is a new sphere of social life
that arose out of industrialization, and ‘employment relations’ between
employers and workers became important as they arrange labor ‘con-
tracts.’ The core promise of contract relations has two expressions in the
field of employment such as ‘free contract’ and ‘free mobility.’ On the
level of ideology, these ideas play constitutive roles in establishing labor
contracts and labor markets as modern institutions.
The actual institutions built on these ideas, however, show signifi-
cant variety and complexity in the different social and historical set-
tings, which is due to the inherent issues of the labor market and labor
contracts. The one is unequal power relations between buyer and seller
in the labor market, and the other is the ‘indeterminacy’ of labor con-
tracts. Unequal power relations between employers and workers is the
fundamental nature of labor markets, and there are two major solutions
to this, both of which are encouraged by the rise of the concept of
‘citizenship.’ First, the structure and mechanisms of labor markets are
negotiated by state, firm and labor, to prevent employment relations
that could be considered equivalent to slavery4 (Streeck 1992). Second,
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labor union movements are organized to form collective fronts in terms

of the actual conditions of the labor contracts (Marshall 1992 [1950]).
Instead of negotiating contract terms individually, labor unions seek to
do so collectively in order to protect workers from economic fluctua-
tions that brings uncertainty to workers’ lives. In addition to collective
bargaining, the state’s capacity also impacts on employment relations
through industrial and employment policies and welfare provisions
(Manow 2001; Ebbinghaus and Manow 2001).
The ‘indeterminacy of labor contract’ is originally formulated in
Marx’s scheme that distinguishes labor and labor power. By the term
‘indeterminacy,’ he means that concluding labor contracts does not
realize labor, but labor is realized in the organized labor process since
what is traded in the labor market is only ‘labor power’ (Marx 1976
[1867], vol. 1: 270–1; 291). Contemporary scholars also see that the con-
tract relation is ‘indeterminate,’ and that it is specific to the labor mar-
ket compared to other markets. The indeterminacy of labor contracts is
rooted in the fact that ‘labor power’ – the commodity of labor markets –
is not separable from human capacity and not completely transferable
(Polanyi 2001 [1944]). Therefore, the contract between buyer and seller
is under constant negotiation, which is the key dynamic of the consti-
tution of employment relations (for example, Erikson and Goldthorpe
1992; Goldthorpe 2007; Rubery and Grimshaw 2003).
To comprehensively and systematically understand this complexity,
the book proposes the analytical framework that sees employment rela-
tions being constituted by interrelated aspects such as contract/effort and
mobility. Given the inherently political nature of employment relations,
the book argues that these aspects are shaped by the political- cultural
negotiations between state, firm and labor at various levels of regula-
tion, covering societal and organizational-level politics to workplace-
level contention. In the following sections of this chapter, these aspects
will be explained independently followed by clarification of the politi-
cal dynamics that assemble these aspects in order to constitute employ-
ment relations.
Contract/effort
Contracts
Contracts and effort point to two different aspects of employment rela-
tions, but are inseparable due to the ‘indeterminate’ nature of labor
contracts. A contract is a distinctive and fundamental social relation
in modern industrialized societies, and as mentioned, it is the core of
employment relations that emerged together with the labor markets and
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firm organizations. A contract is concluded by employers and workers,

and is represented by various types of employment contracts that con-
tain different combinations of working conditions, different profiles
(form, frequency and amount) of wages and benefits, different lengths
to the term of contract, and other labor conditions including work-
ing time (Tilly and Tilly 1994: 286; also see Boyer and Julliard 1998).
A contract also has informal side. For instance, Durkheim said that it
is noncontract terms of contract which make labor contracts possible
due to the function of normative obligation (Durkheim 1964 [1893]).
Norms such as expectations and taken-for-granted recognitions about
the terms of contract play important roles to give a concrete under-
standing about the contents of contracts.
A contract relation is greatly shaped by the politics rooted in the
attempt to equalize inherently unequal relationships between employ-
ers and workers. First, it is important to notice that labor market regu-
lations and labor standards shape contract relations. State, firm and
labor negotiate about the rules of labor market transaction, which
specify the general/minimum standards of the contract relations.
Second, labor relations at societal and organizational levels negotiate
the substance of the relations since labor movements became increas-
ingly legitimate as a tool for demanding social rights in contemporary
society (Marshall 1992 [1950]). The pattern of collective bargaining
became the determinant of the contents of contract and relations
between contracts, which eventually segments and stratifies the labor
force (Western 1998). It is argued, for instance, that the traditions
of occupational guilds in western European societies greatly shaped
the patterns of wage bargaining and employment security (Crouch
1993). The result of the bargaining was the stratification of workers
into occupational status attached with specific set of wage and social
rights (Marshall ibid.).
It is this process of politics, from which a taken-for-granted notion of
status emerges. The Japanese labor union movement in the period of
early industrialization is a good example. Labor unions in Japan were
formed based on communities at work sites such as factories and busi-
nesses. They demanded wage increases, employment security and career
prospects in business organizations as proof of respected organizational
membership.5 The rise of company unions segmented and stratified
workers by their membership to firms, and the process of politics gave
rise to the recognition of ‘organizational membership to a company’ as a
specific notion of status, effective within Japanese labor markets (Smith
1988; Nimura 1987). This process – the rise of a version of industrial
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citizenship – established the authority relation at workplaces (Marshall

ibid.; Streeck 1992).
Effort
The aspect of effort refers to the agreed intensity of work that completes
a labor contract. The commodity that is exchanged under the conditions
of a labor contract is ‘labor power.’ Since labor power does not realize
labor, realizing the contents of a contract requires work organization and
individual workers’ consent to what extent they provide ‘effort’ to the
work processes considering the conditions of labor contracts. Thus, the
negotiation of this aspect, effort bargain, is primarily about the issues of
control and the legitimacy of authority relations at workplaces. The issues
of control include systems such as simple control, technical control, nor-
mative control and self control and the implementation of them through
the practices such as direction (supervision), evaluation, and discipline
(Edwards 1979; Knights 1990). The evaluation of performance is a major
tool of control and discipline (Shire 1999; Endo 1999), and depending
upon its significance for wage determination (contract) and promotion
(mobility), the legitimacy of the method and criteria of evaluation would
be the issues of contention between employers and workers.
Although it is primarily organizational and workplace levels where
the aspect of effort matters, it is not that societal level regulation does
not have an impact. The regulation of working time has an important
impact on the practices of control. Labor movements in the early phase
of industrialization demanded the regulation of working time (espe-
cially to shorten it) because, during this working time, workers were
under the control of employers6 (Thompson 1993). Thus the legal regu-
lations (at societal level) on working time such as the normal hours of
work (per month/week/day) became substantial factors in contract rela-
tions (for example, Mori 2003). The regulations also set constraints on
designs of labor management practices that organize the relationship
between wage and labor. The development of the methods of control is
understood as managerial efforts to extract maximum results given the
constraints of working time and wage systems (Edwards 1979; Kalleberg
and Epstein 2001). It should be also noted that the negotiation about
the relationship between working time, effort and wages shapes a part
of the taken-for-granted notion of control at workplaces.
Mobility
The aspect of ‘mobility’ refers to the types of movement that work-
ers make in employment-related social space: job to job, occupation
9780230_209084_02_cha01.indd 6 11/24/2010 3:53:21 PM

to occupation, organization to organization, employment to educa-

tion, and upward and downward mobility. The main argument of the
political- cultural approach is that the dynamics of state-firm-labor pol-
itics have significant impacts in constructing the structure of oppor-
tunity and constraints and the distribution of resources for those who
move in the social space. The politics also define the notion of career,
which is decisive in designing an educational system and its connec-
tion to employment and gives individuals a cognitive framework to
understand the institutional logic of employment systems and to locate
themselves within the structure of a career (Fligstein 2001). The com-
bination of these elements produces the patterns of mobility, which
in sociology, are seen as “a persisting and pervasive factor shaping the
ways in which the members of a society define themselves” (Erikson
and Goldthorpe 1992: 2).
Realizing ‘free mobility’ of workers, meaning that workers have the
right to dispose of themselves freely at their will in labor markets, is one
of the foundations of building contract relations in modern industrial-
ized societies. The legal framework of labor markets and labor stand-
ards, like constitutional endorsement of free mobility (or free choice
of occupation), is the basic resource for individuals to move within the
social space of employment. It is used particularly as a resource in con-
junction with the politics that shapes contract relations since, in the
process of the bargaining of contract, related actors compete to control
labor supply (and skills) (Fligstein and Fernandez 1988; Streeck 2005).
Here, it means that the control over the workers’ mobility is the subject
of politics between related actors.
Fligstein locates this politics at the center of his theory of employ-
ment relations. He defines an “employment system” as “rules governing
the relations between groups of workers and employers that concern
the general logic of how ‘careers’ are defined” (Fligstein 2001: 101).
State-firm-labor politics sets up the ‘conception’ of workers’ careers, and
the most powerful tries to keep the power relations to maintain the
established model. Fligstein proposes three ideal types of employment
systems realized by different patterns of the politics. Strong occupa-
tional labor unions result in vocationalism in which careers in a specific
occupation or industry are taken for granted. Associations of expert
peers (and their reliance on university for training) produce professional-
ism. Strong management characterized with company unions and firm-
specific training takes shape managerialism in which workers typically
move within internal labor markets. Real cases are mixtures of the ideal
types. France is characterized as state professionalism with strong state
9780230_209084_02_cha01.indd 7 11/24/2010 3:53:21 PM

intervention that controls credentials, the USA as a mixture of profes-

sionalism and managerialism, Germany as a pure type vocationalism, and
Japan as the closest example of managerialism (Fligstein ibid.: 102).
His scheme emphasizes the relationship between the state-firm-labor
politics and the formation of a taken-for-granted notion of career, but
also indicates that the politics shape the opportunity structure and the
pattern of resource allocation necessary for individuals to move within
the social space of employment (which could be conceptualized as
resources for ‘mobility bargain’). Politically strong vocational and pro-
fessional associations are able to secure opportunities of employment,
and are also able to support workers in changing employers by provid-
ing the necessary resources such as skills (training and credentials) and
networks. However in the case of managerialism, it is management that
controls the practices of hiring and firing, assignment allocation and
rotation (that have strong impacts on skill formation) within company
organizations. In conjunction with the aspect of effort, upward mobil-
ity is also under the control of management depending upon the extent
that labor unions are able to ease the influence of personnel evaluation
and the competition among workers (Fligstein and Fernandez 1988;
Streeck 2005; Kumazawa 1997).
There is another distinctive characteristic about managerialism. Under
the circumstances of managerialism, the labor markets outside company
organizations tend to be left unorganized by major actors. The combina-
tion of managerial prerogative and company union produces collectively
organized patterns of mobility developed within organizations (Kalleberg
1988). Subsequently, the distinction between the inside and outside of
internal labor markets defines major differences in the experience of
mobility among workers as well as contractual differences. It is important
to notice that the organization of this external market is not a ‘free mar-
ket’ in contrast to the organized mobility within internal labor markets.
The political-cultural approach points to the absence of any institutional
support for these workers, which means, depending upon the process of
politics that defines internal/external labor markets, there tends to be less
established opportunity structure, less resources available to move, and a
weak concept of career that is recognizable by others and by themselves.
State–firm–labor negotiations at societal,

organizational and workplace levels
The constitution of the aspects of employment relations involve three

major actors – state, firm and labor – in various domains of politics
9780230_209084_02_cha01.indd 8 11/24/2010 3:53:21 PM

in societal, organizational and workplace levels of regulation.7 In the

discussion about employment relations, it is common to perceive
employers and workers as the only actors who negotiate the terms of
contracts.8 It is true that examining politics between employers and
workers is crucial. It is however important to recognize that the state
plays a role in shaping employment relations, especially at the soci-
etal level.
It is also important to consider the three levels of regulation in order
to capture the political dynamics of employment relations. All these
levels of regulation substantially associate with each other in constitut-
ing employment relations. As seen in the previous sections, there are
number of domains of politics that include ‘collective bargaining’ and
‘labor market regulations and labor standards’ at societal level, ‘enter-
prise bargaining’ and ‘labor management’ at organizational level, and
‘control and authority relations’ at the workplace level (see Table 1.1).
In the following section, the impacts of the dynamics at each level of
social regulation will be explained focusing on the domains of politics.
In the explanation on the societal level, the focus is placed specifically
on the roles of state.
Societal construction of labor markets

Labor markets are social constructs. This means that state-firm-labor
politics need to define ‘commodity’ and set the ‘basic rules of exchange’
in order for related actors to negotiate the terms of contracts (Campbell
and Lindberg 1990; Fligstein 2001).9 The implication is drawn from
the recent arguments in economic sociology that point to the social-
constructive nature of markets. It claims that any markets – including
product and financial markets – are political- cultural constructs.10 In
the case of labor markets, it is constructed by the negotiations between
Table 1.1 Domains of contention by the levels of regulation
Societal Organizational Workplace
Domains of Industrial relations Enterprise Control and

contention and collective bargaining authority relations
bargaining Labor management
Regulations of labor practices
market and labor
standards
Note: Italics indicate the domains especially emphasized in the book.
9780230_209084_02_cha01.indd 9 11/24/2010 3:53:21 PM

state, firm and labor (Fligstein 1996, 2001). Fligstein especially empha-
sizes the state’s constitutive roles in the process of market formation in
contrast to the economic view that sees the state only exogenous to it.11
In the case of labor markets, the economic sociological approach points
out that the encounter between employers and workers do not automat-
ically make markets, but the state as regulator is necessary to establish
labor markets as modern institutions.
The issues necessary to establish labor markets are negotiated at the
policy domains of ‘labor market regulations and labor standards’12 set
by state. The underlying assumption in these regulations of modern
labor markets is the commitment to the extension of the standards of
civil rights, especially emphasized by the state,13 which distinguishes
modern labor markets from those with premodern practices (Nakayama
et.al. 1999; Hamamura et.al. 2002). Although securing civil rights must
be the foremost concern, which is underpinned by constitutions and/or
international standards (provided by ILO or others), it is up to how the
relevant actors define the standards, set actual regulations and interpret
them. Thus, even the regulations to set up labor markets are not politi-
cally neutral, rather they reflect the politics and realize the interests, of
the most powerful in the regulation-making process. For employers and
workers, policy domains are the access points to participate in policy
process, where they can show their interests and try to formulate regu-
lations to serve their own interests.
The negotiations in the domains that reflect the interests of the most
powerful directly impact on the formation of the aspects of employ-
ment relations. Formally, they virtually cover all dimensions of con-
tract relations. The regulation of labor standards especially concern
rights and duties for both parties of contract relations14 especially in
the forms that define responsible participants of labor markets who can
sell and buy labor power (set by age, health and legal capacity with con-
sideration for nondiscriminatory clauses). The minimum wage is also
set. There are other regulations that also influence workers’ mobility.
Types of contract are set up that can be used in the markets. Various
temporary periods of contract are defined in the context of a full-time/
part-time distinction and working-time limitations per day to month.
There are regulations on hire and fire, as well as the regulations on the
functions of labor market intermediaries.
Welfare- employment policies

The state’s capacity to influence employment relation is not limited
to the issues dealt with in the domain of labor market formation.
9780230_209084_02_cha01.indd 10 11/24/2010 3:53:21 PM

Employment relations are actually shaped directly and indirectly by

industrial, employment and welfare policies set by the state. Scholars
from comparative welfare- employment regimes argue that they are
especially influential in the areas of wages and employment security
(Miyamoto 2008). The state’s interests in the formation of labor mar-
kets may also reflect the direction of these policies. This view is rooted
in the idea that it is not just labor unions that are concerned with the
workers’ well-being, but the state and even employers have interests in
this to ensure economic growth and stability of society (Swenson 2002;
Manow 2001; Ebbinghaus and Manow 2001). The style and extent
of states’ involvement in the issue differ greatly depending upon the
economic and political trajectory of the society (Fligstein 2001). Thus
Miyamoto argues that it is necessary to closely examine how welfare
and employment policies are linked to understand the institutional
coordination of workers’ well-being (Miyamoto 2008).
Labor management practices and authority relations

Recognizing the indeterminacy of labor contracts, Streeck argues that
“the distinction between labor and labor power opens the door for a
sociological theory of work organization” (Streeck 1992: 42). This rec-
ognition encourages the view that businesses are the actual sites of
contention for both organizational and workplace levels. Employers
assemble the production process and organize employment and work
organization to face market competition and technological changes.
For workers, actual terms of contract, actual work intensity, and actual
mobility prospects are all organized and decided at these levels. In this
sense, there is no doubt that firms are major sites for management and
workers to directly negotiate their relationship.
At the organizational level, the politics is about labor management
systems (as well as enterprise level bargaining). Labor management sys-
tems impact on employment relations through the coordination of hir-
ing and firing, work assignment, wage systems, opportunities of skill
formation and career, working time, and the methods of workplace
control – thus covering all aspects of employment relations. Workplace
level negotiation is about whether workers take the employer’s right to
manage for granted, including the notions of status, control and car-
eer. Thus there is a close association between organizational and work-
place level. The negotiations in labor management systems between
management and workers are about the design of the system as well as
the taken-for-granted notions of the aspects of employment relations
assumed in the system.15
9780230_209084_02_cha01.indd 11 11/24/2010 3:53:21 PM

The regulations at these levels are broadly contoured by the outcomes

of societal level negotiation that can be both a constraint and a resource.
At the same time, these levels are the sites where new necessities and
solutions emerge, which may change the societal level regulation mainly
through the institutionalized channels of collective representation. In
general, the relative importance of these levels compared to societal
level is largely dependent on the historical trajectory of labor relations
in a society. For instance, in the societies where a corporatist arrange-
ment is dominant, societal level negotiation plays a guiding role, while
in the societies with pluralist traditions, it is less so. In any case, the
details of the regulative arrangements are different from society to soci-
ety. Thus it is important to carefully examine the historical develop-
ment of the regulative regime and the politics behind it and how they
relate to the actual employment practices (Pontusson 2005).
Research strategy and the structure of the book
The reform efforts described above put the complex dynamics that reg-
ulate the employment relations under pressure for change in Japan. The
purpose of this book is to explain how and to what extent the reform
efforts after the 1990s have changed Japanese employment relations
under the circumstances of liberalization and industrial structural
changes. To pursue this goal, the book generally is structured to com-
pare the employment relations for core regular employees before and
after the reforms by setting a point of comparative reference to measure
the impacts of those reforms. It is, of course, difficult to distinguish
before and after in clear- cut way, and the historical point that distin-
guishes before and after may be different from one employment and
labor market institution to another. To overcome these challenges, two
strategies are adopted in the book.
First, a general overview of the historical development of Japanese
employment relations will be presented and examined with regard to
the aspects of employment relations and the power relations behind
the development in various levels of regulation (Chapter 2). The tra-
jectory of the development of employment relations is described as the
constant renegotiation of the aspects in all three levels responding to
the industrial structural changes and market environmental changes.
The historical period here is up until the start of the decadelong eco-
nomic stagnation during the 1990s, namely the end of so-called ‘bubble
economy’ of 1991 to 1992, that triggered the waves of socioeconomic
reforms ‘without sanctuary.’ It is a reasonable periodization of the
9780230_209084_02_cha01.indd 12 11/24/2010 3:53:21 PM

history especially when the impact of the reforms on the previous insti-
tutional arrangement, known as ‘Japanese management,’ are the points
of concern.
Second, in each of the chapters that deal with specific reforms, I try to
preserve the unique historical development of the employment and labor
market institutions in question and the great complexity of the dynam-
ics of reform efforts as much as it is necessary. For instance, Chapter 3
deals with the labor market reforms that include the liberalization and
deregulation of temporary agency work, liberalization of the private
labor supply business, and the relaxation of regulations on limited-term
contracts. These reforms are mostly relevant to the features of contracts
and mobility. The most radical reforms for these labor market institu-
tions came in the late 1990s. It is, however, not possible to evaluate the
impact of the reforms without having any contextual knowledge about
the reforms and their relevance to the aspects of employment relations.
It is the establishment of the Temporary Dispatching Work Law in 1986
and even the history of labor lending in the Japanese labor market that
provides this information. Although the general overview of the post-
war situation in employment will be given in Chapter 2, the context-
specific history that is closely knitted with the general overview will
be given again with regard to these labor market institutions to fully
uncover the meanings of the reforms.
The same strategy will be applied to the topic of Chapter 4 that deals
with the establishment of the Discretionary Work System in the Labor
Standards Act, which is a specific working-time regulation. Under the
Discretionary Work System, work time is no longer documented, there-
fore no overtime premium is paid, for the expanding group of white-
collar workers. This reform is concerned with the aspects of contract and
effort in employment relations. Again the radical reforms were made in
the 1990s in an attempt to expand the coverage to a broader domain
of white- collar workers to mobilize more effort from these workers.
However, why it is important can only be understood in contrast to the
system first established in the late 1980s for a limited number of profes-
sionals, or in the context of the relations of working-time regulations
with the workplace control and the organization of effort at Japanese
companies.
Although the book emphasizes the historical context of the institu-
tions, it is not to point out how history constrains actors in the fields. As
the scholars of the historical institutionalist analysis claim, it is import-
ant to assume ‘agency’ in actors (Steinmo, Thelen, and Longstreth 1992)
under given historical institutional settings. Here, agency means actors’
9780230_209084_02_cha01.indd 13 11/24/2010 3:53:21 PM

capability to respond to endogenous and exogenous factors in poten-

tially creative ways to influence others, although their resources may be
heavily constrained by the institutional arrangement and power rela-
tions behind them. It is important to examine how actors understand
the situations in which they are located in the specific circumstances
of history to understand the dynamics of politics. This theoretical
emphasis necessitates a specific research strategy in addition to the
emphasis on the historical context: a focus on actors.
In each of the stories of reforms, the analytical foci are the state’s,
firms’ and labor’s understanding of the situation and their tactics for
the situation. Research methods are tailored to understand them and
include the collection of documents from the government, labor unions
and employers’ associations, as well as interviews with the experts (see
Appendix A1.1 for the list of interviewees). Government documents
mainly included all the records from the advisory committees of the
labor ministry16 (to follow the policy discussion on the reforms of the
labor market and the working-time regulations). Records of the parlia-
ment sessions were also collected. Documents from labor unions and
employers’ associations included their programs and appeals. Statistical
data collected from the government ministries and agencies are used to
examine how these institutional changes impacted on the reorganiza-
tion of labor markets and the organizational practices of employment.
After the examination of two societal level reforms, the book finally
recasts its focus on a company, the central actor that actually coordi-
nates employment relations in practice. In Chapter 5, the re-bargaining
process that occurred in association with the introduction of the results-
oriented labor management system at a case company is analyzed. The
reform was seen as the firm responded to the globalization and market
environmental changes, therefore the chapter analyzes the reorganiza-
tion process of the new necessities of labor management. In practice,
the reform primarily transfers results responsibility to individual work-
ers through changes in the wage system. Stimulated by the change, the
bargaining with regards to other aspects of employment relations are
(re)activated, and start to shape workplace-level authority relations dia-
lectically. This analysis will be accomplished by drawing evidence from
a case study of the reform at a major electronics firm in Japan. The case
study is located at the end of the empirical part of the book not because
the chapter should come chronologically at the end but because to clar-
ify how firms utilize the fruits of regulative reforms (or not).
Chapter 5 is based on the research I participated in between 1995
and 1996 entitled ‘knowledge worker project.’ The company case study
9780230_209084_02_cha01.indd 14 11/24/2010 3:53:22 PM

used in the chapter is a part of this project. The investigation at the case
company was in- depth. The study team conducted three weeks of work-
place observation at a chosen work unit (one department with about
40 workers) and collected various documents including statements of
corporate and organizational strategy, products/service information,
labor management materials including personnel evaluation and wage
determination, and statements of labor relations. Interviews were also
conducted with the division manager, department managers, workers,
union representatives and the manager of the personnel department. In
2000 and 2001, follow-up research was conducted at the same company.
At this time, I interviewed the manager of the personnel department,
and collected documents from labor unions. Additional interviews were
conducted with the members of an alternative labor movement at this
case company (see Appendix A1.1 for the list of interviewees).
In sum, these three regulatory reforms nicely cover all aspects of
employment relations and all levels of social negotiations in different
ways. First, the issues treated in these regulatory changes touch on all
three aspects of employment relations, though with different foci. The
expansion of non-regular employment deals with the aspects of contract
and mobility; the new working-time regulations concern the nexus of
contract/effort; and results- oriented labor management system relates
Table 1.2 The structure and regulations of employment relations
Societal:
collective Organizational: Workplace:
bargaining, labor enterprise bargaining control and
market and labor and labor management authority
standard regulations practices relations
Contract ● Labor market ● Different types of ● Notion of

regulations employment contract status
● Labor standard ● Profiles of wage and
regulations benefit
● Work assignment
● Expectations on different
forms of employment
Effort ● Working time ● Direction ● Notion of

regulations ● Personnel evaluation control
Mobility ● Labor market ● Promotion and career ● Notion of

regulations formation career
● Labor standard ● Assignment allocation
regulations and rotation
● Internal/external
9780230_209084_02_cha01.indd 15 11/24/2010 3:53:22 PM

to all aspects with a special focus on effort. The interrelations between

these three reforms are also strong, and covering all three gives a com-
prehensive understanding of changing employment relations. Second,
the three reforms cover all three levels of social negotiations: societal,
organizational, and workplace. The first two reforms deal mainly with
societal and organizational-level changes, and the third focuses more
on the organizational-level of practices and their relations to control
relations at the workplace level. The interrelations between these three
levels of regulation are thus also highlighted. The major issues that will
be discussed in the book are summarized in Table 1.2.
In the next chapter, I begin by portraying the postwar development
of employment relations in Japan. Following the historical account, the
postwar Japanese employment relations will be analyzed in terms of
the aspects of employment relations – contract/effort and mobility – to
set up comparative references to estimate the impacts of current reform
efforts. The characteristics of social regulation in three levels of nego-
tiation – societal, organizational and workplace – will also be analyzed,
and the chapter finally raises the hypothetical framework of the book:
‘reform without labor.’
9780230_209084_02_cha01.indd 16 11/24/2010 3:53:22 PM

2
Employment Relations in
Postwar Japan
Introduction
The first part of this chapter describes the historical development of

the key institutions of employment relations in postwar Japan, focus-
ing on the politics between state, firm and labor unions that made the
status of regular (and non-regular) employment. The second part of the
chapter looks at the historical development of Japanese employment
relations; first, in terms of the aspects of employment relations: con-
tract/effort and mobility by shedding light on the employment struc-
ture of the Japanese firm, and then the major characteristics of Japanese
employment relations are conceptualized at the end of the section. In
the third part, the structure of the regulation of Japanese employment
relations will be summarized, and the recent trend in labor relations
will be introduced to analyze specific issues of employment and labor
markets from Chapter 3.
A brief history of employment relations in Japan
The history of postwar Japan starts with a broad attempt to establish

‘democratic’ government and society. The reestablishment of employ-
ment relations is a part of this endeavor based on the principles of
individual freedom of choice, rights of association, and collective
bargaining.
The postwar labor struggle and its consequences

The reconstruction of the private sector, which had been required
to come into line under the state’s wartime policy, was the primary
focus of Japan’s postwar economic recovery. The government adopted
17
9780230_209084_03_cha02.indd 17 11/29/2010 10:25:32 AM

a priority production system (keisha seisan hōshiki) for its priorities

of iron and coal production, both of which were an urgent necessity
in order to restore the socioeconomic infrastructure in the wake of
the postwar devastation. The labor market was also in turmoil. The
destruction of industry and the returning military personnel were two
major causes of labor market chaos. The government could only avoid
the social unease caused by this chaos, by trying to supply these extra
labor forces to the focused industries of primary production system
(Ujihara 1989b). In many of these work sites, such as the iron mill,
workers used facilities to produce extra goods after their regular opera-
tion to sell on the black market. Given the dire economic conditions,
these black market practices were silently accepted, and the work sites
became more than just a workplace – more the center of life for the
workers (Gordon 1998). The sense of community shared by workers
at these work sites was the major resource for the postwar labor move-
ments (Nimura 1987).1
The postwar employment relations that grew out of this economic
chaos was designed on the basis of ‘democratic’ principles, distinct
from the militant social regime during the war. Various laws were
passed to achieve democratic employment relations including the Labor
Standards Act (rōdō kijun-hō: hereafter, LSA), the Employment Security
Law (shokugyō antei-hō: hereafter, ESL) the Minimum Wage Law, and
the Trade Union Law. The rising expectation towards ‘democracy’ and
the support by the GHQ, the occupation government, encouraged a
significant surge of labor movements between 1945 and 1950, which
in some cases even achieved production management by labor (Gordon
1993; Hyodo 1997). Up until 1950, when the GHQ fundamentally
reversed its policy to support the establishment of managerial authority,
the labor disputes during this period laid the foundations for some key
employment institutions (Gordon 1998). The bases of secured employ-
ment, seniority wages, and stable and equalized status of ‘employee’
were all established during this period, and characterizes the specific
pattern of labor market segmentation. These ideas were, however, not
necessarily postwar inventions. According to Gordon, the continuity
throughout pre- and post-war employment relations in Japan was the
powerful claim by male workers to be treated as full members of the
company, and ‘humane’ treatment as the social equals of managers,
which was articulated after decades of turbulent relations from the
early 1900s (Gordon 1993: 378). And he claims that “this historical con-
text of demands and expectations significantly directed the efforts of
workers and managers” after the war (Gordon ibid.: 378). Given such a
9780230_209084_03_cha02.indd 18 11/29/2010 10:25:32 AM

Employment Relations in Postwar Japan 19
legacy, through the militant labor struggle mainly between 1945 and
1950, this ‘powerful claim’ attained two concrete expressions: job and
wage security and the abolishment of the discrimination against blue-
collar workers (shokkō sabetsu no teppai) (Gordon ibid.: 379; Kumazawa
1993: 84–5).
Job security and wage security are actually the results of a different,
yet strongly interconnected, series of events in these days of labor strug-
gle. For instance, Gordon lists that the cases of JNR (Japan National
Railway) and Toshiba disputes confirmed job security, while the case
of Densan (labor association of the electric power industry) represents
the establishment of wage security (Gordon 1993: 379). The prototype
of the so- called nenkō chingin, seniority wage system, is an integrated
achievement of these disputes. The idea and the prototype of the sen-
iority wage system can be found in densan-gata chingin (wage system of
electric power industry). And it is possible to say that the basic philoso-
phy of the system based on the assumption of job security had a broad
influence on the Japanese wage system throughout the postwar Japanese
history (Kawanishi 1999; Hyodo 1997; Kumazawa 1997).2 According to
Kawanishi, densan-gata chingin is characterized as follows.
● Densan-gata chingin established two basic criteria: regular wages and

non-regular wages. Regular wages are divided into three components:
life security (seikatsu hoshō-kyū), competency and ability (nōryoku-
kyū), and seniority/length of service (kinzoku-kyū). Non-regular wages
include various allowances.
● The regular wage is mainly to secure workers’ livelihoods and to stop
the uncontrolled expansion of the latter as in the previous systems.
● Among the three components of regular wages, life security is espe-
cially emphasized and is designed to compose 80 percent of the total
wage. This part is designed to be a social safety net.
● In addition to this life security component, there are merit and sen-
iority components, which are limited within 20 percent of total wage.
These components are added to consider differences between workers
in terms of an individual’s competency and skills. Seniority is treated
as the best index to measure skills and competency. Competency is
measured by personnel evaluation (Kawanishi 1999: 5–7, translated
by author).
This excerpt shows specifically and clearly the objectives of the system.
In this system, the wage is pegged primarily to objective items such as age
and the length of service. The intended purpose is to secure workers and
9780230_209084_03_cha02.indd 19 11/29/2010 10:25:33 AM

their families with a predictable wage system reflecting the egalitarianism

of the day (Kawanishi 1999). In this sense, this wage system is a ‘life-stage
adjusted wage system’ rather than the seniority wage system. Contrary to
the discussion typically made by economists such as Koike, this wage sys-
tem was not primarily designed to compensate for the high skills of eld-
erly workers (for example, Koike 1999). This idea of wage and job security
based on life-stage adjustment prevailed and carried over to other related
systems such as public social insurance system. And, as we will discuss
later, the institutionalization of these related systems established the deep
foundations of the corporate-centered social structure (Osawa 1993).
Another achievement of the postwar labor struggle was the abolish-
ment of discrimination against blue-collar workers. Before the war,
white-collar and blue-collar workers were sharply divided, reflecting
their separate employment tracks with different wage and promotion
systems. Shokuin, white-collar workers who are supposed to be manag-
ers, were paid monthly and had a full package of corporate welfare. Kōin,
blue-collar workers, were paid daily and had only limited access to welfare
programs. This discriminatory approach disappeared with the integra-
tion of these two statuses into one called shain, which means ‘employee’
(Gordon 1993; Kumazawa 1993; Hisamoto 1998). This change promised
shain, all regular employees, the same wage system and promotion pros-
pects, and achieves the same ‘humane’ treatment of all employees.3
The counterthrust to reestablish management authority at workplaces
was comprehensive. The GHQ’s support of the government’s decision to
call off the general strike planned in 1947 was the start of the reverse
movement. In 1948, Nikkeiren, one of the employers’ associations espe-
cially focusing on the issue of labor management, publicized its opinion
on the reestablishment of management authority. The revision of the
Trade Union Law in the following year helped set aside the agreements
on labor participation (Kume 1998: 80–1). Many of the labor rights on
managerial decisions were expected not to be renewed and the labor-
management council began to have merely an advisory role (Gordon
1993). The start of the Korean War in 1950, which pushed Japan into
the anticommunist front, legitimatized the red purge executed by the
Yoshida cabinet. In 1953, a year after the end of GHQ occupation, the
USA and Japanese governments cooperatively funded the establish-
ment of the Japan Productivity Center to encourage the productivity
movement (Gordon ibid.:376). Encouraged by these activities, in the late
1950s and early 1960s, management started to replace militant ‘first
labor unions’ (dai-ichi kumiai) with cooperative ‘second labor unions’
(dai-ni kumiai) (Fujita 1955; Gordon 1993; Kume 1998).
9780230_209084_03_cha02.indd 20 11/29/2010 10:25:33 AM

The economy gradually took off after the start of the Korean War.
Although the manufacturing production expanded by around 2.5
times between 1950 and 1954, employment increased just about 10 per-
cent as employers understood that the economy was still volatile and
the boom might be temporary. Employers tried to adapt to the vola-
tile but expanding economy by increasing the number of temporary
laborer (rinjikō) and increasing flexibility of regular workers in terms
of working hours and firm-internal job transfer. This caused friction
with labor unions with regard to personnel planning and the require-
ment of other flexibility measures. Labor unions at that time still had
influence on personnel planning, but had begun to accept the flexibil-
ity requirements for the sake of the development of firm organizations
(Hisamoto 1998). Because of the continued expansion of the economy,
the problem of temporary laborers disappeared without causing any
further struggles between employers and labor unions. It should, how-
ever, be noted that in Hisamoto’s description about the labor disputes
at the companies of the chemical textile industry, labor unions ‘tapped
the shoulder’ of married women when employers claimed the necessity
of personnel cuts (Suzuki 1999; Hisamoto 1998). The start of the insti-
tutionalization of the status of regular employee marks the elimination
of temporary laborers and women from its ‘membership.’
The later years of the 1950s confirmed the steady economic growth, and
the issue of employment was changed from the cleanup of the imperfect
employment (precarious employment) to perfect (or full) employment.
The Income Doubling Plan (shotoku baizō keikaku) of the Ikeda adminis-
tration (1960) was designed to achieve that goal, and eventually helped
support the rise of the middle class in Japan. This period of rapid eco-
nomic growth throughout the 1960s was the era of expanding prospects.
The institutionalization of the spring offensive (shuntō), started in 1955,4
brought workers steady wage increases, and expanding businesses assured
better promotion prospects. Responding to the comprehensive thrust
for managerial authority, labor unions tried to focus their efforts on the
negotiation of economic redistribution rather than participation in man-
agement. As far as it concerns the wage increases, the spring offensive was
successful. Until the first oil crisis in 1973, the spring offensive achieved
the higher ratio of wage increases than the actual economic expansion
(Kume 1998). This institutionalization of the redistribution system of
economic expansion had a decisive role in creating a strong middle-class
consciousness and the emergence of a mass consumer culture. Buying
the three basic electric appliances, called ‘sanshu no jingi’ (three sacred
treasures such as the television set, electric washing machine, and electric
9780230_209084_03_cha02.indd 21 11/29/2010 10:25:33 AM

refrigerator, later replaced with color TV, air conditioner, and car) were
the symbol of the affluence of the ‘middle-class’ consumer life.
Behind the scenes was the gradual draw back of labor unions from
workplace decision making. On the one hand, the policy change at
Sohyo (Sōhyō), the national center of the labor unions at that time,
from political participation to economic rewards enabled the success of
the spring offensive. On the other hand, giving economic return was a
major strategy of management to legitimatize the second union (dai-ni
kumiai) “in exchange for a freer hand to introduce new technology, rede-
fine jobs, rearrange work, and transfer employees”5 (Gordon 1993: 384).
The same point is made by Koike (1977) and also by Kumazawa (1997);
the measures of flexibility, the seeds of which can be already seen in
the 1950s, were fully accepted by workers and firmly institutionalized
in this period. The merits employers can extract from the existing labor
relations were getting bigger towards the end of the 1960s, and this
recognition encouraged the fundamental shift of employers’ attitudes
towards life-stage adjusted wage systems.
One of the major goals of the movement to reestablish management
authority from the 1950s was the abolishment of the densan-gata life-stage
adjusted wage system by the introduction of the job-rate wage system.6
However, through the experience of industrial structural change, from
the emphasis on heavy and chemical industries to the additional growth
of automobile and electric manufacturing, management recognized that
unclear job demarcation and flexible job assignments were quite success-
ful (Kumazawa 1997). After giving up the job-rate system (shokumu-kyū),
management sought to install the system which broadly emphasized merit
and ability by expanding the ‘merit’ component in the life-stage adjusted
wage system. In the midst of rapid economic growth and expanding life
prospects, workers accepted the process of evaluation and the inequality
of income, as long as management decisions were not widely unjust. The
new system is usually called shokunō-kyū or shokunō shikaku-kyū, rank-
ing and qualification system. Under this system, wage was still pegged to
components such as age and seniority, but workers’ acceptance of the eval-
uation of hard work, loyalty, and quickness at learning new skills, which
Kumazawa calls ‘furekishiburu na tekiō nōryoku’ (the ability to be flexible),
brought competition among workers (Kumazawa 1997: 40).
The end of the rapid economic growth and

belt-tightening management
The two waves of oil crises in 1973–4 and 1978–9 marked the end of rapid
economic growth. Given the high rise of the cost of resources, companies
9780230_209084_03_cha02.indd 22 11/29/2010 10:25:33 AM

were forced to restructure their businesses; usually called genryō keiei

(belt-tightening management). Consequences included the development
of the ME (micro electronics) technologies and the emergence of out-
sourcing services,7 which had strong influences on industrial and occu-
pational structure (Ujihara 1989b; Kumazawa 1997). After the oil shocks,
Japanese companies tried to focus more on exports, which in return,
brought about the abrupt appreciation of the yen in the 1980s. The Plaza
Accord in 1985 accelerated the trend and the subsequent appreciation
of the yen after the Plaza Accord immediately resulted in a slump in
the export sector (endaka fukyō: high-yen recession). The government
responded with a low-interest policy, and companies invested in compu-
ter and communication technologies to construct efficient networks of
production, distribution and sales. They also invested in further refine-
ment of the ME technologies along with the overseas transfer of produc-
tion sites. The result was yet another drive of exports in the sectors of
auto manufacturing, communications equipment, computer, semicon-
ductor, and other business equipment (Ujihara ibid.; Kumazawa 1997).
Japan’s emphasis on exports caused trade conflict in the 1980s and,
as the excessive trade surplus began to expand from the early 1980s
(see Figure 2.1), was a constant target of criticism from other advanced
industrial countries, especially the USA.
In 1985, the advanced industrial countries signed the Plaza Accord, an
agreement aiming at devaluing the overly strong US dollar. The value
of the yen jumped from ¥240 (=$1.00) to ¥150 in 1987. The issue of the
exchange rate was not the only target of external criticism (gaiatsu: liter-
ally means ‘external pressure’). The USA was troubled with a twin deficit
in trade and budget at that time, and was especially anxious for Japan to
open up and to expand her domestic market. The issues raised included
policies on food imports such as oranges, rice and beef, as well as anti-
dumping policies with reference to semiconductors, and super comput-
ers. The Structural Impediments Initiative (nichibei kōzō kyōgi) from
1989 to 1990 was intended to alter Japanese trade customs and insti-
tutions rather than adjust the differences between Japan and the USA.
Responding to these gaiatsu, the Japanese government also proceeded
with its own initiative. Prime Minister Nakasone established the Study
Group for the Adjustment of the Economic Structure for International
Cooperation (kokusai kyōchō no tame no keizai kōzō chōsei kenkyū kai),
and the report, called the Maekawa report, was published in 1986. This
report was considered the major reform plan for Japan’s expansion of its
domestic market. These external and internal initiatives strengthened
the deregulation trend, which surfaced in the 1980s by the privatization
9780230_209084_03_cha02.indd 23 11/29/2010 10:25:33 AM

1,000
(trade balance)
500
(current account)
0
∆500
(total balance of current account of G7 countries)

∆1,000
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
Figure 2.1 The comparison of trade surplus: Japan and other G7 countries
(hundred million US dollar)
Source: Economic Planning Agency (EPA) 1991: 280.
of some major state-owned enterprises such as Nihon Telegraph and

Telephone (1985) and Japan National Railway (1986).
The oil crises also had significant impacts on labor movements. The
increasing legitimacy of the ‘principle of productivity’ started to limit the
pay raise at the spring offensive (Kumazawa 1993: 88; Kume 1998: 171),
and in turn caused a major rift between the leftist-leaning Sohyo and
moderate Domei (Dōmei) lines of the labor movement (Hyodo 1997: 416).
Having complained that Sohyo’s policy was inflationary, labor unions
affiliated to Domei, mainly from the private sector, started to refrain
from requiring substantial pay raises. Instead, they put more emphasis on
employment security and maintenance of living standards (Kume 1998:
164). The employment adjustment subsidy (koyō chōsei kyūfu-kin) system
introduced by the Employment Insurance Act (koyō hoken-hō) in 1975,
for instance, reflects such a strategy. In the midst of the first oil crisis, the
system was established to subsidize firms to keep their employees despite
the downturn in the market, rather than paying to expand unemploy-
ment insurance that might allow layoffs for firms (Hamaguchi 2004).
Further, Domei’s affiliates agreed upon a neoliberal policy turn in the
1980s, which appeared as the privatization of the state-run enterprises
mentioned above (Hyodo 1997). Domei was closely allied with Nikkeiren,
the management association, in this process, and achieved more partici-
pation in the policy process (Kume 1998: 256; Gordon 1993: 390). This
increasing participation of the moderate group of labor in the policy for-
mation is sometimes evaluated as “corporatism with labor” (Gordon ibid.:
391).8 Having failed to mobilize public support for the ‘strike for the right
9780230_209084_03_cha02.indd 24 11/29/2010 10:25:34 AM

to strike’ (suto-ken suto) in 1975,9 the labor movements in the public sector,
affiliated with Sohyo, failed again in their attempts during the battles in
the 1980s: the privatization of NTT, JNR, and Japan Tobacco. The weaken-
ing labor movements in the public sector significantly damaged Sohyo.10
The growing Domei movement took the initiative to form one national
center. This was realized as Rengo (Rengō) in 1987 (Hyodo 1997).
The expanding cooperation from labor unions toward the ‘principle
of productivity’ made further corporate restructuring possible within
businesses, while maintaining employment security and living stand-
ards. The just-in-time production system was sophisticated and spread
to all industries (Kumazawa 1997). Working time was increasingly used
as one of the major tools to trim labor costs (Dore 1986). Dore observed
that the easiest solution to trim labor costs among Japanese compa-
nies was to reduce working time, especially overtime (Dore 1986: 91).11
When firms face an economic downturn, they cut the amount of over-
time instead of firing employees. Even when firms experienced growth,
they expanded overtime rather than expand employment.
23
21
19
17
15
13
11
7 recession after recession after high-yen recession after kin-yû kiki

the first oil crisis the second oil crisis recession the bubble burst (crisis of financial system)
5
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
500– 100–499 30–99
Figure 2.2 Trend of overtime and business conjuncture by firm size (manufac-
turing) (hours per month)
Source: Monthly Labour Survey*: MHLW 2008c.
* The Monthly Labour Survey (maitsuki kinrō tōkei chōsa) is carried out every month by the labor
ministry, choosing about 33,000 businesses with more than five employees, out of 1,900,000.
9780230_209084_03_cha02.indd 25 11/29/2010 10:25:34 AM

The graph in Figure 2.2 demonstrates the direct association between

the amount of overtime work and the ebb and flow of business conjunc-
ture. The graph is based on reported overtime per month (shotei-gai rōdō
jikan), and shows three groups of companies by their size: more than
500 employees, employees between 100 and 499, and ones between 30
and 99. The overall trend is clear; Japanese companies adjust overtime
in response to the business conjuncture. Large firms have the strong-
est correlation between the amount of overtime and changes in busi-
ness conjuncture compared to smaller firms, even though overtime is
declining and with it the differences among firm sizes.12
Intra-(group) firm employment adjustment also became common dur-
ing this period through the institutionalization of shukkō and tenseki,
through which employers can adjust the labor force by transferring
workers to other companies, usually to their own subsidiaries (Inagami
2003). Although these practices expanded in the 1960s as labor lending
to subsidiary companies that were in need of managers and technicians,
the main purpose of the practices began to change to employment
adjustment through the periods of oil shocks and high-yen appreciation
(Inagami 2003). In addition to the firm-internal flexibility, the use of
paato expanded significantly during the period13 (Takanashi 1993).
The strong drive towards efficiency required workers to gain an even
more flexible attitude towards work assignments. This requirement for
workers was deepened from ‘the ability to be flexible’ to ‘the ability to be
flexible rooted in lifestyle’ (seikatsu taido to shiteno nōryoku) (Kumazawa
1997: 40). It is the ability to be fully adaptive to the assigned tasks, work
environment, rotation, and regional transfer (with their family or, in
many cases, alone). Kumazawa argues that the management prerogative
in these issues forces workers to adopt a submissive lifestyle to satisfy cor-
porate requirements. The term ‘kaisha ningen’ (company man, who com-
pletely dedicates his life to his company) appeared during this period.
The personnel evaluation system started to play an important role
during this period. The managerial effort was devoted to expanding
the merit part to determine wages. By doing so, management sought to
draw more effort from workers. The stricter implementation of selection
signals the strengthened function of evaluation. It establishes the stand-
ard of a good worker, and encourages workers to conform to managerial
expectations. This standard was established solely by employers under
the managerial prerogative, and some argue that the range of what is
evaluated is wider in Japan than, for instance, the USA (Kumazawa
1997, 1998; Endo 1999). Kumazawa cites Nikkeiren’s suggested range to
include physical strength, aptitude, knowledge, experience, personality,
9780230_209084_03_cha02.indd 26 11/29/2010 10:25:35 AM

and willingness (Nikkeiren 1969). Endo shows that this range even
includes political thought. In his detailed case studies, he convincingly
argues how personnel evaluation has been used to discriminate against
labor activists (Endo 1999). Personnel evaluation determines the desired
quality of labor performance and effort from concrete skills to norma-
tive values. Under the managerial prerogative, workers are encouraged
to internalize these standards and this internalization completes the
shop-floor control. Japanese style shop-floor control enables flexible
allocation of workers and encourages a strong commitment toward
work assignments.
The characteristics of postwar

Japanese employment relations
The previous section described the brief historical overview of the

development of Japanese employment relations in the postwar period.
It introduced the broad trend going back to the effort to establish a
‘democratic’ society, and described the history, focusing on the core
dynamics that shaped employment relations. In this section, major
descriptive characteristics of Japanese employment relations will be
summarized with supplemental discussions referring to the further
details of historical development. This section follows the conceptual
framework by dividing the summary into the aspects of employment
relations, contract/effort and mobility.
Contract/effort
Contract
From the legal perspective, there were only two kinds of employment
contracts in Japan until the mid 1980s: non-limited term contracts and
limited-term contracts. Companies usually provided non-limited term
contracts to workers whom they considered to be ‘regular employees’
(sei-shain) of the company. All other categories of employment fell into
the category of limited-term contracts and were ‘non-regular employees
of the organization’ (hi-sei-shain). Regular members of the organization,
generally called sei-shain in Japanese, are expected to stay in the organi-
zation throughout their career as organizational members (see catego-
ries A, B and C in Figure 2.3), except for young female workers who are
supposed to quit the company at the time of marriage (or childbear-
ing at the latest) (see category D). Non-regular members, hi-sei-shain,
are expected to fulfill temporary needs for labor and skills and here
there are various forms such as paato (female part-time), arubaito (other
9780230_209084_03_cha02.indd 27 11/29/2010 10:25:35 AM

A. Torishimariyaku (employer)
B. Managers, administrators
E (mostly non-union eligible,
A
some union eligible)
C. Male regular employees
B (union eligible)
D. Female regular employees
(union eligible)
E. Shokutaku (regular employees
re-employed as contract workers)
F. Tenseki, shukko (transferee: from
F G and to allied companies)
C G. Haken workers (temporary agency
dispatched workers)
F D D G H. Shitauke, shagaiko (dispatched
from suppliers)
H G I. Paato (part-time middle
age women)
J. Arubaito (student and young
part timers)
H I, J, K, L G
K. Rinjiko, Kisetsuko (temporary
labourers, seasonal workers)
L. Gaikoku-jin rodosha
(foreign workers)
Allied Regular ‘member’ employees
External
firms, Temp. A, B, C, D, F
Labor
Sub- Agency Non-regular employees
Market
contractors E, G, H, I, J, K, L
Figure 2.3 The Japanese employment structure

Source: Cited from Kumazawa, M., 1998 [1989]: 263, and modified by the author.
part-time, usually students), keiyaku (contract workers), and shokutaku

(reemployed elderly workers as contract workers). According to the
Employment Status Survey (shūgyō kōzō kihon chōsa) in 1987, 81.6 per-
cent of all employees were regular employees.14 Especially focusing on
the sector of large companies that employ more than 1,000 workers, 89.1
percent of employees were regular employees.15 Further, if we limit the
same statistics to just male workers, the figure becomes 97.9 percent;16
nearly all men in large corporations were regular employees. Figure 2.3
visualizes the Japanese employment structure especially focusing on
large- company sectors.
These two forms of employment, regular and non-regular, are in real-
ity referred to as regular and non-regular ‘members’ of the organization.
9780230_209084_03_cha02.indd 28 11/29/2010 10:25:35 AM

Especially at the large firms, regular employees are the people who
have succeeded in becoming members of the firm as soon as they leave
school (Dore 1997: 21). Thus, those who are employed in non-limited
term contracts are the ‘organizational members,’ and the primary iden-
tity of these workers is the membership of the organization rather than
occupations or other categories, which gives a particular quality to the
other aspects of employment relations for these core regular workers.
The regular members of the organizations are selected on the basis of
personal qualities, general intelligence and learning ability, and not on
the basis of vocational capacities (Dore 1997: 21). Having been selected
as organizational members, they are assigned to various tasks, without
a clear job description. As we will discuss in the next section, regu-
lar members experience rotation within a certain breadth of expertise
(Koike 1999). Each of these assignments does not have clear defini-
tion. This practice enables Japanese companies to develop functional
flexibility. However, taking labor out of market competition through
long-term employment also can form rigidity in terms of responding
to environmental changes (Dore 1986). As an organizational member,
regular employees are expected to take on new assignments in response
to these environmental changes. This has long been the alternative to
utilizing the external labor market for new skills or unanticipated labor
needs. Employee qualities such as loyalty and the ability to quickly
learn new skills are especially tested in these situations.
The regular employees of firms who are covered by so- called ‘lifelong
employment practices’ (shūshin koyō kankō), which are better described
as ‘long-term’ rather than ‘lifelong,’ emerged out of the postwar labor
struggle. It is not just an agreement between employers and workers;
courts support the practice by restricting worker dismissals. Unless
companies meet very strict conditions, their chances of winning a case
of worker dismissal was slim. ‘Lifelong’ or ‘long-term’ employment for
regular workers refers not only to job security, but also to the wage and
benefit programs that are bestowed upon the regular employees of large
firms. A life-stage adjusted wage system is applied to regular employ-
ees, who have full access to corporate welfare programs that include
favorable health insurance, retirement allowances, corporate pensions,
employee’s welfare facilities, low-interest housing loan and company
housing. These programs, not only pension systems, but also retire-
ment allowances, are supported by social security programs and tax
exemption. Corporate employees, especially those who are employed
by large firms, are allowed to have generous benefits from these pro-
grams (Osawa 1993).
9780230_209084_03_cha02.indd 29 11/29/2010 10:25:36 AM

Until very recently, a limited-term contract in Japan meant a contract

for less than a year of employment. There are important differences
between types of non-regular employment contracts: paato, arubaito
(although in many cases, arubaito workers do not conclude formal work
contracts), keiyaku, shokutaku, and haken (as we will discuss later as a
new form of employment since the 1980s). The boundaries between
these categories are clearly defined based on the attributes of workers
and their contribution to numerical and functional flexibilities.
The largest form of non-regular employment is paato, which liter-
ally means part-timers. In 1987, 14.2 percent of total employees were
paato workers (18.4 percent total were non-regular workers). Paato work-
ers are predominantly middle-aged female workers. Paato employment
started to expand, especially after the oil shocks of the 1970s, and has
since been the major form of employment for women after (or during)
their childbearing age (Takanashi 2001b). The name paato is nearly syn-
onymous with middle-aged working women, and the actual skills and
organizational roles they have may vary. In some industries, such as
retail, paato workers play a central role, while in other industries they
are in secondary or supplementary roles.17 In the former case, paato
workers work as long hours as regular workers. Even the content of their
work is sometimes as same as regular workers. This is an exemplary case
of the distinctive character of the Japanese labor market segmentation
between regular and non-regular employment. Arubaito is another form
of part-time work covering workers who are mainly students and young
workers. Paato and arubaito (and kisetsukō and gaikokujin rōdōsha18) are
employed directly through the local labor market.
The category of keiyaku sometimes overlaps with shokutaku. Keiyaku
mainly includes those who independently conclude a contract with a
firm on the basis of their specific skills, and they are mainly male work-
ers. Shokutaku workers are also employed with a limited-term contract
for their specific skills. However in the case of shokutaku, the emphasis
is more on the aspect of ‘reemployment’ of the retired personnel of the
company with a new fixed-term employment contract. Shokutaku is, in
one sense, considered a benefit of ‘lifelong’ employment practices for
regular workers, but at the same time, it is a strategic choice for compa-
nies to retain necessary skills at a lower wage level.
In Japanese enterprise unionism, collective bargaining and union rep-
resentation do not cover these non-regular workers. As we reviewed in
the previous historical discussion, the withdrawal of labor unions from
personnel decision making and the establishment of the spring offen-
sive (shuntō) of wage bargaining eventually resulted in the cooperative
9780230_209084_03_cha02.indd 30 11/29/2010 10:25:36 AM

forms of enterprise unionism, in which employers and labor unions each

prioritized corporate performance. It is no surprise that many observ-
ers of labor relations in Japan note that the interests of both manage-
ment and labor have been shaped more by the needs of organizational
survival than the class theory teaches (Kumazawa 1982, 1993; Hyodo
1997; Gordon 1993, 1998). It is important to note that this is a ‘produc-
tivity coalition’ established between employers and regular employees
only. Hisamoto calls this coalition ‘mutually trusted labor relations’
(sōgo shinrai teki rōshi kankei) and praises it as a successful conciliation
of possible conflicts at work (Hisamoto 1998). Suzuki (1999) argues the
opposite. He insists that it is the limit of cooperative enterprise union-
ism, in which ‘productivity coalition’ is only possible at the expense of
insecurity among non-regular workers (Suzuki 1999).
Other than these forms of direct employment, there are hidden forms
of employment through the practices of labor lending based on interfirm
relations. Shukkō (temporary transfers) and tenseki (permanent transfers)
are major forms of labor lending that characterizes a specific associa-
tion between contract and mobility. From the late 1960s, Japanese com-
panies established subsidiary companies to diversify their businesses in
new and growing industries. In order to fuel the necessary personnel
needs, Japanese companies dispatched their employees, especially man-
agers, engineers and technicians, to these subsidiary companies. In this
sense, the practice means a lot for the aspect of mobility too. This form
of labor lending became very common during the 1970s.
Another form of labor lending, shagaikō (literally, the use of exter-
nal firms’ workers), has a longer history than shukkō, and it involves
a wider network of firms. During the time of economic expansion in
the Korean War, Japanese companies started to (re)establish enterprise
groups called keiretsu in order to secure stable yet flexible business
relationships. Keiretsu relationships typically coordinate hierarchical
linkages between large firms and medium and small size companies.19
Medium and small firms in the vertical keiretsu allied companies are
called shitauke and ukeoi companies. When cost reduction is necessary,
the small and medium size companies in the keiretsu usually carry more
of the burden. When personnel reduction is necessary at large compa-
nies, their allied small and medium size companies may be expected to
absorb the excess labor force. When large companies establish limited-
term projects, small and medium size companies may be called on to
lend some workers to the projects, so that large companies do not need
to hire extra workers. The workers from small companies who are sent to
work at large firms or their clients’ worksites are mainly called shagaikō.
9780230_209084_03_cha02.indd 31 11/29/2010 10:25:36 AM

In return, small and medium size companies can expect continuous

business contracts with large companies.
At the time of the Korean War, many employers were still skeptical
about the prospects for the economy, since the wartime economic expan-
sion could have been just temporary. Heavy industry and the chemical
industry, which profited most from the war, relied heavily on shagaikō,
or temporary external employees who were dispatched from shitauke or
ukeoi supplier companies, to cope with high labor demand (Takanashi
2001a; Matsushima and Hazama 1987 [1960]). Although these practices
were partly illegal, these forms of labor lending were constantly being
practiced throughout the postwar periods. In particular, the reliance on
some suppliers just to supply labor (kōnai ukeoi) became quite common
for providing the labor and skills in need without hiring additional reg-
ular workers (Takanashi 2001a).
Effort
Institutions such as company welfare, ‘lifelong’ employment and the
fusion of labor representation with company organizations in Japan
contribute to a view of employment, which Gordon has characterized
as ‘company citizenship’ (Gordon 1985). The social integration implied
by the concept of company citizenship signifies the fusion of work-
ers’ interests with managers’, to the advantage of the latter (Kumazawa
1993, 1997). Shire analyzes how company-based socialization merges
the identities of ‘social adult’ and ‘company citizen’ so that young
employees learn that to accept management goals as their own personal
goals is the expression of adult behavior (Shire 1999).20 And this sociali-
zation is continual. Under the ranking and qualification labor manage-
ment system, periodical training programs are organized to socialize
workers who will be promoted to the next step in the firm hierarchy to
cope with the expectations attached to their new roles. Constant imple-
mentation of personnel evaluation helps facilitate the socialization of
mature but obedient company citizens (Shire ibid.).
The creation of company citizenship historically parallels the estab-
lishment of the productivity coalition between managers and regular
workers, which signifies the gradual decline of the labor unions’ influ-
ence on labor management and workplace control. Given that the aim
of the personnel evaluation system is to choose ‘good organizational
members,’ its subjective tendency has been clear for decades. The sys-
tem is not based on job description and does not rely solely on meas-
uring performance. Thus the evaluation system has tended to focus
on employees’ personal qualities and contributions as organizational
9780230_209084_03_cha02.indd 32 11/29/2010 10:25:36 AM

members. This tendency can be clearly seen in the specific evaluation

criteria, of which there are three: performance, potential, and general
attitude (Kumazawa 1998 [1989]; Endo 1999), with work attitudes play-
ing a particularly important role.
Given the wide and subjective nature of Japanese personnel evalua-
tions, the socialization effect of the system is quite strong. Endo found
that the personnel evaluation has been used to legitimatize discrimi-
nation on the basis of gender and political thoughts (Endo 1999). The
managerial prerogative over determining any corporate internal mobili-
ties and the fact that leaving the firm is not a realistic option for male
regular workers, the personnel evaluation system generates further
worker obedience to management, “since workers are under strong pres-
sure to avoid at all costs any kind of behavior that might result in a
poor evaluation” (Endo 1994: 79). Shire found that the socialization
effect is clear from her detailed analysis of the evaluation criteria and
the system of evaluation in terms of gender socialization in a business
context (Shire 1999). In her empirical findings, the evaluation criteria
cover general work performance and work-related and general attitudes.
The criteria of these categories are marked by gendered expectations
on workers, and evaluations encourage self-adjustment to management
expectations via the methods of evaluation such as self-assessment and
management by objectives (Shire ibid.: 88). Since evaluation takes place
at least once a year in most companies, the evaluation practices mean
continuous socialization of employees. Further, the linkage between
self-assessment and future job assignments and employee development
“encourage a long-term identification of one’s personal growth with
company growth” (Shire ibid.: 88–9). The homogenous ‘company man’
(kaisha ningen) is a result of this socialization.
Requiring workers to have a specific disposition complements manage-
ment expectations concerning functional flexibility in Japanese compa-
nies. Kumazawa points out that competition among workers is achieved
in terms of a flexible ability to cope with organizational necessities. The
skill, according to Kumazawa, that workers eventually have to earn is the
‘ability to be flexible’ (furekishiburu na nōryoku). It is the ability to adjust
to the assigned tasks, which emerge from organizational necessities and
environmental changes. As the kinds of task vary, what workers have pre-
viously learned is less important than the ability to continue learning.
The ‘ability to be flexible’ also shapes understanding about the tem-
poral dimensions of work: the understanding of the normal working
day and the distinction between work and life. In his study of the rea-
sons for the prevalence of longer working hours of Japanese workers, Ota
9780230_209084_03_cha02.indd 33 11/29/2010 10:25:36 AM

found that the system of personnel evaluation puts pressure on workers

to advertise their work effort. This is most typically demonstrated by
long working hours, which Ota calls ‘symbolic effort,’: symbolic because
it does not necessarily correlate with higher productivity (Ota 1995).
Given the wide-ranging and subjective nature of the personnel evalua-
tion system, the small group reputation within ka (the section) or bu (the
department) becomes crucial. This is especially true when the evalu-
ation is conducted by direct supervisors, when workers’ performance,
ability, attitude, and personality are evaluated in the context of a group,
by benchmarking their relative positions in the group. Ota concludes
that evaluations in such circumstances encourage competition among
workers to show symbolic effort, most typically by working longer hours
to demonstrate their dedication to the organization (Ota 1995). Ota’s
2600
Labor force survey
2500 Monthly labor survey
2400
2300
2200
2100
2000
1900
1800
1700
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Figure 2.4 Unpaid overtime work (hours per year)

Sources: Labor Force Survey: ILO 2010; Monthly Labor Survey: MHLW 2008c*
* The Labor Force Survey (rōdōryoku chōsa) is carried out every month by the Statistics
Bureau. This survey chooses about 100,000 individuals from people older than 15 years of
age from 40,000 selected households. (see note for Figure 2.2 of this chapter, for Monthly
Labor Survey.). The numbers in this figure are calculated as follows: in the Labor Force
Survey, the working hour is reported as weekly working hours. Thus, the reported number
times 52 can be considered as annual working hours. In the Monthly Labor Survey, the
monthly working hour is reported. Here, the reported numbers times 12 is the annual
working hours.
9780230_209084_03_cha02.indd 34 11/29/2010 10:25:37 AM

study clearly shows that working-time practices are deeply enmeshed

with the social relations of control in the Japanese workplace.21
The existence of unpaid overtime work, which is commonly referred
to in Japanese as sābisu zangyō, has been a constant characteristic of
Japanese work practices, and it typically shows how ‘company citizen-
ship’ is expressed in the working-time practice (see Figure 2.4).
The Labor Force Survey report of overtime work, based on worker self-
reporting is consistently higher than the employer reports which form
the basis of the Monthly Labor Survey. This significant gap is the best
indicator of unpaid overtime, and it constantly shows about 300 hours
per year while the overall amount of overtime declined significantly.
This practice of unpaid overtime can exist because regulations concern-
ing working time are lax and unenforced. Working-time regulations
encourage autonomous problem solving at the organizational level.
Reporting shorter working time in official records is a sign of the
devoted worker who seriously considers the total cost of the team or
section, which, in principle, is a managerial concern (Kumazawa 1997).
The seemingly contradictory anecdotal observations, which follow,
begins to make sense when one considers that working-time practices
are expressions of an aspect of workplace control at Japanese companies.
Sometimes Japanese workers do not leave their workplace for as long as
their colleagues stay at work (‘symbolic effort’). Sometimes they work
late without reporting overtime and thus without overtime pay (unpaid
overtime as an expression of ‘company citizenship’). Sometimes, how-
ever, they leave the workplace when they still have work to do because
of a designated ‘no overtime work day,’ which is a measure of reducing
working- time (worker obedience to management).
Mobility
The establishment of the corporate-centered society, under the circum-
stances of a restricted external labor market, had significant impacts on
the labor force mobility of regular employees. First, the employment
security that the labor movement achieved plays a significant role in set-
ting up the pattern of (im)mobility for regular employees. Second, the
life-stage adjusted wage system also plays a part. The wage system pegs
income increases to anticipated household expenses, related to stages in a
normal life course. In addition to wages, additional allowances are given
to workers for specific events of life-stage. Consequently, the wage system
contributes to ‘normalizing’ the life-course of workers, and it is reported
that workers rely on the design of the life-stage adjusted wage system and
the welfare contributions for their domestic household planning (Kimoto
9780230_209084_03_cha02.indd 35 11/29/2010 10:25:37 AM

1995; Kyotani 1993). The strongest assumption of this system is based on

the gender division of labor in paid and unpaid work. It assumes that
male workers are the breadwinners and all other family members, wives
and children included, are dependent on the male wage earners.
The social and economic advantages of the wage and welfare systems,
especially of large companies, came to be considered an ideal for society
as it successfully provided affluence and prospects. For men, changing
employers is not only rare but also a risk, both to himself and his fam-
ily’s well being.22 Simply put, regular employees lose the ability to leave
the company; an equivalent external labor market option hardly exists.
Thus there is structurally no mobility bargain for male workers in the
Japanese labor market. Mobility is constrained. This is especially true
among the regular workers of large firms, where ‘lifetime employment’
is considered ideal, and interfirm mobility hardly exists. For women,
not having a husband was the worst possible scenario since the Japanese
labor market was only open to non-regular and peripheral employment
options for women. Further, compulsory social insurance does not pro-
vide an alternative social safety net. For this reason, Osawa insists that
there is nothing worse in Japanese society than being a single mother
(Osawa 1993). Thus, since the period of rapid economic growth, life
courses have been structured in gendered ways; women tend to be
housewives, and men’s career mobility is quite low especially among
workers in large companies (Watanabe and Sato 1999).
This gendered division of labor peaked at the end of the period
of rapid economic growth in the early-to-mid 1970s. Sugino and
Yonemura (2000) measured the ratio of women who typically expe-
rienced the life- course pattern depicted in the M- curve of female
labor participation. 23 They first demonstrate that the expansion of
the nonlabor participation rate of females peaked between 1975 and
1980. They also argue that from 1995 the birth cohort of 1951–5 most
typically experienced the M- curve life- course. Forty-seven percent of
women in this period left the labor market to become full-time house-
wives. This rate was 42 percent for the older (1946–50) cohort and 37
percent for the younger (1956–60) cohort. The study also confirms
that female workers were first employed as full-time employees, and
that their reemployment later in life tends to be part-time (Sugino and
Yonemura 2000).
For men who successfully became regular employees of large firms,
their entire career would be spent as such. Koike argues, in his theory of
skill formation (chiteki jukuren-ron) that in Japanese companies, workers
rotate between a “relatively wide range of assignments within a certain
9780230_209084_03_cha02.indd 36 11/29/2010 10:25:37 AM

specialty” throughout their working lives (Koike 1999: 57). They learn
necessary skills by OJT with OffJT as a supplement (Koike ibid.: 25). The
required basic knowledge is gained by OffJT, and workers apply this to
the real work process with the support of senior workers and colleagues.
The accumulation of rotation gives regular employees an indispensable
asset, a personal network (Shire and Ota 1998; Kimoto 2002). Frequent
rotation develops workers’ skills in a relatively wide category of work,
which can be described as a ‘careers.’
Table 2.1 The ranking and qualification system
Qualification Corresponding Minimum Maximum

rank Grade Name Definition official title (year) (year)
Managerial M3 San-yo Chief Buchō

level management (department
manager)
M2 Fuku Advanced Fuku Buchō (vice
San- management, department
yo advanced manager)
professional
jobs
M1 Sanji Management Kachō (section 3
planning, manager)
professional
jobs
Supervisory 6 Fuku Advanced Kachō hosa 3
level Sanji supervision, (vice section
advanced manager)
decision
making jobs
5 Shuji Supervision, Kakarichō 2
decision (group
making jobs manager)
4 Fuku Lowest rank Shunin 2
Shuji managerial (support
jobs of group
management)
Entry level 3 Shain 1 Complex jobs, No official title 2 6
kyū relatively
skilled work
(for university 2 Shain 2 Standard jobs 1 6
graduates) kyū
(for high 1 Shain 3 Supplementary 4 or 2 6
school and kyū jobs
associate
college
graduates)
Source: Imano and Sato 2002: 55 (translated and arranged by the author).
9780230_209084_03_cha02.indd 37 11/29/2010 10:25:37 AM

This process of career formation is controlled solely by manage-

ment and can be considered a managerial prerogative. As Koike rightly
points out, workers and labor unions have very limited influence in
the decision-making process concerning assignment allocation, rota-
tion, and career development (Koike 1977). Viewing the term ‘internal
labor market’ as a misconception for describing a firm-internal mobil-
ity, Dore calls this practice the “personnel office career deployment sys-
tem” in order to emphasize the aspect of managerial prerogative (Dore
1997: 24). Thus, the term ‘career’ in the Japanese context is a series of
rotations assigned by the personnel department of one firm.
While firm-internal horizontal ‘career’ mobility is shaped by
management- determined rotation practices, upward or vertical mobil-
ity in Japanese companies has been most typically characterized by
a ranking and qualification system (shokunō shikaku-kyū), which is
also under the strong grip of managerial prerogative. The ranking and
qualification system contains two types of ranks: the normal verti-
cal progression through managerial ranks and a detailed system of
skill-specific qualification ranks within these levels. Workers climb
the closely knit ladder of these two rankings. In a typical case, the
organization sets about 10 to 12 skill-specific qualification ranks,
five or six to both the managerial and nonmanagerial class workers,
which approximate the official titles of the hierarchical organizational
ranks (see Table 2.1). Usually, the promotion in qualification ranks is
called shōkaku (promotion in rank), and shōshin means the promotion
in managerial ranks. Thus, workers in a managerial level in qualifica-
tion rank may not have the official titles that correspond to that level.
In the ranking and qualification system, minimum and maximum
lengths of time that workers can stay are set (such as three years for the
fastest and six years for the slowest). This system of labor management
is based primarily on age group, and, accordingly, provides competi-
tion within the group.
Vertical mobility is closely related to the effort aspect of employment
relations through its close association with the selection process which
is accomplished through evaluation. Imada and Hirata detect the pat-
terns of competition which can be observed among white-collar work-
ers in large firms, which can be seen in Figure 2.5.
After workers become members of the firm, all workers in the same age
group move up the promotion ladder for approximately 10 to 15 years.
At this early stage of one’s career, the age component has a stronger
influence on promotion prospects. While there is no clear competition
during this period, the records of personnel evaluation are gathered
9780230_209084_03_cha02.indd 38 11/29/2010 10:25:38 AM

(Ranking)
bucho
kacho
shunin (Tournament competition)
(Promotion speed
competition)
(Seniority)
(Length of service)
Figure 2.5 Multi-layered structure of competition

Source: Imada and Hirata 1995: 150.
and accumulated for the decision of the first selection. After this first
selection, selection based on work ability is emphasized. Competition
is attained by the pace of promotion and competition to pass through
the ranks as quickly as possible is essential. Thus, the hierarchical range
where this competition occurs is from the entry level managerial posi-
tion to the level of the section manager. After competition in terms
of promotion speed is accomplished, continued competition becomes
tournament style to reach the department manager level (Imada and
Hirata 1995).
The competition system carefully selects those who ‘delay’ rather
than the front runners. Takeuchi clarified how this competition system
is organized by using the method to make a ‘career tree’ of 67 employees
who were accepted by one company in 1966 (Takeuchi 1995). According
to the study, until the first selection, only a few fall off in the competi-
tion. During the competition relative to promotion speed, competition
accelerates. Workers are stratified into fast achievers and slow achievers.
Following this, significant numbers of workers gradually drop out of
the competition. The fastest group of workers takes 12 years to reach the
managerial positions, while the last group achieves this goal after 22
years. Despite the clearly fierce competition, the group-based competi-
tion system effectively motivates workers throughout their careers with
9780230_209084_03_cha02.indd 39 11/29/2010 10:25:38 AM

the smallest possible number of workers dropping out from each stage
of the competition (Takeuchi 1995; Kumazawa 1997).
The treatment of workers who are ‘delayed’ in the competition is an
important aspect of ‘long-term’ employment. Dropping out from the
competition does not mean that they are discharged from the company.
Shukkō and tenseki transfer practices relocate these workers from the
parent company to subsidiary companies (Inagami 2003). Accordingly,
‘long-term’ employment practices are maintained within the group
of allied companies, especially for workers in the parent company, by
securing workers’ continued employment.
Summary
In this chapter, the historical development of Japanese employment
relations was described by seeing employment relations as a social-
historical construction arising out of state-firm-labor negotiations. After
the historical description, the institutional characteristics of societal,
organizational and workplace level of negotiation and the three aspects
of employment relations are discussed. The model of Japanese employ-
ment regulation presented in this chapter is summarized in Table 2.2.
Table 2.2 The characteristics of employment relations in Japan (core regular

workers)
Societal: Organizational: Workplace:

collective bargaining, enterprise bargaining control and
labor market and labor and labor management authority
Contract ● Non-limited term ● No job description ● Organizational

contract as dominant ● Seniority and membership
form competition on ability (company
● Restriction on worker citizenship)
dismissal
● Spring offensive
Effort ● 36 kyōtei (Labor ● Subjective criteria of ● Organizational

Standards Act, article personnel evaluation membership
No. 36 for overtime ● Labor force (company
agreement) adjustment through citizenship)
working time ● Symbolic effort
Mobility ● Strict regulation on ● Internal labor ● Submissive

mobility mobility attitude on
● Corporate centered ● Management ‘career’
social structure prerogative
9780230_209084_03_cha02.indd 40 11/29/2010 10:25:38 AM

When we limit the subject to male employees in the large- company

sector, the non-limited term contract has been the dominant form of
employment with strict regulation on worker dismissal. These workers
with non-limited term contracts are employed with no job descriptions
as organizational members who are supposed to spend their whole career
in the organization. ‘Organizational members’ are expected to take on
new assignments that emerge within the organization as adaptations
to environmental changes. The wages for the organizational member
are designed on the basis of a life-stage adjusted wage system, and the
privileged welfare programs are developed to be complementary to the
wage system. Although the spring offensive, institutionalized during
the period of rapid economic growth, had achieved significant pay
increases, competition on ability among workers was widened after the
oil shocks and high-yen appreciation.
Postwar labor market regulations strictly limited labor mobility.
Private job placement and worker dispatching were banned as they were
considered feudal exploitation. In addition to the strict regulations, the
establishment of the corporate- centered social setting, in which social
and economic incentives are favorable for the members of company
organizations, deeply structured the life courses of men and women in
Japan. Especially for male employees, changing employer is not a realis-
tic alternative. For regular members of the organization, rotation, solely
controlled under managerial prerogative, characterizes firm-internal
horizontal mobility. This mobility is an important source of workers’
skills. Upward or vertical mobility is shaped by the ranking and quali-
fication system. The system is a complex knit of managerial ranks and
skill-specific ranks, and promotion competition is regulated by the per-
sonnel evaluation practices.
The productivity coalition between managers and regular employ-
ees facilitated a specific pattern of social integration called ‘company
citizenship,’ which signifies the fusion of workers’ interests with those
of the managers, to the advantage of the latter. A submissive attitude
by workers towards rotation is one expression of ‘company citizenship.’
The ‘company citizenship’ is achieved through the socialization proc-
ess, in which personnel evaluation plays a significant role that mainly
measures performance, potential, and general and work attitude of the
workers. Due to its subjective nature, Japanese personnel evaluation
socializes workers effectively to be obedient to the managerial preroga-
tive. The ‘ability to be flexible’ is a product of such socialization.
Working-time practices are shaped by this ‘ability to be flexible.’
Given the wide range and subjective nature of the personnel evaluation,
9780230_209084_03_cha02.indd 41 11/29/2010 10:25:39 AM

workers’ performance, ability, attitude and personality are evaluated in

the context of a group. Such pressure encourages competition between
workers to show ‘symbolic effort,’ most typically demonstrated as work-
ing longer. The existence of unpaid overtime work is another sign of
the ‘ability to be flexible’ in terms of working-time practices. Reporting
shorter working time in official records is a sign of the devoted worker
who seriously cares for the cost- consideration of the work team. This
practice is only possible under the lax regulation of working time. The
LSA allows organizational level discretion, and there is no severe sanc-
tion on the violation.
Regulations of employment relations:

with or without labor
‘Corporatism with labor’ at work

The governance of employment in Japan has been characterized as a
variety of corporatist regime, which has a strong decentralized ten-
dency reflecting the tradition of enterprise unionism (Inagami et.al.
1995). It is true that labor relations and labor management practices at
the organizational level have had a strong hold in coordinating employ-
ment relations. Especially in large firms, the organizational level nego-
tiations have sole control over almost all of the aspects of employment
relations, with the exception of wage determination at spring offensive,
which is distinctively outlined with the practices of ‘lifelong employ-
ment’ (shūshin koyō). However, it does not mean that societal regula-
tions are too weak in Japan: in many areas of regulation, it is actually
quite the opposite. What regulative agents usually try to accomplish is
to regulate organizational practices in the form of advice and consul-
tation, expecting organizations to show the capability of autonomous
problem solving (rōshi jichi) (for example, Schwartz 1998).
The regulations on worker dismissal and working time, which were
discussed at the end of the previous section, are the representative cases
of the regulations emphasizing autonomous problem solving. In the
case of worker dismissal, there is no regulation that clearly prohibits
worker dismissal. Court awards, however, encourage deliberate interac-
tive processes between employer and worker to build up consent on the
conditions of dismissal based on the norms of ‘lifelong employment’
rather than simply decide cases based on the law (Dore 1986). The 36
Agreement, based on the article no. 36 of the LSA that sets out the
rules on overtime work, allows each business organization to decide
the acceptable amount of overtime work, which is also deliberated at
9780230_209084_03_cha02.indd 42 11/29/2010 10:25:39 AM

organizational level labor relations (Schwartz 1998: 116; Yoroi, Wakita

and Goka 2001). What the labor ministry tried to suggest, when exces-
sive working hours were problematized, was to encourage companies
to create a culture that allows for workers to take paid (or sick) leave
(Morioka 1995). Thus, although the organizational level regulations
appeared to have a strong hold on personnel and staffing decisions, it
should not be ignored that societal level regulations provide the foun-
dation of such practices in Japan.
Societal level regulations of employment relations have been nego-
tiated primarily at the advisory council called shingikai established
under the labor ministry. The system of the advisory council was set
up by the initiative of the occupation government immediately after
the war to avoid the overcentralization of power of ministries and to
achieve pluralistic policy making (Schwartz 1998). Advisory councils
formed under the labor ministry are a tripartite commission composed
of public-interest, employers and labor representatives, most typically
seven members from each party (see Table 2.3). Employers and labor
unions can nominate their own members to represent them in the
advisory council. Public-interest representatives are deliberately cho-
sen by the labor ministry, so as not to be radically opposed to one of
each interest group (Schwartz 1998: 128). Due to this selection, public-
interest representatives are usually considered to be close to the gov-
ernment. Some scholars, however, found that the bureaucrats of the
labor ministry accepted the importance of coordinating various inter-
ests more than the bureaucrats of other ministries (Tsujinaka 1987;
Kume 1998). This suggests that public-interest representatives are not
simply providing a convenient shield for the ministry in achieving its
own policy goals.
The role of advisory council is to set its own agenda based upon the
agreement of the tripartite members and to deliberate the issues to send
to the Diet session (Takanashi 2000:1).24 Since the advisory councils
under the labor ministry basically adopt the principle of unanimous
vote after deliberations, employment issues rarely become contentious
in the Diet session (Kume 2000: Takanashi 2000).
‘Reform without labor’?

The historical development of Japanese labor relations points to the
gradual disarmament of labor unions and their withdrawal from sub-
stantial fields of labor management at business organizations. This poses
a question on the ‘corporatism with labor’ argument, although some
evaluate the advisory council arrangement as enabling a consensus of
9780230_209084_03_cha02.indd 43 11/29/2010 10:25:39 AM

Table 2.3 The advisory council: the case of the Central Labor Standards Council
as of 2000
Public-interest 1 Research Associate, Japan Institute of Labor

representatives
2 Assistant Professor, The Sanno Institute of
Management
3 President, Japan Crane Association
4 Professor, Faculty of Law, University of Tokyo
(chair)
5 Professor, Faculty of Integrated Human Studies,
Kyoto University
6 President, Japan Labor Health and Welfare
(deputy Organization
chair)
7 Professor, Saitama Medical School
Worker 1 Secretary, The Japanese Federation of Textile,
representatives Chemical, Food, Commercial, Service and
General Workers’ Unions
2 Secretary, Japan Association of Metal, Machinery,
and Manufacturing Workers
3 Deputy President, Japanese Federation of Labor
Unions
4 Deputy President, Japan Commercial Workers
Union Confederation
5 Secretary, Japan Chemistry Workers Union
6 Member of Central Committee, National Union
of General Workers
7 Japan Trade Union Confederation (Rengo)
Employer 1 Department Manager, Department of Personnel
representatives and Labor Management, Kobe Steel, Ltd
2 Chair, Committee of Employment, the Chamber
of Commerce (President of Japan Building
Service, Ltd)
3 Managing Director, IBM Japan Ltd
4 President, Aoki Construction Ltd
5 Senior Director, Nikkeiren
6 Managing Director and Department Manager
of the Department of Personnel, Mitsubishi
Chemical Corporation
7 Managing Director, National Federation of Small
Business Associations
Note: The table is translated by the author from the government document.
9780230_209084_03_cha02.indd 44 11/29/2010 10:25:39 AM

40
35.4
34.4
35
30.8
30 28.9
25.2
25 23.8
21.5
18.7
20 18.1
15
10
0
1970 1975 1980 1985 1990 1995 2000 2005 2008
Figure 2.6 The trend of unionization in Japan (%)

Source: Basic Survey on Labor Unions: MHLW 2009d*
* The figure is based on the data from Basic Survey on Labor Unions (rōdō kumiai kiso chōsa),
conducted by the labor ministry every year in July (based on the circumstances at the end
of June). All registered labor unions are included in the survey.
9000
Non-strike
8000 Strike
7000
6000
5000
4000
3000
2000
1000
0
1970 1975 1980 1985 1990 1995 2000 2005 2007
Figure 2.7 The number of labor disputes in Japan

Source: Statistic Survey on Labor Dispute: MHLW 2008d*
* The figure is based on the data from Statistic Survey on Labor Dispute (rōdō sōgi tōkei chōsa).
The labor ministry requires reports from all the labor unions that had labor disputes with
their employers. Information is collected every month, and an annual report is published.
9780230_209084_03_cha02.indd 45 11/29/2010 10:25:40 AM

wide possible interests in the policy process (Takanashi 2000; Kume

1998; Tsujinaka 1987). There are however some facts that question
the thesis of ‘corporatism with labor.’ First, it is possible to point out
the decline of labor union organizing in Japan. Figure 2.6 shows the
decline of unionization from 1970. The organization rate was 35.4 per-
cent in 1970. By the start of Rengo, it was only little more than 25.2
percent by 1990. It continues to decline, and it marked a record low of
18.1 percent in 2008. These numbers show that the ‘representation’ of
worker is, in reality, quite limited.
Second, the cooperative tendency of enterprise unionism is clearly
manifested by the declining number of strikes at the organizational
level (see Figure 2.7). Having peaked in 1975, right after the oil shocks,
the number of labor disputes has constantly declined. The number
of participants in strikes declined from about 4.6 million in 1975 to
54,105 in 2007 when there were only 156 strikes nation-wide. 25 The
growing Domei movement that was said to have achieved ‘corporat-
ism with labor’ was actually a sign of the successful taming of the
labor union movement. The historical period covered in this book
overlaps with the time that Rengo succeeded the Domei movement
and seems to show the taming of labor, especially at organizational
level.
The deregulation movements that emerged at the societal level
in the mid-1990s were also the employer- led initiatives to liberal-
ize and to deregulate employment relations. The Administrative
Reform Committee (gyōsei kaikaku iinkai: hereafter, ARC) was
established by the Murayama coalition administration (Social
Democratic Party and Liberal Democratic Party) in 1994. The
Special Committee on Deregulation (kisei kanwa shō- iinkai) was
founded in April 1995. The ARC was chaired by Iida Yotaro, 26 the
vice chairman of Keidanren, the most influential employers’ asso-
ciation. The Special Committee on Deregulation was first headed
by Shiina Takeo, the Chairman of IBM Japan, immediately followed
by Miyauchi Yoshihiko, the CEO of ORIX Corp. Miyauchi is an
entrepreneur and one of the most radical deregulation advocates
of the day, who has continued to serve as a chair for subsequent
deregulation committees (see Table 2.4).
These deregulation committees usually did not include any union
representative (with a few exceptions in the early committees). It is
also important to note that, as Iida admits, 14 observers for the Special
Committee on Deregulation were chosen from the group of people
9780230_209084_03_cha02.indd 46 11/29/2010 10:25:40 AM

Table 2.4 The list of deregulation committees since 1995
Month/ Deregulation
year committee Cabinet Chairperson
4/1995 Special Murayama Shiina Takeo (Chairman: IBM

Committee on (Social Japan)
Deregulation, Democratic Miyauchi Yoshihiko
Administrative Party and (Chairman: ORIX corp.)
Reform Liberal
Committee Democratic
(gyōsei kaikaku Party)
iinkai kisei
kanwa shō-
iinkai)
1/1998 Deregulation Hashimoto Miyauchi Yoshihiko (Board
Committee (LDP) Chairman: ORIX corp.)
(kisei kanwa
iinkai)
4/1999 Deregulation Obuchi (LDP) Miyauchi Yoshihiko (Board
Committee Chairman: ORIX corp.)
(kisei kaikaku
iinkai)
4/2001 Council for Koizumi (LDP) Miyauchi Yoshihiko (Board
Regulatory Chairman: ORIX corp.)
Reform (sōgō
kisei kaikaku
kaigi)
4/2004 Council for the Koizumi (LDP) Miyauchi Yoshihiko (Board
Promotion of Chairman: ORIX corp.)
Regulatory
Reform and
Liberalization
(kisei kaikaku,
minkan kaihō
suishin kaigi)
Source: The table is constructed by the author from various government documents.
who were strong advocates of deregulation.27 Table 2.5. shows examples

of membership composition from the Deregulation Committee (kisei
kanwa iinkai) in 1998 and Council for Regulatory Reform (sōgō kisei kai-
kaku kaigi) started in 2001.
Both committees are chaired by Miyauchi. A labor representative still
holds a chair in the Deregulation Committee, but it certainly does not
9780230_209084_03_cha02.indd 47 11/29/2010 10:25:41 AM

Table 2.5 Members of deregulation committees, samples from 1998 and 2001
Deregulation Council for Regulatory

1998 Committee 2001 Reform
Name Title Name Title
Miyauchi Board Chairman, Miyauchi Board Chairman, ORIX

Yoshihiko, ORIX Corp. Yoshihiko, Corp.
Chair Chair
Suzuki CEO, Asahi Research Ikuta Board Chairman, Mitsui
Yoshio Center Masaharu O.S.K. Lines, Ltd.
Iwata Kikuo Professor of Okutani CEO, The R, Co. Ltd.
Economics, Sophia Reiko
University
Noguchi Vice Secretary Kanda Professor of Political
Hiroya General, Rengo Hideki Science, University of
Tokyo
Makino Vice Chairman, Kono Eiko CEO, Recruit, Co. Ltd.
Shojiro Polyfibron
Technologies, Inc.
Miwa Professor of Sasaki CEO, ewoman, Inc.
Yoshiro Economics, Kawori
University of Tokyo
Yoshinaga Author Suzuki CEO, Asahi Research
Michiko Yoshio Center
Seike Professor of Economics,
Atsushi Keio University
Takahara Board Chairman,
Keiichiro Unicharm Corporation
Hatta Professor of Economics,
Tatsuo University of Tokyo
Murayama Managing Director, The
Rie Goldman Sachs Japan,
Inc.
Mori CEO, Mori Building Co.
Minoru Ltd.
Yashiro President, Japan Center
Naohiro for Economic Research
Yonezawa Professor of Computer
Akinori Science, University of
Tokyo
9780230_209084_03_cha02.indd 48 11/29/2010 10:25:41 AM

represent one third of the committee such as shingikai advisory coun-

cil. In the Council for Regulatory Reform, there is no labor representa-
tive advisory council. There are three characteristics with regards to the
membership composition. There are representatives from: 1) the inde-
pendent (non-firm-group) sector of companies (such as Mori Building,
UniCharm and Goldman Sachs), 2) newly emerging sectors of business
(such as personnel services in the cases of The R and Recruit), and 3)
liberalization/deregulation advocates.
All the stories this book picks up deal with the rise of these employer-
initiated employment reforms. The reforms that occurred chronologic-
ally parallel to each other include: 1) the creation of new employment
forms, 2) the establishment of new working time regulations under
the Discretionary Work System, and 3) the introduction of the results-
oriented labor management system. Chapter 3, the first empirical
chapter, examines the rise and the impacts of the movement on the
organization of labor market in Japan.
9780230_209084_03_cha02.indd 49 11/29/2010 10:25:41 AM

3
Political Segmentation of the
Labor Market: The Establishment
and Expansion of New
Employment Forms
The employers’ initiative for labor market reform
The sudden collapse of the asset-inflated economy in 1991 (usually

referred to as ‘the burst of the bubble economy’) was the start of the
period of low growth, or sometimes even shrinking, economy in the
1990s and in the 2000s. The crash of stock and land markets caused a
serious credit contraction, by which business investment was radically
decreased. The following period is often described as the ‘lost decade’
mainly referring to the lack of economic growth. Figure 3.1. shows the
postwar trend of the rate of economic growth in Japan. The first oil
shock reveals the end of the period of rapid economic growth. The fol-
lowing period shows significantly lower economic growth, although
it is still higher than most of other advanced industrial societies. This
was achieved in the midst of crises such as the end of Bretton Woods
Regime, by which the yen was allowed to float, and the second round
of oil shock. On the one hand, the competitive strength that Japanese
companies showed was praised as ‘Japan as No.1’ during this period, but
on the other, Japan’s excessive trade surplus was starting to be criticized.
The end of this period came with the burst of the bubble. It clearly marks
the start of a period of economic stagnation, and Japan even experienced
the shrinkage of her economy several times during this period.
Japanese companies used to achieve numerical and functional flex-
ibilities in a very specific arrangement of employment institutions.
However, in the wake of the economic downturn, Japanese employers
50
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Political Segmentation of the Labor Market 51
14.0
12.0
10.0
average 3.8%
8.0 (1974–1990)
6.0 average 1.1%

average 9.1% (1991–2008)
4.0
(1956–1973)
2.0
0.0
(2.0)
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
(4.0)
Figure 3.1 The rate of economic growth in Japan from 1956 to 2008 (GDP) (%)
Source: System of National Accounts (SNA): Cabinet Office 2009*
*
Prior to 1980, the numbers are based on 68SNA (thereafter, they are based on 93SNA), and
the figures after 1995 are calculated based on the chain-linking method.
began to see the existing employment system as a burden. In December

1993, the year Japan experienced negative growth for the first time
after the first oil shock in 1973–4, Nikkeiren1 organized a study group
that reexamined the foundations of ‘Japanese management.’ The study
group’s report was published in 1995 as New Age Japanese Management
(shin-jidai no nihon-teki keiei) that proposed the future direction of the
employment system in Japan.
The following statements summarize the employers’ understandings
about environmental changes and the agenda they wanted to set.
● The transition to an era of low economic growth directly impacts

on the supply- demand structure of labor markets. Although it is not
realistic to expect high-rate growth, it still is necessary to maintain
some growth to keep and create employment.
● Under the circumstances of low economic growth, it is inevitable to
have excessive labor in the short term, especially in the white- collar
sector and service sector.
● It is necessary to facilitate corporate restructuring in order to revamp
high cost structure. By informatization and systematization, it is
also inevitable to have excessive labor, particularly in the white-
collar sector.
9780230_209084_04_cha03.indd 51 12/3/2010 6:10:54 PM

● Since there will be excessive labor in a shrinking manufacturing sec-

tor and a labor shortage in growing new industries and occupations,
it is necessary to facilitate labor mobility between the sectors and
occupations.
● High appreciation of the yen and rising Asian economies highlight
the high employment costs in Japan and cause the hollowing out
of industry that creates further excessive labor in Japan. (Nikkeiren
1995: 21–2)
The core of the proposal shown in the report is basically the strategy to
diversify employment at firm organizational level and calls for regula-
tive reforms to support such a strategy. The strategy divides the work-
force into three groups and discusses differentiated labor management
practices for each of these groups (see Table 3.1).
With this new strategy, employers detach professional and flexible
employment groups from the long-term employment group. Workers in
the long-term employment group are still employed in unlimited-term
contracts and have full access to corporate welfare programs (while the
Table 3.1 Nikkeiren’s employment diversification strategy
Target
workers
Work (skill/career Wage Retirement /
contract expectation) Career system pension
Long-term Unlimited- Managers Promotion Monthly/ Contribution-

employment term and career- (titles) and annual based
group contract track advancement salary, retirement
workers (in (ranking and ranking and allowance/
clerical and qualification) qualification, lifelong
technical base-up comprehensive
divisions) package by
employer
Professional Limited- Professional Achievement Annual Not applicable/
group term divisions evaluation salary, not provided
contract (planning, results-based, by employer
sales and No base-up
R&D)
Flexible Limited- Clerical, Transfer to Hourly salary Not applicable/
employment term technical career track based on job not provided
group contract sales works description, by employer
No base-up
Source: Adapted and translated from Nikkeiren 1995: 32.
9780230_209084_04_cha03.indd 52 12/3/2010 6:10:55 PM

workers in this group are designed to be under pressure from the results-
oriented labor management system). Workers in the other two groups
are anticipated to be employed with limited-term contracts and limited
access to welfare programs. Workers in the professional group are hired
on an occupational basis, and are intended to be assigned to divisions
such as planning, sales and research and development. The performance
expectations are purely based on results. Workers in the third group are
hired by job description, and are to be assigned to clerical, technical
and sales tasks. They are paid an hourly wage. To achieve this new flex-
ible employment strategy, in addition to the reform efforts at organiza-
tional level, employers claimed the liberalization and deregulation of
the private job placement and the temporary dispatching work system
in order to facilitate labor mobility (Nikkeiren ibid.: 26–7, 95–6).
The report was the direct trigger that initiated the era of reform. It
was a major manifestation by employers to reform Japanese employ-
ment relations, which was also a part of the reform process underway
since the mid-1980s. It needs to be located in the context of the histori-
cal development of Japanese employment relations, and it is also neces-
sary to understand how other major actors such as labor unions and the
state understood the situation and how they reacted to the employers’
initiative. To pursue these goals, this chapter starts from the detailed
historical description about the ways the numerical and functional
flexibilities are achieved by the coordination of employment contracts
and labor mobility in Japan as a result of state-firm-labor politics. Based
on the historical development, the employers’ reform initiative will be
situated in the politics from the late 1980s focusing on the establish-
ment and revisions of temporary dispatching work, the liberalization of
job placement, and the expansion of the limited-term contracts. Finally,
the chapter will evaluate the impacts of these reforms on the structure
of labor market segmentation, organizational practices and the changes
of employment relations.
Social organization of labor markets in the postwar period
The comparative strength of ‘flexible rigidities’

From a comparative perspective, the Japanese labor market is catego-
rized as one of the most strictly regulated, especially with regard to
the difficulty of dismissal (Miura 2001a). It is commonly argued that
taking labor out of market competition through long-term employ-
ment introduces rigidity against industrial adjustments to new activ-
ities and sectors. However, as Ronald Dore put it as ‘flexible rigidities,’
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Japanese employment relations developed numerical and functional

flexibilities through specific combinations of contracts and mobility.
Flexibilities emerged out of largely restrictive regulations of the exter-
nal labor market and the regime of organized mobility within business
organizations based on the lifetime commitment by regular employees.
This institutional arrangement is a result of the historical developments
of state-firm-labor politics with regard to labor market regulations and
the welfare- employment arrangement including collective bargaining
and the control of demand/supply of labor. These two developments
had influence with each other on the development of the institutional
arrangement of ‘flexible rigidities.’
Restricted external labor mobility

The restrictions of the external labor market were established during
the postwar reconstruction efforts of the society under the frame
of ‘democratization.’ The occupation government tried to elimin-
ate the labor supply business organized by ‘labor bosses’ (Takanashi
2001a). Since labor bosses dispatched their own subordinate workers
to other employers and earned brokerage commissions, private tem-
porary agency work was seen as a feudal practice and prohibited by
the ESL. 2 The ESL only permitted public job placement except for
the ones provided by schools, trade unions and a limited number of
occupations. 3 The LSA Article No. 6 also prohibited such forms of
intermediary exploitation and forced these labor bosses to become
regular employers. The Japanese Public Job Placement Agency
(shokuan, or shokugyō antei- jo) was set up under the strong initia-
tive of GHQ, and through this system, workers were placed in the
expanding industries by the policy of priority production system
of the late 1940s and the 1950s (Ujihara 1989b). Although the pub-
lic job placement service became less important afterwards, the job
placement function provided by schools, especially high schools,
became one of the representative cases of regulated labor markets
(Rosenbaum and Kariya 1989).4
The concern over feudal practices by labor bosses also put restrictions
on the regulations of limited-term contracts, which was only permit-
ted for a one-year duration to avoid unduly severe constraints by labor
bosses. Thus it was only after the oil shocks in the 1970s that paato, a
dominant form of limited-term contract, became important to fill the
needs of flexible employment (Takanashi 1993). During this period,
Japanese firms were forced to execute their first serious restructuring
9780230_209084_04_cha03.indd 54 12/3/2010 6:10:56 PM

efforts in the postwar history, which were viewed as a belt-tightening

effort (genryō keiei). As mentioned, paato workers are primarily middle-
aged female workers who could be employed from local labor markets,
and are considered suitable to fill the needs of numerical flexibility.
For the needs of specific skills, workers are employed in other forms of
limited-term contracts such as keiyaku/shokutaku.
As described in Chapter 2, the employment security of regular employ-
ees is one of the major results from the postwar labor struggle, and it
turned out to be the core of Japanese employment relations. Although
it is the direct result of the labor relations, the state’s roles should not
be ignored in maintaining the practice. Chapter 2 points out the role
of state subsidy in the corporate welfare programs. In addition, it is also
important to note the role of judicial ruling on employment protection.
Superficially, as far as the laws are concerned, there is no strict restric-
tion on worker dismissal in Japan. Article no. 627 of the civil law clearly
provides the basis of the right of dismissal for employers. The LSA also
does not prohibit worker dismissal except in some cases such as dismis-
sal during sick or maternity leave (Ikezoe 2002: 1). However, in reality,
the accumulated case law places strict restrictions on worker dismissal,
and is called the doctrine of abusive dismissal (kaiko-ken ran-yō hōri)
in conformity with the practices of ‘lifelong employment.’ The deci-
sions of lower courts resulted in a body of law governing worker dismis-
sal. The Supreme Court case of Nihon Shokuen Seizō in 1975, set forth
the terms of the doctrine, and thus the standard by which the cases of
worker dismissals are judged (Ikezoe 2002, Nogawa 2004). In this way,
throughout the period of rapid economic growth, worker dismissal has
become strictly regulated in Japan by putting emphasis on the norms
and practices of ‘lifelong employment.’
Flexible rigidities
Under these circumstances, Japanese companies developed some
unique solutions to achieve numerical and functional flexibility in
their workforces using various types of organized mobility of regular
employees. The basis of the organized mobility is an interfirm network
among Japanese companies. From around 1955, after the economy
took off due to the Korean War, Japanese companies started to form
enterprise groups called keiretsu, a distinctively Japanese practice of
quasi- organizational structure among companies, in order to have sta-
ble and flexible business relationships. 5 Using the network, Japanese
firms developed practices of labor lending (without a labor contract)
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which contributed to attaining required skills and dealing with labor

adjustment. Subsidiary (ukeoi/shitauke) companies lent workers to the
main companies when needed.6 Matsushima and Hazama reported
in 1960 that there were as many ukeoi workers as regular workers in
one plant of the petrochemical industry (Matsushima and Hazama
1987). This is called kōnai ukeoi. Some of the kōnai ukeoi workers who
were dispatched to client companies worked under the direction of
the clients. This practice was illegal, but the practice survives due to
the lax enforcement of regulations.7 Ukeoi was extended in the manu-
facturing industries in the 1970s and 1980s, as was kōnai ukeoi. The
expansion of the computer industry relied on the practice (Takanashi
2001a).
Another form of labor lending that appeared in the 1960s is shukkō.
Towards the end of the period of rapid economic growth, Japanese
companies needed to expand their businesses in a new direction to
cope with the industrial structural changes from heavy and chemical
industries to auto and electronics manufacturing. To cope with such
changes, Japanese firms deployed regular employees across sections
through the practices of job rotation and job transfer. However, when
firms expanded their business fields by establishing subsidiary compa-
nies, they sent necessary workers, especially managers and engineers, to
those subsidiary companies to insure that they had sufficient resources
for the task (Inagami 2003). Thus, the practice of shukkō started as a
dispatching of technicians/engineers and managers to subsidiary com-
panies from parent companies.
In the case of shukkō, the workers are still employed by the parent
company, and just perform work for the subsidiary. However, there
emerged an extended form of shukkō in the midst of the struggle to sur-
vive the oil crises and its aftermath, which is called tenseki. In the case
of tenseki, the workers are officially transferred to subsidiary firms with
lower contract terms. During the 1970s and especially in the 1980s,
shukkō and tenseki became the main measures of personnel adjustment
by Japanese companies. Inagami reports that at Toray, a textile giant,
management and trade unions agreed under the circumstances of oil
shocks not to execute any layoffs but to use external personnel, limit
the new hires, and facilitate (group) internal labor transfers to trim
down the labor force (Inagami 2003: 21–3). Some employees were relo-
cated to the subsidiary companies that were established in growing
industrial fields as shukkō workers, and later in the 1980s, they all com-
pletely transferred to the subsidiaries (Inagami ibid.: 23–4).
9780230_209084_04_cha03.indd 56 12/3/2010 6:10:56 PM

Table 3.2 Regular/non-regular composition of the Japanese labor market from

1956 (%)
1956 1959 1962 1965 1968 1971 1974 1977 1979 1982* 1987
Regular 88.93 90.27 92.19 92.17 92.98 92.69 92.21 90.28 88.92 84.23 81.59
Non- 11.07 9.73 7.81 7.83 7.02 7.31 7.79 9.72 11.08 15.77 18.41
regular
Source: Employment Status Survey**: Statistics Bureau 1959, 1960, 1963, 1966, 1969, 1972, 1975,
1978, 1980, 1984, 1988.
* From the 1982 survey, employment categories based on how they are called at workplaces
(such as paato and keiyaku) became available. Numbers until 1979 are based on the terms
of contract, and workers with less than a year of contract are categorized as ‘non-regular’
employees in this table.
** The Employment Status Survey (shūgyō-kōzō kihon chōsa) is conducted every five years by
the Statistics Bureau. The survey is based on the method of the National Census. For instance,
The Employment Status Survey in 1997 was conducted by choosing 29,000 areas based on the
National Census. About 430,000 households were chosen in these areas, and about 1,100,000
people were included in the survey. The results are statistical estimations. In this survey, the
categorization of the non-regular employment relies on the local customs of respondents (and
their workplaces).
Until the end of the rapid economic growth, Japanese firms devel-
oped a system of organized mobility among regular employees inside
the firm and firm network in order to achieve numerical and functional
flexibilities. That they did not rely on the external labor market is clear
from the statistics about the regular and non-regular composition of the
Japanese labor market during the period (see Table 3.2).
The percentage of non-regular employees declined from the 1950s to
the 1960s.8 In 1968, it was only about seven percent of the total employ-
ees. Given the low unemployment rate during this period (about one to
two percent throughout the 1960s), it was only a small part of precari-
ous employment that the labor ministry recognized as a problem for
the Japanese labor market. The impact of the oil crises is clear, and the
expansion of non-regular employment seems to be the rising number
of paato that became an important source of flexible employment.
Initial expansion of the external labor market

By the early 1990s, before the low-growth era, the demand for flex-
ible employment grew for new and skilled lines of work connected
with technological changes and internationalization. Various forms of
worker dispatch grew to meet the demand. As noted earlier, kōnai ukeoi,
partly a system of worker dispatch, was built into the vertical keiretsu
9780230_209084_04_cha03.indd 57 12/3/2010 6:10:56 PM

relation, entrenched in the Japanese employment system, in order to

utilize certain skills and ensure flexible employment due to the lax
application of the ESL. Specialized dispatching agencies emerged as
new players in the labor markets. Manpower Japan was the first that
came to Japan in the 1960s, and many dispatching agencies, which
became the leading firms of today, were established in the 1970s.9 They
all started their businesses to dispatch clerical workers, utilizing female
workers who sought the opportunity to return to the labor markets.10
Above all, when the labor ministry’s working group studied illegal dis-
patching, they found that the practice was common in occupations
such as building maintenance, engineering works, information tech-
nology, clerical work and some other relatively skilled lines of work
(Takanashi 1985, 2001a).
With the expanding use of illegal dispatching, the government was
unable to ignore the situation. The Administrative Management Agency
(gyōsei kanri- chō) conducted an audit of the activities of the labor min-
istry and, in 1978, gave them an admonition for the illegal dispatching.
The labor ministry immediately organized a study group of five schol-
ars followed by, in 1980, a tripartite research committee. The debate
between labor and employers was so contentious that a period of a few
years was necessary to reach a compromise. Labor unions were opposed
to the establishment of the system of worker dispatch, primarily due
to its potentially threatening effects on the employment security of
regular workers by replacement with temporary workers, rather than
any concern over the employment conditions of temporary workers
(Hamaguchi 2004: 68–9).
The result is the Temporary Dispatching Work Law (rōdōsha haken-hō:
hereafter, TDW Law) enacted in 1986,11 which legalized private temporary
agency work under the recognition that the Japanese employment rela-
tions were modernized enough12 (Takanashi 1985: 122; Takanashi 2001a).
Reflecting labors’ opposition and the labor ministry’s commitment to
the policy to protect employment of regular employee13 (Hamaguchi
2004: 69), the new system was designed to create external labor mobili-
ties under strict regulations. The TDW Law approved only thirteen rela-
tively high-skilled and specialized occupational areas (the positive list
system: a series of revisions added 13 occupations until 199714) for a
very limited-term (one year) of dispatch. At the same time, however, it
is important to note that the new system contained strongly marketized
elements. The new law established two types of worker dispatch; one
is the employment-type (jōyō-gata) by which dispatching workers have
continuing employment with temporary help agencies (hereafter, THA),
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but in the registered-type (tōroku-gata) workers are only employed for the
term of the dispatch.
The initial expansion of the external labor market is characterized
by the legalization of the private temporary agency work, which meant
the liberalization of the business after forty years of state control. It
was to capture the temporary worker dispatching practice that already
existed informally as a particular form of kōnai ukeoi and a dispatch
of relatively skilled clerical workers. It prevailed in various industries
during the period of rapid economic growth responding to the rise of
new industries and internationalization, and it had been overlooked
by the lax application of the ESL. The establishment of the TDW Law
put the practices under legal control, which also forced private THAs to
become responsible employers. This arrangement of labor mobilities is
however clearly located external to the traditional sphere of organized
labor mobilities.
Deregulation of the labor markets
Policy shift
Changes in policy environment
After the burst of the bubble economy and in the following economic
stagnation employers started to recognize that traditional measures of
flexibility had reached the limit of their ability to cope with the environ-
mental changes. Tenseki started to have more importance than shukkō,
and the number of workers to whom companies would like to apply
these practices began to exceed the capacity of the company group, as
the applicable age of these practices was becoming younger (Inagami
2003: 37–8). In addition, these practices were considered not suitable to
fulfill the personnel needs of skilled workers, such as IT engineers, thus
companies were under pressure to take further measures to reduce and
diversify employment. It was in this context that Nikkeiren published
the report, calling for collective efforts of reform that involve regulative
changes. Employers claimed that external labor market mechanisms
were necessary to achieve smooth labor mobility of the excessive labor
force caused by its own restructuring efforts and to use workers with
appropriate skills to cope with the emergence of new business fields.
The government’s concern has been for labor market mismatches and
unemployment rates. The unemployment rate in Japan barely reached
2.5 percent at the end of the 1980s. However, it started to rise after the
burst of the bubble economy, and it reached a record high, in postwar
9780230_209084_04_cha03.indd 59 12/3/2010 6:10:57 PM

0
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Figure 3.2 The trend of unemployment rates from 1970 to 2004 (%)
Source: Labour Force Survey: ILO 2010.
history, of 2.9 percent in 1995 (and it continued to rise afterwards, see

Figure 3.2). The ministry analyzed labor market policies in the USA and
Europe, and concluded that it would take a middle position to avoid
high social inequalities due to high flexibility (USA) and the long-term
unemployment due to high labor protection (Europe) (MOL 1995a: 15).
The government on one hand tried to solve the problem by facilitat-
ing the traditional mechanisms of labor mobility. It began with a series
of special support plans within the framework of ‘labor transfer without
unemployment’ (shitsugyō naki rōdō idō) for companies trying to facili-
tate labor transfers by shukkō and especially tenseki in the form of mone-
tary subsidizing. This commenced in 1993 as a part of a comprehensive
economic revival plan, and continued eleven times until 2002.15 These
measures basically established subsidiary funds for companies in vari-
ous situations, who were able to use the subsidies when they employed
workers who were discharged by previous employers. These subsidies
also included training funds and investments in information systems
to dissolve employment mismatches.
On the other hand, deregulation of the temporary agency work became
the central agenda to strengthen the external labor mobility and facili-
tate the relocation of workers to new areas (MHLW 2001a). The White
Paper on Labor in 1994 points to the necessity of the arrangement that
achieves “smooth transfer of workers outside the firm and firm network”
(MOL 1994a: 28, 207) especially for middle-aged and elderly workers in
addition to the traditional Japanese employment practices. The revision
of the TDW Law in 1994 reflects the shift of labor market regulation in
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Japan. It was the complete deregulation of the temporary agency work

lifting occupational limitations for workers above sixty years of age
adopting the negative list system (only the occupations that are not per-
mitted are listed). This measure was expected to expand employment
opportunities for elderly workers, especially after retirement, relocating
those who are still capable of work (Takanashi 2001a:178–9).
The emergence of the deregulation committees changed the politi-
cal balance between actors and the policy process of employment
and labor market issues. Accordingly, their emergence accelerated the
deregulation of Japanese labor markets. During most of the postwar
period, advisory council (shingikai) set their own agenda based on the
agreement of the tripartite members (Takanashi 2000: 1). The deregu-
lation committee emerged as a new actor in this process. As mentioned
in Chapter 2, the Administrative Reform Committee was founded in
December 1994, and the Special Committee on Deregulation was set
up under ARC in April 1995. A series of proposals from the deregula-
tion committee were included in the Cabinet’s decisions (kakugi kettei),
and they started to function as the agenda setters for the following dis-
cussions at advisory council (Miura 2001b: 505). Although their pro-
posals in 1995 and 1996 were not fully reflected in the 1996 revision of
the TDW Law, the influence of the deregulation committee on the con-
tents and the process of the revision is recognized by various authors
(Takanashi 2000; 2001a: 180, 189; Araki 1999; Nakamura 2001). As
their political power was strengthened by subsequent administrations,
the trend of deregulation was accelerated.
There was another level of regulation that was changed to support
the political climate toward deregulation. The influence was from the
international arena. In this case, it was the revision and the ratifica-
tion of the ILO treaty. In 1997, after three years of deliberation, the
ILO adopted ILO Convention no.181,16 which is the revised version of
the ILO Convention no.096 enacted in 1949.17 The revisions and the
subsequent ratification of the ILO Convention became an important
resource for those who sought deregulation of the private labor mar-
ket intermediary system. The liberalization of private job placement
in 1997 and 1999 benefited particularly from this. The first revision
was of the ministerial ordinance of the ESL. This revision loosened
restrictions to start up business, to charge expenses, and switched
the positive list of the applicable occupations to the negative list,
including clerical work, sales,18 service,19 security, agriculture and
fishery, transportation and communication, and manufacturing and
construction. 20
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The revision (and the ratification) of the ILO Convention led the
ministry to form the Study Group of the Employment Law (koyō hōsei
kenkyū-kai) headed by Koike Kazuo21 and Sugeno Kazuo22 in 1997, and
the group made a report proposing labor market reorganization in the
following year. The report claims that the proposed reforms are to cope
with the industrial structural changes, international competition and
the change of the worker consciousness encouraged by the ratification of
the ILO Convention 181. To achieve the goals, it states that the reorgan-
ization of the labor market should be based upon “market mechanism(s)
through the private intermediate agencies with appropriate regulations
on them” (MOL 1998a).
Radical deregulation
After the revision in 1996, the labor ministry immediately started
preparations for further revisions due to pressure from the deregula-
tion committee that required them to achieve a ‘negative list’ of the
temporary dispatching work system with a time limit on discussions
at advisory council (Takanashi 2001a, p. 190, Miura 2001b, p. 498).
It was discussed at the Special Committee on Private Labor Market
Intermediary System in the Central Advisory Council on Employment
Security (shokugyō antei shingikai minkan rōdōryoku jukyū seido shōiinkai).
Labor representatives opposed the radical deregulation of the sys-
tem. The discussions however, were not about the rights or wrongs of
deregulation of the system, but on the details of the implementation
plan of the negative list system. For instance, the largest issue at the
advisory council was whether the system was applicable to manufac-
turing lines. Here again the rationale behind labor’s opposition was
the concern over the replacement of regular employees with tempor-
ary workers. Since the advisory council could not reach a compromise,
initiatives by public representatives with the ministry behind them
started to gain weight in advisory council decision making, although
overall, the importance of advisory council was declining.
Faced with the peremptory demand from the deregulation com-
mittee, the labor ministry changed its attitude on the mechanisms of
labor mobility. In 1999, the annual White Paper on Labor sought to
explain the ministry’s changing attitude towards employment secur-
ity. For the first time, the labor ministry expressed little hope in the
role of traditional firm-internal labor mobility practices to curb the
historically high unemployment rate (standing at 3.8 percent in 1998).
With regard to the balance between the benefits and deficits of long-
term employment commitments, the labor ministry pointed out that
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employment security may even have been interfering with the abil-
ity of firms to adapt to the current economic changes (MOL 1999a:
242). This White Paper particularly suggested improving employability
of workers, organizing labor markets for paato and temporary agency
(haken) workers by the closer coordination between public placement
agencies and private personnel placement service firms and improv-
ing the safety net for the unemployed, including retraining programs
(MOL 1999a: 5, 247).
The revision of the TDW Law and the ESL was passed by the diet
in 1999 (enacted in 1999), and it was a turning point in the history
of labor market policy (Suwa 23 2000: 9; Mawatari 2000). It radically
deregulated the temporary dispatching system, and removed the
public monopoly of job placement. The temporary dispatching work
system was essentially deregulated except for a few occupations (the
negative list). With respect to the length of dispatch, three years of
dispatch were accepted for 26 relatively high-skill occupations, with
a one-year limitation for all other occupations. After the revisions of
this year, the temporary dispatching work system became quite com-
plex. Simply put, there are two systems in one. One is the original 26
occupations which can be defined in terms of the relatively high skills
required for workers. The term of dispatch for these workers is up to
three years, while for all other occupations except for those on the
negative list it is up to one year. Manufacturing line was not on the
negative list, but by supplemental provision, it was excluded from the
subject of the law.
The revision of the ESL was also made in 1999. There was a revision
in 1997 that loosened the conditions to start up a business and added
many white- collar occupations to the positive list,24 but it still kept the
baseline that the private job placement is not acceptable and permit-
ted only in special cases. The revision in 1999 was a radical one that
removed the principle to prohibit private job placement, 50 years after
the establishment of the ESL, lifting occupational limitations (Tsuchida
2000: 74). The report from the Study Group of the Employment Law was
the direct trigger for the liberalization of the system. The ratification
of the ILO Convention greatly legitimatized the revision (Hamaguchi
2004: 87).
The expansion of limited-term contracts were realized under the
same trend. As with private job placement and the dispatching worker
system, it began by admitting up to three-years contracts for small
numbers of professional occupations, which can be defined by their
official qualifications or credentials in 1997.25 The conditions for using
9780230_209084_04_cha03.indd 63 12/3/2010 6:10:58 PM

limited-term contract employees also reflects the fact that labor unions
were strongly opposed to the system since employers might use the sys-
tem to replace regular workers with those on limited-term contracts.
Thus, the law limits the business situation where employers can utilize
workers with limited-term contracts. It can be used only when skilled
workers are necessary “to start up, convert, expand, downsize or close
down an enterprise which is expected to be completed within a definite
period”.26
In 1994, the first deregulation committee was set up as a subdiv-
ision under the ARC. In 2001, the Council for Regulatory Reform (sōgō
kisei kaikaku kaigi) was launched as an independent council in the
cabinet office, in which there was no labor representative (ten busi-
ness representatives and five scholars). The Koizumi administration
(2001–2006) led the further deregulation of employment and labor
markets that extended the radical reforms made in 1999. In terms of
the TDW Law, the revision enacted in 2004 had significant impacts
by introducing the system to the manufacturing line, the bastion of
enterprise unionism. It also lifted the limit of the terms of dispatch for
the original 26 occupations. The limited-term contract was expanded
too. The conditions attached to the 1999 revision to use limited-term
contract workers were removed from 2004. In addition, the revision
extended the maximum contract term to five years, and relaxed the
applicable occupations, so that highly qualified workers defined by
a certain level of credential, the length of service and the amount of
income could move from one employer to another as an independent
worker. 27
Descriptive characteristics of the labor market changes

During the initial phase of the reform, the expansion of the external
labor market was well negotiated by state, firm and labor as equal part-
ners. However, from the mid-1990s, labor was effectively excluded from
the process of deregulatory reforms. Given the politics, it is clear that
the reforms became primarily the resources for employers to cope with
globalization and industrial structural changes. Thus, this section first
analyzes how new employment forms are used, and how employers’
practices changed labor markets in Japan. Second, the impacts of the
reforms on employment relations will be examined. The rise of new
employment contracts may be a challenge to the company citizen-
ship characterized by privileged access to corporate welfare and organ-
ized mobility. I will argue that the basic contractual terms for regular
employment were preserved during the period, but the expanding
9780230_209084_04_cha03.indd 64 12/3/2010 6:10:58 PM

sector of non-regular employment is clearly excluded from the entitle-

ment to company citizenship and is facing fragmented career prospects.
The segmentation between regular and non-regular statuses is deep and
rigid as non-regular workers have difficulty obtaining regular employ-
ment status.
Expansion of non-regular employments

Taking advantage of the deregulatory reforms, Japanese firms increased
the proportion of non-regular employment to about 30 percent of the
total workforce. Table 3.3, based on the Employment Status Survey, dem-
onstrates the dramatic changes in the employment structure – regular/
non-regular composition – from 1987 to 2007.
Table 3.3 Changes in labor market structure by employment status (numbers in

thousands)
1987 % 1992 % 1997 % 2002 % 2007 %
Regular 37,653 81.59 42,032 79.96 42,392 77.10 38,452 70.35 38,336 66.98
employees
Non-regular 8,498 18.41 10,532 20.04 12,590 22.90 16,206 29.65 18,899 33.02
employees
paato / 6,563 14.22 8,481 16.13 10,342 18.81 12,062 22.07 12,935 22.60
arubaito
haken 87 0.19 163 0.31 257 0.47 721 1.32 1,608 2.81
keiyaku / 730 1.58 880 1.67 966 1.76 2,477 4.53 3,313 5.79
shokutaku
others 1,118 2.42 1,008 1.92 1,025 1.86 946 1.73 1,043 1.82
Total 46,151 100 52,564 100 54,982 100 54,658 100 57,235 100
employees
Reported 46,153 52,575 54,997 54,997 57,274
total
employees*
Source: Employment Status Survey: Statistics Bureau 1988, 1993, 1999, 2004, 2009.
* Numbers are rounded to the nearest 1,000 in actual numbers. In percentage, numbers are
also rounded to the nearest 0.1 percent. In all years, the statistics are first calculated based
on legal contracts, then are recaped in terms of the employment status. The numbers of each
employment status often do not add up to the total number of employees, which is especially
true for the year 2002. This is because there is no clear definition of the employment statuses
(paato, keiyaku and so on), it is up to respondents to which category they categorize themselves.
And in some cases, they do not answer. If they answered ‘others’, they are categorized as
‘others’. But if they did not answer the category question, they are simply not included in the
table. (telephone correspondence with Japanese Statistics Bureau).
9780230_209084_04_cha03.indd 65 12/3/2010 6:10:59 PM

Almost 82 percent of the total employment was regular employment

in 1987, which went down to around 67 percent in 2007. Accordingly,
the non-regular employment expanded significantly from 18.4 percent
to 33 percent of total employment. The impacts of the deregulatory
reforms are clear here, especially the ones after the mid-1990s. The
numbers in regular employment in 1987 and 2007 are much the same,
37.7 million in 1987 and 38.3 million in 2007, while total employment
increased from 46.2 million to 57.2 million, indicating that the net
increase is due to the expansion of non-regular employment. During
the period of the bubble economy, the numbers in regular employment
increased, while the pace of expansion of non-regular employment is
slightly faster. From 1992 to 1997 – post-bubble period – the number of
regular employment remained static and only non-regular employment
grew. The change accelerated between 1997 and 2002. The numbers in
regular employment declined by about four million, which is trans-
lated into a decline of seven percentage points . Conversely, the same
magnitude of change occurred in the non-regular segment. The pace of
change slightly lessened after 2002, but the trend is still continuing.
Japanese firms not only expanded the non-regular employment
but also diversified the employment. Among the non-regular catego-
ries of employment, paato is always the largest category and has been
expanded from 14.2 percent in 1987 to 22.6 percent in 2007. The trend
90
85 1000~
500~999
80
300~499
100~299
75
30~99
1~29
70
public
total
65
60
1987 2002 2007
Figure 3.3 Proportion of regular employee by firm size (%)

Source: Employment Status Survey: Statistics Bureau 1988, 2004, 2009.
9780230_209084_04_cha03.indd 66 12/3/2010 6:10:59 PM

of expansion, however, is quite steady, about two to three percent-

age points increase every five years. 28 Radical expansion can be seen
in the categories of keiyaku/shokutaku and haken. Keiyaku/shokutaku
stayed as low as 1.76 percent until 1997, but it expanded dramatically
to 4.5 percent in 2002 and reached 5.8 percent in 2007. The work-
ers in this category are employed by limited-term contracts, and one
might actually find an employment through private job placement,
although individually contracted workers and rehired retirees are also
included. The fastest growing category among the various non-regular
employments is haken. It was almost none in 1987 but it started to
grow significantly, particularly after 1997, and reached about 2.8
percent of total employment in 2007, which is almost the same per-
centage as that in the USA, which is usually seen as the world’s most
liberal economy.
The expansion of the non-regular employment occurs regardless of
the firm size. This fact proves that traditional measures of flexibility
really hit the limit especially in large and medium size firms that repre-
sent Japanese economy.
Figure 3.3 shows the changing proportion of regular employee by
firm sizes. In average, the percentage of regular employee dropped
from 81.6 percent in 1987 to 66.9 percent in 2007. The decline is more
dramatic at larger firm sectors than the smallest ones. At the largest
firm sector, which includes firms with more than 1,000 employees,
the percentage declined from almost 90 percent to 65.7 percent. The
decline at the smallest firms with less than 29 employees was 74.3 per-
cent to 67.9 percent, a figure that is actually slightly higher than the
largest firm sector. These observations indicate the declining capacity
of employment and the limitation of the traditional measures of labor
force adjustment within company groups, in which a redundant work-
force at larger firms were sent to subsidiary firms with lesser contracts.
All individual firms, especially large firms, needed to reduce regular
employment, and instead, increasingly rely on non-regular contracts to
utilize flexibilities.
As a result, large and medium size firm sectors use new employment
forms more than small firms. They use haken and keiyaku workers more
than the smaller counterparts in addition to the increasing use of paato/
arubaito. Table 3.4 shows that haken is used most at the companies with
300–499 employees (5.1 percent is haken) followed by the sector with
more than 1,000 employees (4.9 percent). At the smallest sector, this
form of employment is not used (only 0.8 percent), and they almost
solely rely on paato/arubaito. Keiyaku follows a similar trend. At the
9780230_209084_04_cha03.indd 67 12/3/2010 6:11:00 PM

Table 3.4 Changes in labor market structure by employment status and firm size (numbers in thousand)
500∼ 300∼ 100∼

2007 1000∼ % 999 % 499 % 299 % 30∼99 % 1∼29 % public % others total
9780230_209084_04_cha03.indd 68
Regular 7,072 65.7 1,938 65.7 1,617 65.0 3,681 63.9 4,506 64.0 10,921 67.9 4,129 79.9 4,219 66.5 38,336 66.9
employee
paato 1,531 14.2 416 14.1 360 14.5 967 16.8 1,292 18.3 2,660 16.5 312 6.0 1,170 18.4 8,855 15.5
arubaito 809 7.5 201 6.8 164 6.6 365 6.3 532 7.6 1,552 9.6 105 2.0 218 3.4 4,080 7.1
haken 527 4.9 142 4.8 127 5.1 276 4.8 232 3.3 121 0.8 25 0.5 96 1.5 1,608 2.8
keiyaku 627 5.8 188 6.4 158 6.4 321 5.6 298 4.2 245 1.5 127 2.4 256 4.0 2,255 3.9
shokutaku 145 1.3 52 1.8 48 1.9 110 1.9 112 1.6 102 0.6 278 5.4 207 3.3 1,059 1.8
others 47 0.4 10 0.3 10 0.4 34 0.6 69 1.0 475 3.0 190 3.7 179 2.8 1,043 1.8
Non-regular 3,686 34.2 1,009 34.2 868 34.9 2,073 36.0 2,534 36.0 5,154 32.0 1,036 20.0 2,126 33.5 18,899 33.0
total
Total 10,762 18.8 2,948 5.1 2,486 4.3 5,757 10.1 7,046 12.3 16,088 28.1 5,168 9.0 6,345 11.1 57,274
employee
500∼ 300∼ 100∼

2002 1000∼ % 999 % 499 % 299 % 30∼99 % 1∼29 % public and others total
Regular 6,831 73.7 1,933 71.5 1,627 69.5 3,822 67.5 4,692 67.2 10,862 67.8 38,452 70.3
employee
paato and 1,693 18.3 540 20.0 487 20.8 1,325 23.4 1,781 25.5 4,382 27.3 12,061 22.0
arubaito
haken 217 2.3 67 2.5 59 2.5 137 2.4 105 1.5 55 0.3 720 1.3
keiyaku and 487 5.3 150 5.5 151 6.4 329 5.8 306 4.4 302 1.9 2,477 4.5
shokutaku
12/3/2010 6:11:00 PM
others 34 0.4 9 0.3 13 0.6 38 0.7 83 1.2 400 2.5 946 1.7
Non-regular 2,431 26.2 766 28.3 710 30.3 1,829 32.3 2,275 32.6 5,139 32.1 16,204 29.6
total
Total 9,271 16.9 2,704 4.9 2,342 4.3 5,661 10.3 6,978 12.7 16,026 29.3 11,240 20.5 54,733
employee
9780230_209084_04_cha03.indd 69
500∼ 300∼ 100∼
1987 1000∼ % 999 % 499 % 299 % 30∼99 % 1∼29 % public and others total
Regular 7,579 89.2 3,761 85.6 4,559 82.6 5,731 80.2 11,514 74.3 37,673 81.6
employee
paato and 684 8.1 489 11.1 744 13.5 1,127 15.8 3,232 20.9 6,562 14.2
arubaito
haken 25 0.3 15 0.3 20 0.4 17 0.2 10 0.1 87 0.2
keiyaku,
shokutaku and 207 2.4 131 3.0 198 3.6 269 3.8 734 4.7 1,848 4.0
others
Non-regular 916 10.8 635 14.4 962 17.4 1,413 19.8 3,976 25.7 8,497 18.4
total
Total 8,495 18.4 4,396 9.5 5,521 12.0 7,144 15.5 15,491 33.6 5,074 11.0 46,153
employee
Source: Employment Status Survey, Statistics Bureau 1988, 2004, 2009.
12/3/2010 6:11:00 PM
90
80
15-24
70 25-34
35-44
60 45-54
55-64
50 65-
total
40
30
1987 1997 2002 2007
Figure 3.4 Proportion of regular employment by age (%)

Source: Employment Status Survey: Statistics Bureau 1988, 1999 2004, 2009.
1. To reduce personnel cost
2. For the daily/weekly..
3. To adjust working hours
4. To reduce personnel cost other..
5. To adjust labor force for..
6. Unable to recruit regular..

2007
7. To allocate important works to.. 2003
0 10 20 30 40 50
Figure 3.5 Reasons to use paato workers (%)

Source: Employment Diversification Survey: MHLW 2008b.
sectors of firms with 300–999 employees, 6.4 percent of their employ-

ees are keiyaku workers, followed by the largest sector with 5.8 percent.
These trends reflect the increasing demands of relatively skilled workers
in flexible terms of contract (such as project-style work organization).
This change did not happen equally to all segments of the working
population. Reflecting the politics to protect the employment of regular
workers and the detachment of clerical work from the sphere of regular
9780230_209084_04_cha03.indd 70 12/3/2010 6:11:00 PM

1. To recruit capable personnel
4. To allocate important works to..
5. For the seasonal adjustments of..
6. To utilize professional skills 2007

2003
0 10 20 30 40 50
Figure 3.6 Reasons to use haken workers (%)

1. To utilize professional skills
2. To rectruit capable personnel
6. To re-employ elderly workers 2007

7. To allocate important works to.. 2003
0 10 20 30 40 50 60
Figure 3.7 Reasons to use keiyaku workers (%)

employment, the non-regular employment statuses are applied widely

disproportionately to young workers and women.
Figure 3.4 shows the proportion of regular employment by age.
Although the proportion of regular employment declines in all age
groups after 1997, the decline in the 15–25 group is significant: from
more than 80 percent to just about 50 percent. It reveals that the
replacement of regular with non-regular workers occurs as the gen-
erational replacement of workers. This resulted in problems in the
transition from school to work for younger generations in career
9780230_209084_04_cha03.indd 71 12/3/2010 6:11:01 PM

100
12.2 13.1 13.6 14.4 14.9
90
80
70 22.4 23.3 23.4 22.3 22.7
60
13.4 13.5 13.5 14.1 13.2
50
6.4 6.6 7.3
40 9.1 9.8
30
20 33.4 31.8 30.7

28.7 26.9
10
0
1987 1992 1997 2002 2007
Tech./pro. Management Clerical Service

Sales Security Trans./comm. Man./con.
Agri./fish. Unclassified
Figure 3.8 Changing occupational composition of Japanese labor markets (%)

planning, learning skills, and employment, which led the govern-

ment to take special measures to solve the problem. 29 In terms of
the employment of women, more than half of women employees are
employed by non-regular terms according to the 2007 Employment
Status Survey, due to the expansion of paato and the inclusion of
clerical work in the temporary worker dispatching system.
The impacts of industrial structural changes

The diversification reflects the necessities of Japanese firms to deal with
the environmental changes. As shown in Figures 3.5, 3.6 and 3.7, firms
use paato/arubaito for numerical flexibility and keiyaku/shokutaku and
haken for functional flexibility.
9780230_209084_04_cha03.indd 72 12/3/2010 6:11:02 PM

(D.I.Point)
30
professional and technical sales
20 service
10
trans. and comm.
Total
total
0
skilled workers
unskilled
−10 workers
−20 managers
clerical workers
−30
1996 97 98 99 2000 01 02 03 04
Figure 3.9 The Diffusion Index by occupation

Source: MHLW 2004a: 21.
The steady increase of paato/arubaito clearly reflects the increasing

demand for numerical flexibility. But the radical increase in other
forms of employment reveal that the reforms helped Japanese firms
to acquire necessary skills. Figure 3.8 is a representation of the indus-
trial structural changes from a manufacturing- centered economy to
the economy that has more emphasis on knowledge and service. The
occupational categories that expanded during this period were ser-
vice (6.4 percent up to 9.8 percent) and technical/professional (12.2
percent up to 14.9 percent), 30 while the manufacturing and construc-
tion declined about 6.5 percentage points from 33.4 percent to 26.9
percent.
The Diffusion Index (DI) of occupations directly shows the changing
demand towards necessary skills reflecting the industrial structural
change. The Diffusion Index is calculated by the difference between
the percentage of employers who see redundant labor from the percent-
age of employers who see a labor shortage. Thus, the positive number
means the demand of labor (see Figure 3.9).
Throughout the period that overlapped with the deregulatory reforms,
occupational categories such as sales, service, and technical/professional
were in strong demand. Managers and clerical workers have a surplus of
supply. The demands on skilled workers and unskilled workers clearly
reflect the ebb and flow of the business conjuncture,31 while it is clear
that employers perceive redundancy of unskilled workforce more than
skilled ones.
9780230_209084_04_cha03.indd 73 12/3/2010 6:11:04 PM

1800
4.7%
1600
Tech./pro.
1400
9780230_209084_04_cha03.indd 74
Management
Clerical
1200
36.6%
Sales
1000
Service
800 Security
6.1%
Agri./fish.
600
49.9% Trans./comm.
400 39.6%
Man./con.
11.7%
200 Unclassified
70.0% 26.6%
0 10.9%
1987 1992 1997 2002 2007
*
Figure 3.10 Haken workers by occupation (numbers in thousands)
* The occupational categorization of the Employment Status Survey is based on JSCO, which refers ISCO 1968. Employment Status
Surveys until 1997 use JSCO which was revised in 1986.
12/3/2010 6:11:04 PM
New employment forms are, in a way, used to cope with these

changes, although each of them is used in a specific pattern. For
instance, as shown in Table 3.3, haken is the fastest growing category of
non-regular employment, expanding from almost none to 2.8 percent
of total employment. It is however important to note that the character
of the employment form changed after the revision in 1997, and the
radical reforms of 1999 and 2004. At the start of the system, it was to
put the illegal but common practice of interfirm worker dispatch of
skilled workers under legal control and to enable the flexible utiliza-
tion of relatively skilled clerical workers. As a result, the professional/
technical was the second largest category until 1997 (see Figure 3.10). In
2002, although the proportion of professional/technical workers in the
total number of temporary dispatched workers declined, the increase of
this category in actual number has generally been steady. The largest
category was clerical, which was clearly the dominant one until 1997,
and still consisted of more than 50 percent in 2002. The proportion
of female workers in this occupation was 82.1 percent in 1987, 91.5
percent in 1997 and 92.0 percent in 2002. This is the reason why this
employment status has long been considered as the one for women
after its emergence.
The deregulatory reforms in 1999 and 2004 changed the character of
this employment form significantly. The almost complete deregulation
in 1999 provided the approval to drive female clerical workers out of
the sphere of company citizenship. Together with the increasing inflow
of women from the self- employed sector to paato, the reform contrib-
uted to move more than half of the employed women into non-regular
employment status. The 2004 reform finally started to affect men’s
employment. Triggered by the 1997 reform, manufacturing/construc-
tion had already started to increase from 28,000 in 1987 to 192,000
in 2002, but it jumped to 636,000 in 2007, in which 60.5 percent of
the workers are men, due to the 2004 reform. Actually this is the only
male dominant category in temporary agency work, and 63.2 percent
of the male haken workers are working in manufacturing/construction.
This expansion however is a clear sign that the manufacturing line, the
basis of Japanese enterprise unionism, and the traditional employment
relations system has been eroded by temporary employment. Sales and
service also emerged as a main occupational category of temporary
agency work in 2002. Close to 80 percent of the workers in these cat-
egories are women.
9780230_209084_04_cha03.indd 75 12/3/2010 6:11:05 PM

3500
Tech./pro.
14.5%
3000
Management
9780230_209084_04_cha03.indd 76
2500 Clerical
26.4%
15.3%
Sales
2000
Service
26.4% 11.0%
1500 Security
10.7%
12.0% Agri./fish.
1000 10.5%
18.1% Trans./comm.
29.3% Man./con.
500 24.1%
9.1% 25.0%
Unclassified
23.2%
0
1987 1992 1997 2002 2007
Figure 3.11 Keiyaku/shokutaku workers by occupation (numbers in thousands)

12/3/2010 6:11:05 PM
The expansion of limited-term contracts shows a similar trend as

haken: deregulation facilitates the expansion, and it expanded on the
lines of relatively skilled labor (see Figure 3.11).
After 1997, contract workers radically increased, from 966 thousands
in 1997 to 3,313 thousands in 2007. Although in haken the expansion
is concentrated in work categories such as clerical and manufactur-
ing/construction, it is slightly more diversified in the case of keiyaku/
shokutaku. It is increased in technical/professional, clerical, sales, ser-
vice, and manufacturing/construction. The top three biggest occu-
pations in this category did not change throughout the period. For
instance in 2007, clerical workers consisted of 26.4 percent, manufac-
turing/construction was 24.1 percent, and technical/professional were
14.5percent.
Inequalities between regular and non-regular contracts

Non-regular employment forms became prevalent in Japanese labor
markets in conjuncture with globalization and industrial structural
changes. The analyses in this section compares the employment con-
ditions of regular and non-regular workers with regard to employ-
ment security, wages and the access to other welfare measures. As the
principle of ‘equal treatment’ has never been the issue within social
bargaining,32 a significant gap between regular and non-regular forms
of employment with regard to these employment conditions is expected
to emerge.
Employment security
There is nothing immediately clear about the impact of the deregula-
tory reforms on the employment security of regular workers.33 After the
burst of the bubble economy, there has been increasing unemployment
while there is no change in the trend of bankruptcy, but the insecurity
seems to be allocated radically disproportionately to non-regular work-
ers rather than regular workers. Layoffs, or midterm termination of
contracts, started to gain attention. In the case of the temporary agency
work, employment-type workers are supposed to have better employ-
ment security than registered-type workers as they have continuing
employment with THAs. Midterm termination of the contracts is par-
ticularly a problem for registered-type workers. According to the Survey
on Temporary Agency Work by the Tokyo Metropolitan Government
(hereafter, Tokyo Survey),34 43 percent of the THAs experienced mid-
term termination of the business contracts that were involved with the
9780230_209084_04_cha03.indd 77 12/3/2010 6:11:07 PM

dispatching of registered-type workers (declined from 61.7 percent in

2002).
The layoff of the limited-term contract workers (and temporary
agency workers too) had been a problem even before the waves of
deregulatory reforms called yatoi- dome. 35 Superficially, the termin-
ation of employment contracts at the end of the term is not a problem.
However, Japanese firms tend to use limited-term contract workers
over a long period of time by renewing contracts almost automatic-
ally. Thus the sudden disruption of an employment contract, even
when it is at the end of the term of the contract, has been accused
of as illegal and the courts have been often supported such a charge.
The expansion of non-regular employment gave rise to the concern
over the spread of yatoi- dome from lawyers, workers’ movements and
other advocates of employment security for non-regular workers (see
Figure 3.12).
In the revised LSA enacted in 2004, clear principles were set out with
regard to the start, renewal and the termination of limited-term con-
tracts that sought ‘informed consent’ about their terms from those on
these contracts.36
There is also a significant difference with regard to the coverage of
employment insurance to non-regular employees. Figure 3.13 shows
the situation of employment insurance coverage comparing regular and
non-regular workers.
In all non-regular employment statuses, the percentage of coverage is
lower than regular employees.
6000 5242
5000 4270
4000
3000
2114
2000
960
1000
0
(2001)** (2002) (2003) (2004)
Figure 3.12 The number of yatoi-dome troubles reported by individual workers*

Source: MHLW 2005.
* Reported number of individual labor-related dispute (kobetsu rōdō funsō sōdan kensū)
accumulated by MHLW.
** In 2001, the number is accumulated from Oct. 2001 to Mar. 2002 (six months).
9780230_209084_04_cha03.indd 78 12/3/2010 6:11:07 PM

Regular employee 83.1% 7.5% 6.7% 1.8%

0.9%
Paato 44.4% 43.8% 7.0% 1.1%
3.8%
Arubaito 15.2% 60.2% 8.2% 12.9% 3.5%
Haken workers 62.9% 28.9% 6.2% 0.0%

2.1%
Keiyaku/shokutaku 66.5% 24.5% 4.8% 1.6%

2.7%
Other 29.5% 51.1% 3.4% 13.6% 2.3%
0 10 20 30 40 50 60 70 80 90 100
%
covered not covered not eligible

d.k. n.a.
Figure 3.13 Employment insurance coverage by employment status

Note: Sample population includes 1,559 regular employees, 559 paato workers, 171 arubaito
workers, 97 haken workers, 188 keiyaku/shokutaku workers and 88 other workers.
Source: Hara 2006: 100.
Table 3.5 Average hourly wages of temporary staff by occupational category (yen)
2002 2006
Software development 2,763 1,960

Machine design 3,371 1,881
OA operation 1,822 1,510
Filing 1,754 1,415
Marketing 1,861 1,479
Sales 1,492 1,399
Light work 1,474 1,004
Manufacturing line – 1,123
Average 1,992 1,480
Source: Survey on Temporary Dispatched Workers: Tokyo Metropolitan Government 2007.
Wages and labor management practices

It is well known that there is a significant wage gap between regular
and non-regular employment even when assigned tasks are relatively
similar. Not to mention the wage disparity between regular workers
and paato,37 a dominant form of limited-term contracts, the situations
9780230_209084_04_cha03.indd 79 12/3/2010 6:11:08 PM

Table 3.6 Methods of wage payment by employment status (%)
Methods of payment /
Employment Status Hourly (women) Daily Monthly
Regular workers 0.1 5.7 86.3

Shokutaku 14.2 (23.0) 11.7 59.6
Keiyaku 29.4 (33.9) 13.4 49.6
Haken 66.9 (81.9) 8.2 22.5
Employment-type 47.8 (65.3) 10.4 38.1
Registered-type 85.5 (90.2) 6.0 7.3
Note: There are other payment methods such as weekly and annual payment, which are
omitted from this table.
of wage among temporary staff reveals the declining level and the
volatility of their wages reflecting the market- driven nature. Tokyo
Survey has data on the average hourly wages for temporary staff (see
Table 3.5).
In some occupational categories, workers experienced a radical decline
of their wages, especially in those occupations that paid well in 2002. In
the data available from Tokyo Survey, the only occupation that pays more
in 2006 than 2002 is interpreter. In all other occupational categories, the
wages declined, and it clearly shows the volatility of their wages.
What is indicated here is the difference in labor management prac-
tices that cover regular and non-regular workers. The difference of
the method of wage payment is symbolic as well as substantial in
terms of the segmentation between regular and non-regular employ-
ment. Most of the regular employees in Japan are paid monthly:
the Employment Diversification Survey in 200738 showed that 86.3
percent of them work under a monthly salary system (4.8 percent
are paid under annual salary system). It is only 20.8 percent among
non-regular workers: 64 percent of them are paid hourly, and about
10 percent are paid daily. However, it should be noted that there is
significant variance among non-regular statuses and between sexes
(see Table 3.6).
It is no surprise that shokutaku is the closest to regular employment
as it is, in part, an extension of regular employment. Keiyaku follows
a similar pattern. But the majority of haken workers are paid hourly
with a great disparity between employment-type and registered-
9780230_209084_04_cha03.indd 80 12/3/2010 6:11:08 PM

74.5
Employee Keiyaku
29.0 73.4
pension Paato
33.1
1999
41.1
23.0 2003
Company Regular Employee
17.0
pension Keiyaku 9.8
Paato 5.1
3.1
Retirement Regular Employee 83.4

66.1
allowance Keiyaku 27.5
Paato 15.8
14.0
7.3
Bonus system Regular Employee 90.4

79.3
Keiyaku 69.4
Paato 60.2
51.5
37.4
Support for Regular Employee 41.8

24.7
self- Keiyaku 36.8
development Paato 19.0
13.9
6.3
0 20 40 60 80 100
Figure 3.14 Access to the rights of company citizenship by employment status

(%)
Note: The figure is made by the data collected by Employment Diversification Survey car-
ried out by MHLW.
Source: Modified from Ogura 2008: 97.
type. In all employment statuses, women are paid hourly more than
men. Although the detailed data will not be presented here, different
rules of promotion and pay raise are usually applied to non-regular
workers.
Corporate welfare
In addition to the methods of wage payment, access to the measures
of corporate welfare such as employee pension (kōsei nenkin), company
pension (kigyō nenkin) and retirement allowance divides regular and
non-regular workers and shows the depth of labor market segmentation
9780230_209084_04_cha03.indd 81 12/3/2010 6:11:08 PM

in Japan. Figure 3.14 presents the percentage of business enterprises that

apply various corporate welfare measures to workers by employment
statuses.
It is clear that there is a deep divide between regular and non-
regular employees with regard to the access to various measures
that characterizes company citizenship. As for the employee pen-
sion, the survey assumes that all companies provide access to regu-
lar employees. A relatively high percentage of, but not all, business
enterprises give keiyaku workers access to an employee pension,
while only one third of them give paato access. The company pen-
sion is a luxury item only for the employees in the large firm sector,
thus only 41 percent in 1999, significantly dropping to 23 percent in
2003, of business enterprises gave regular employee an entitlement
to receive this benefit. In 2003, only 9.8 percent for keiyaku and 3.1
percent for paato have access to a company pension. Retirement
allowance is another major practice of company citizenship, and is
clearly for regular employees.
A high wall between contracts

The mobility between employment statuses is a crucial indicator
that measures the depth of labor market segmentation. The effects
of the deregulatory reforms, which were supposed to bring fluid-
ity within all segments of Japanese labor markets, actually created
deep division especially between regular and non-regular employ-
ment statuses. The analyses show that regular workers tend to stay
with their current employers, while mobility is increasingly distrib-
uted to non-regular workers.
Mobility change of regular workers

The Employment Status Survey shows that there is a trend in increasing
job mobility in the Japanese labor market that clearly reflects the waves
of regulatory reforms from the late 1980s.
The numbers in Figure 3.15 represent the proportion of the cur-
rent labor force who experienced job mobility from a year before the
survey. Until the first oil crisis in 1974, job mobility was rising to
4.0 percent, and at that time, men moved more than women. After
the oil crisis, during the heyday of Japanese management, mobility
was low until the first wave of regulatory reform. The impact of the
reform is clear. The average mobility rate rose to 4.3 percent in 1987,
and the pattern of men and women started to diverge partially due
9780230_209084_04_cha03.indd 82 12/3/2010 6:11:09 PM

7.00
Total
6.50 Men
6.00 Women
5.50
5.00
4.50
4.00
3.50
3.00
2.50
2.00
1962
1965
1968
1971
1974
1977
1979
1982
1987
1992
1997
2002
2007
Figure 3.15 The trend in job mobility in Japan from 1962 (%)
Source: Employment Status Survey: Statistics Bureau 1963, 1966, 1969, 1972, 1975, 1978,
1980, 1984, 1988, 1993, 1999, 2004, 2009.
Table 3.7 Mobility within the labor force (numbers in thousands)
1987 % 1992 % 1997 % 2002 % 2007 %
Labor force 54,358 89.8 58,808 89.4 59,479 88.8 56,414 86.8 56,679 85.9
with
no status
change
Career 2,646 4.4 2,986 4.5 2,911 4.3 3,327 5.1 3,683 5.6
changers
employees 2,369 89.5 2,783 93.2 2,708 93.0 3,139 94.4 3,517 95.5
regular 1,381 58.3 1,659 59.6 1,486 54.9 1,217 38.8 1,372 39.0
New entrants 3,422 5.7 3,850 5.9 4,480 6.7 4,391 6.8 4,044 6.1
Total labor 60,502 99.9 65,756 99.8 67,003 99.8 65,009 98.7 65,978 97.6
force*
* It contains three categories, “labor force with no status change,” “career changers,” and “new
entrants” have subcategories such as “self- employed,” “family workers,” and “employees.” The
percentages of all these categories do not add up to 100% due to the n.a. and d.k.
9780230_209084_04_cha03.indd 83 12/3/2010 6:11:09 PM

Table 3.8 The number of workers who changed jobs (1997–2002) (numbers in thousands)
9780230_209084_04_cha03.indd 84
current job
self- family regular paato/ keiyaku/

2002 employed workers employee arubaito haken shokutaku others total %
previous self- employed 69 9 129 131 5 29 13 402 3.20

job
family workers 9 8 39 60 2 7 3 132 1.05
regular 490 117 3,732 1,346 189 581 113 6,773 53.91
employee
paato/arubaito 122 62 851 2,503 104 203 61 3,924 31.23
haken 6 3 89 62 124 35 4 336 2.67
keiyaku/ 35 8 195 125 28 156 13 568 4.52
shokutaku
others 15 4 75 44 4 13 35 194 1.54
total 774 212 5,178 4,314 461 1,043 248 12,564

% 6.16 1.69 41.21 34.34 3.67 8.30 1.97
Source: Employment Status Survey, Statistics Bureau 2004.
12/3/2010 6:11:10 PM
Table 3.9 The number of workers who changed jobs (2002–7) (numbers in thousands)
9780230_209084_04_cha03.indd 85
current job
self- family regular paato/ keiyaku/

2007 employed workers employee arubaito haken shokutaku others total %
self- employed 57 4 98 105 14 28 8 337 2.66
previous
job family workers 9 4 32 40 5 6 3 102 0.81
regular employee 401 51 3,527 1,044 302 596 96 6,209 49.08
paato/arubaito 111 38 857 2,476 221 249 50 4,023 31.80
haken 10 3 211 121 282 70 7 704 5.56
keiyaku/shokutaku 46 8 327 175 74 226 17 888 7.02
others 18 2 77 48 12 15 39 223 1.76
total 672 112 5,176 4,033 913 1,216 223 12,651

% 5.31 0.89 40.91 31.88 7.22 9.61 1.76
Source: Employment Status Survey, Statistics Bureau 2009.
12/3/2010 6:11:10 PM
to the inclusion of clerical jobs in the temporary agency work that

marks the separation of women from the sphere of organized mobil-
ity. The reform in 1999 accelerated the trend. Overall mobility rate
rose to 5.58 percent in 2007, averaging the wide gap between men
(4.74 percent) and women (6.74 percent) while men’s mobility started
to rise too.
This increasing mobility is disproportionately distributed to non-
regular employment. Table 3.7 shows the changing trend of labor
force composition among the workers who changed career.
The percentages of ‘career changers’ match with the mobility
rate shown in Figure 3.15. In 1987, 89.5 percent of career chang-
ers were employees, 58.3 percent were regular employees, and the
rest, about 41.7 percent, were non- regular employees. In 2007,
the proportion of regular employees who changed their job in
the previous year dropped significantly to 39.0 percent, indicat-
ing more than 60 percent of career changers were non- regular
employees.
Cumulative statistics also show the same trend. Tables 3.8 and 3.9,
constructed from the Employment Status Survey (2002 and 2007),
showing the numbers of the labor force who experienced job mobility
in the last five years (1997–2002 and 2002–7). They are constructed
Table 3.10 Distribution of employment status, origin and

destination (numbers in thousands)
Destination
2002 Regular Non-regular Total
Origin Regular 3,732 2,229 5,961 Pure mobility 0.316

Non-regular 1,210 3,514 4,724
Odds ratio 4.799
Total 4,942 5,743 10,685
Destination
2007 Regular Non-regular Total
Origin Regular 3,527 2,038 5,565 Pure mobility 0.322

Non-regular 1,472 4,082 5,554
Odds ratio 4.862
Total 4,999 6,120 11,119
Source: Employment Status Survey: Statistics Bureau 2004, 2008,

calculated by author.
9780230_209084_04_cha03.indd 86 12/3/2010 6:11:10 PM

in the style of a ‘mobility table’ commonly used in a social mobility

study. The right- end column represents the employment structure by
previous jobs (original employment status), and the bottom row rep-
resents current employment structure.
In both Table 3.8 and 3.9, the total number of the current labor force
who experienced job mobility in the last five years is about 12.6 mil-
lion, slightly above 19 percent of the total labor force. In 2002, about
40 percent of the original employment status was non-regular, while it
was 46.2 percent in 2007. The largest destination employment status is
non-regular employment status, 48.3 percent in 2002 and 50.5 percent
in 2007. In terms of the composition of job changers, the figures reveal
that the job mobility in Japanese labor markets was increasingly distrib-
uted to non-regular employees. Considering the fact that the share of
non-regular employment in total employment was somewhere around
30–33 percent between 2002 and 2007, it is possible to conclude that
the share of non-regular workers among job changers is significantly
higher.
Mobility between regular and non-regular statuses

Table 3.10 is a summary table constructed from Tables 3.8 and 3.9
in order to calculate the pure and relative mobility between the
employment statuses. In a mobility study in sociology, it is common
to calculate the ‘odds ratio’ that roughly measures, in this case, the
chances of mobility for non-regular workers to regular employment
relative to those of regular workers. The odds ratio for both years
reveals that there was deep segmentation between regular and non-
regular employment. Non-regular workers have only one-fifth of a
chance to be regular workers compared to those who have regular
employment. 39
There is not sufficient institutional support for non-regular workers
to move up (in addition to the ineffective active labor market meas-
ures). The survey introduced in Figure 3.14 (Ogura 2008) reveals that
there were only 31.1 percent of business enterprises in 2003 that had an
institutional channel for limited-term contract workers to upgrade their
employment status (declining from 38.6 percent in 1999). For paato
workers, the figure is around 25 percent (rising from 23.1 percent to
26.7 percent). Given the situation, there is no sign of a lowering bound-
ary between regular and non-regular employment in the Japanese labor
markets.
9780230_209084_04_cha03.indd 87 12/3/2010 6:11:11 PM

70,000
Annual sales (in hundred million yen)
60,000
50,000
40,000
30,000
20,000
10,000
0
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Figure 3.16 The growth of the temporary help industry
Source: Business Report of Haken Industry: MOL 1998b, 1999b, 2000b; MHLW 2001b,
2002a, 2004b, 2005a, 2006a, 2006b, 2007a, 2009a.
The role of new actors in Japanese labor markets

As a last point of analysis of the external labor market, we turn to exam-
ine the newly legalized private THA and its role in facilitating job mobil-
ity.40 Increasingly, the services offered by THAs have taken advantage
of the deregulation of fixed-term contract work and the legalization of
private job placement services through innovations in service products
involving a mix of dispatching temporary workers; offering outsourcing
of business services staffed by agency temps; job recruitment services
involving an initial temporary contract; the placement of fixed-term
contract workers; and, most recently, the development of outplacement
services for redundant workers. Figure 3.16 shows the growth of annual
sales reported by the THAs that registered with the labor ministry. In
terms of the numbers of enterprises,41 sales, and the services offered, the
temporary help industry has grown tremendously since deregulation in
the late 1990s. In 2007 there were a total of 50,149 enterprises of the
THAs, contrasting with 9,259 in 1997. Annual sales show close to a five-
fold increase between 1997 and 2007, to reach 6,000 hundred million
yen (approximately 60 billion dollars).
The outplacement service seems to be a uniquely Japanese innov-
ation tied to changes in large firm personnel practices aimed at
shedding older workers. Under the general heading of jinzai bijinesu
(personnel services business), THAs take on an entire group of older
workers who in earlier times would have been transferred (tenseki suru)
9780230_209084_04_cha03.indd 88 12/3/2010 6:11:11 PM

to allied or subsidiary firms within a firm group (keiretsu). The lar-

gest Japanese THA, Pasona, which calls this new product ‘restructur-
ing services’ (risutora shien jigyō), reported almost a third of its profits
in 2002 was derived from this business (Pasona 2003). In this sense,
Japanese companies are not only turning to the external labor mar-
ket to recruit (new) flexible personnel, but to new private placement
services in order to separate themselves from redundant (especially
older) employees. These changes are too recent to have an effect on
overall job mobility, but do register in the continuing expansion of
non-regular work.
Reconfiguration of employment contracts and

job mobility
In this chapter, we have examined the labor market reforms that

included the liberalization and deregulation of temporary agency work,
the liberalization of private labor supply business, and the relaxation of
regulations on the limited-term contracts. There are several important
findings from the analyses. First, the examination of the relationship
between existing labor relations and the patterns of flexibility made
possible by these relations makes it important to understand the inter-
ests that related actors form under the changing circumstances. Second,
it became also clear that the changing platform of policy decision mak-
ing had significant impacts on the creation of new employment forms
and the relationship between them. Third, analyzing how firms use the
fruits of the deregulatory reforms makes the actual segmentation and
stratification process of labor markets clear.
We analyzed the relationship between the existing labor relations and
the patterns of flexibility made possible, in Chapter 2 and the first part of
this chapter. The emergence of the regular employment status in Japan,
that can be characterized by the rise of ‘company citizenship,’ devel-
oped out of the institutionalization of cooperative enterprise unionism.
From the perspective of mobility and flexibility, it is the development
of the mobility within firm and firm network (keiretsu) under the man-
agement prerogative, by which Japanese firms were able to cope with
most of the necessity caused by environmental changes. Being able to
smoothly adapt to the assignment change became an important part of
workers’ ‘capability’ that is highly evaluated at personnel evaluation.
Labor market reform became radical after the early to mid-1990s when
employers started to recognize the limits of the flexible rigidities arrange-
ment. It is possible to say that the deregulatory reforms were triggered,
fueled and shaped by this recognition.
9780230_209084_04_cha03.indd 89 12/3/2010 6:11:11 PM

The deregulatory reforms of labor markets were already undertaken

from the mid-1980s in response to the technological changes and
increasing internationalization. It established the TDW Law that was
to institutionalize temporary dispatching as a legitimate employment
relation. However at that time, it was negotiated at the tripartite advi-
sory council set by labor ministry represented and governed by state,
firm and labor. In this sense, the initial stage of the reform can be called
negotiated or controlled liberalization/deregulation.
The radicalization of the deregulatory reforms was produced by
the changing platform of policy decision making that effectively
excluded labor from the process. From the mid-1990s, the decision
making on employment and labor market issues gradually shifted
out of the advisory council into cabinet deregulation committees, in
which labor representation was weak or nonexistent. This resulted in
the radical deregulatory reforms. The reform proposals by deregula-
tion committees started to be endorsed by cabinets, and because of
this, tripartite bargaining at the advisory council gradually lost its
grip on agenda setting. The labor ministry changed its attitude on
the solutions to labor market mismatches and unemployment from
one of emphasis on traditional measures to activating the external
labor market due to the increasing pressure from the deregulation
committees.
The deregulatory reforms created and expanded the non-regular
employment status, segmented by specific skills, generation and gender.
Japanese firms started to use non-regular employment forms to utilize
necessary flexibilities, taking advantage of deregulatory reforms under
the current circumstances of globalization and industrial structural
change. New employment forms were expanded rapidly in Japanese
labor markets especially in the younger generations and in medium
to large firm sectors. They can be found in the contracts of relatively
skilled workers especially in traditional occupations such as clerical and
manufacturing and also in expanding ones such as sales and service.
Technical and professional are also increasingly employed with new
forms of contracts. It is possible to observe increasing ratio of job chang-
ers where the proportion of non-regular employment is increasing.
The gap between regular and non-regular employment statuses
became visible. Since employers and enterprise unions were still com-
mitted to maintain company citizenship for regular workers during
the reforms, non-regular employment statuses were created outside the
sphere of ‘lifelong employment’ practices. These two broad categories
of employment differ greatly in terms of the accessibility to various
9780230_209084_04_cha03.indd 90 12/3/2010 6:11:12 PM

measures of corporate welfare, indicating the different state of enti-

tlement to company citizenship. Mainly due to this disproportionate
access to resources, we observed no change of job mobility among regu-
lar workers; job mobility is disproportionately allocated to non-regular
workers. However it is difficult for non-regular workers to obtain regu-
lar employment, moving across the boundary between a regular and
non-regular status. As a result, the difference between regular and non-
regular employment became the hierarchical status difference con-
trasted by the accessibility to resources and by the pattern of mobility.
Regular workers are still protected, experiencing organized mobility
within firms, while non-regular workers lack any resources and experi-
ence individualized and unstable mobility without a distinctive idea of
‘career’ outside the firms.
9780230_209084_04_cha03.indd 91 12/3/2010 6:11:12 PM

4
The DWS: Deregulation of
Working Time and Its Impact on
the Effort–Bargain
Working time regulation and employment relations
The labor market reforms examined in the last chapter did not have
a strong impact on the mobility aspects of employment relations for
regular workers. The reforms did not provide institutional support for
regular workers to change employers (as well as for firms to discard reg-
ular workers), which means the preservation of the institutional base
of effective workplace control at Japanese firms. Concurrently, there
has been another line of reforms in the last two decades that concerns
working time regulations in order to reduce working time and also to
reorganize workplace control especially for regular white- collar workers,
the latter of which is the particular focus of this chapter. The workplace
control was renegotiated through the reforms of working time since
the organization of working time directly associates with the contract/
effort aspect of employment relations in two fronts. They are the issues
of the work/nonwork boundary and the bargaining on wage and effort
at workplace: inherently contested domains that deal with worker con-
trol (Rubery et al. 2005).
There are three points that are crucial to the discussions in this
chapter regarding this renegotiation. First, contractual coverage of
different working time regulations directly associates with the work-
effort expected from the different groups of workers. For instance,
in Japan, men and women were regulated to work different hours
corresponding to the different level of work- effort expected to each
of them period.1 Second, the level of working time regulation is
the level of monitoring work- effort. Legal regulations set societal-
level constraints on normal hours of work (per month/week/day)
that successfully monitor work- effort by working time and the line
92
9780230_209084_05_cha04.indd 92 11/25/2010 8:12:55 PM

The DWS: Deregulation of Working Time 93
between work and nonwork spheres of social life. Third, especially

in conjunction with the organizational and workplace-level labor
management practices, the tight relationship between working time
and the bargaining on wage and effort was assumed in the advanced
industrial societies (Rubery et al. 2005). The bargaining on wage and
effort of factory workers provides an exemplary case; wage bargain-
ing assumes a time-money exchange (Kalleberg and Epstein 2001),
and workplace control is often conceptualized as a method to man-
age work-time intensity (Fagan 2001; Edwards 1979).
The organization of the relationship significantly differs from society
to society, and Japan provides a unique case. Thus the chapter starts
with the description and the examination of the historical develop-
ment of the relationship between working time regulation and employ-
ment relations in Japan.
LSA regulation and the company citizenship
During the rapid economic growth, the relationship between work-

ing time regulations and employment relations in Japan had two
major characteristics. First, the working hours were long compared
to other industrialized countries, and second, it was used as a
source of flexibility made possible by company citizenship. These
were mainly due to the straightforward and relatively decentral-
ized working time regulation set in the LSA. It has been relatively
straightforward since the establishment of the LSA in 1947, in which
the scheduled working hours have been eight hours per day and
forty- eight hours per week, and the overtime premium was set at
25 percent (125 percent of the regular wage). The regulation uni-
formly covered all segments of the workforce. Working time regula-
tions in Japan can be also characterized as relatively decentralized,
emphasizing the autonomous governance of working time by labor
relations, especially at firm level (rōshi jichi). 2 For instance, the LSA
set no official limit on the amount of overtime work (and work on
a day- off) as long as employers and workers at each firm negotiates
and agreed upon them. 3
As mentioned in the previous chapters, the establishment of the LSA
in 1947 was to modernize and democratize Japanese employment rela-
tions. Working time regulation was no exception. The enactment of
the rule of an eight-hours-per- day limitation for the whole population
was the main pillar of the new law, primarily aimed at reducing work-
ing time. In addition, it was the first time that business with less than
9780230_209084_05_cha04.indd 93 11/25/2010 8:12:55 PM

10 employees were subjected to working time regulation. The diffusion

and the increasing compliance to the LSA by Japanese firms character-
ize the trend of working time from the immediate postwar period to the
period of rapid economic growth. Figure 4.1 shows the trend of working
hours from 1960 to 2003.
In all available statistics (such as Monthly Labour Survey4 based on
company reports and the Labor Force Survey based on workers’ self
report), overall working hours declined from 1960 to the first oil crisis
in 1973–4. In an attempt to facilitate the modernization, a two- days-
off per week system, in addition to the encouragement of an 8-hour-
per- day system, also played a role in the reduction that started to be
implemented especially at large firms from the early 1970s, and was
significantly expanded in the 1980s (Hamaguchi 2004).
Although the overall working hours in Japan was declining, it was
still more than 2,400 in 1960, 2,200 in 1970 and was about 2,100 in
the late 1980s, according to the data from Monthly Labour Survey that
the government usually relies on for official statistics. The reduction
mostly stagnated in a decade after the oil crisis for several reasons.
First, employment and wage security for regular employees became
a more important social concern than a reduction in working time.
It was a time when employment security for regular employees was
reaffirmed; the establishment of the Employment Insurance Act and
the institutionalization of the doctrine of abusive dismissal5 cemented
the rigidity of regular employment at Japanese companies. Second,
the economic downturn after the oil crisis made the labor market a
buyer’s market; employers were released from the pressure to ‘improve’
working condition. Third, under the harsher market environment
with a constraint to maintain all regular employment, Japanese firms
shaped unique methods of flexible labor adjustment in the aspect of
working time. This flexibility, which actually takes two major forms,
was achieved in close association with the control of work- effort at
workplaces.
First, as it is clear from the Figure 4.2, Japanese firms began to use
working time – especially overtime – as a source of flexible labor force
adjustment (Dore 1986). Given the rigidity of employment security,
employers relied more on working time adjustment than the adjust-
ment of employment. The figure demonstrates that firms increase
and decrease overtime work responding to the business conjuncture.
It is especially evident among larger firms rather than smaller ones.
Decentralized regulation, where cooperative labor relations were pre-
dominant, helped the realization of this flexibility as employers and
9780230_209084_05_cha04.indd 94 11/25/2010 8:12:55 PM

2683
(hours per year: annual
(hours per year: annual working hour, negotiated overtime
scheduled working hour) based on 36 agreement)
2480
2,500 500
2432
(annual working hours: 2465
2,400
2315 based on firm report)
450
2,300 2239 (annual working hours:
based on worker’s self report) 2267
9780230_209084_05_cha04.indd 95
2,200 2170 400
2117 2108
2110 21112111
2102 2088 2194
2,100 2064 2052
2039
2016 350
1932 1933 1972
2,000 1937 1946
19301922 1913 19091919
(annual scheduled working hours) 1898 1904 1900
1,900 1866 18791859 1846 300
1841 1842 1848
1837
1823 1774
262 1780 1750
1,800 17721772 1742 1720 1700
(annual overtime working hours) 170917141700 250
1,700
198 200 190
1,600 189 186 200
178 178 175
162 172
1,500 149 150 146
145
137 139134137 150
127 133132137 133
1,400
1,300 100
1,200
50
1,100
1,000 0
35 40 45 50 55 60 61 62 63 2 3 4 5 6 7 8 9 10 11 12 13 14 15
1960 1965 1970 1975 1980 1985 1990 1995 2000
Figure 4.1 The trends in working hours from 1960 to 2003

Source: Cabinet Office 2006, assembled by MHLW; additional information from Labor Force Survey: ILO 2010.
11/25/2010 8:12:55 PM
25
20
15
10
recession after recession after high-yen recession after kin-yu kiki
the first oil crisis the second oil crisis recession the bubble burst (crisis of financial
system)
5
0
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
−5
500– 100–499 30–99 economic growth rate (%)
Figure 4.2 The trend in overtime and business conjuncture (economic growth
rate) by firm size (manufacturing: hours per month)
Source: Monthly Labour Survey: MHLW 2008c; System of National Account: Cabinet Office
2009).
workers are able to agree upon the length of overtime work. When busi-
ness expands, they agree to increase working hours instead of employ-
ing more workers, and when business shrinks, they reduce overtime for
workers to keep their employment.
Second, it is possible to observe increasing amount of unpaid over-
time (sābisu zangyō) from this period. Unpaid overtime, as introduced
in Chapter 2, refers to unreported overtime. Regular employees volun-
tarily (or by enforcement) do not report a part of their overtime so that
the firms do not need to pay an overtime premium, which is obviously
a great advantage for the financial health of the companies. It is not
entirely sure when this practice began, but it is safe to conclude from
Figure 4.3 that the amount of unpaid overtime seemed to increase sig-
nificantly from the end of the 1960s and especially after the oil crisis.
It also shows that the practice has become common in Japanese firms
since then.
9780230_209084_05_cha04.indd 96 11/25/2010 8:12:56 PM

410
390
370
350
330
310
290
270
250
230
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Figure 4.3 Estimated hours of unpaid overtime work (hours per year)
Source: Monthly Labour Survey: MHLW 2008c; Labour Force Survey: ILO 2010.
The emergence of these two practices is greatly associated with the

changing effort-bargain of the regular work contracts during this period.
It is important to note that employers shifted their labor management
policy right before these practices became common. In the early to mid-
1960s, employers sought to replace the life-stage adjusted wage system
with a job-rate system. Instead, by this policy change, they started to
commit to expand ‘merit’ component of the life-stage adjusted wage
system in personnel evaluation, wage determination, and promotion
competition, which led to shape ranking and qualification system. The
publication of Merit-based Personnel Management (nōryoku-shugi kanri) in
1969 by the employers’ association was the official declaration of this
shift (Nikkeiren 1969).
As discussed in Chapter 2, this shift and the following oil crises
in the 1970s deepened ‘the ability to be flexible’ to the extent that it
forced regular workers to change their lifestyles for the sake of firm’s
concerns. This renegotiation shaped ‘kaisha ningen’ (company man),
who are the flexible workers, with company citizenship, that indicates
the fusion of workers’ interests with those of the managers’, to the
advantage of the latter. When labor adjustment becomes necessary,
regular workers cooperate to increase and decrease their overtime
work in exchange for the maintenance of their employment security.
When overtime becomes too long, which is more costly than sched-
uled working hours, they dedicate a part of their overtime labor to the
9780230_209084_05_cha04.indd 97 11/25/2010 8:12:56 PM

firms by not reporting them. It is possible to say that these practices

are the two concrete expressions of the company citizenship in the
aspect of working time, which are evaluated positively, and workers
compete to show their ‘ability.’
This complex intermesh between working time and the organization
of effort was achieved by the straightforward and relatively decentral-
ized regulation of working time. It was however put under pressure for
change again from the mid-1980s due to increasing gaiatsu (external
pressure) to reduce trade surplus and working time. After the burst
of the bubble economy, another wave of pressure for change came,
but this time it was carried out in light of the endogenous demands
for further flexibility. Both involved legal regulative reforms, and the
latter particularly concerned the working time regulations of white-
collar workers. By these reforms, I argue that the effort-bargain of reg-
ular white- collar employees was intensified by cutting overtime work
and justifying unpaid overtime by altering working time as the result
of work- effort rather than the prerequisite of it. The labor’s role in
bargaining and monitoring work- effort through working time regula-
tions has been undercut by making workers responsible for their own
results.
The following sections analyze the politics of, and the consequences
for, the deregulation of working time.
Working time reduction and renewed interest in the DWS
Working time reduction for better quality of life

From the mid-1980s, there was increasing pressure from the inter-
national community to reduce working time in Japan, as it was con-
sidered one of the major causes of her excessive trade surplus. While
the working time reduction in Japan stagnated around 2,100 hours
after the oil crisis, it decreased significantly in western European
countries and the USA. During the 1970s it decreased from about
2,000 to 1,800, and in the 1980s, continental Europeans headed
towards 1,600 while English- speaking countries stayed at around
1,800 hours. In these societies, 40-hours-per-week was already
adopted and became the norm, and an upper limit of overtime work
was officially set.
Responding to international criticism, the Japanese government
considered reducing working time as a national goal. The Nakasone
administration framed the policy as a transfer of the benefits of
a strong economy to the people by improving the quality of life. It
9780230_209084_05_cha04.indd 98 11/25/2010 8:12:56 PM

became the major initiative that successive administrations followed

and included in their cabinet decisions (MOL 1991b). The basic tone
of the policy initiative was set at the informal advisory committee for
Prime Minister Nakasone called the Study Group of the Adjustment of
Economic Structure for the International Cooperation (kokusai kyōchō
no tame no keizai kōzō chōsei kenkyūkai) headed by Maekawa Haruo, the
former governor of the Bank of Japan. The study group was later for-
malized as the Special Committee on Economic Structural Adjustment
under the Advisory Committee on Economy, Economic Planning
Agency (keizai shingikai keizai kōzō chōsei tokubetsu bukai). The commit-
tee publicized the Maekawa Report and the New Maekawa Report in
1986 and 1987, and proposed to reduce annual working hours to the
level of other industrialized countries. The plan was to expand domes-
tic consumption by reducing working time, leading to the reduction
in the trade surplus that was the target of international criticism (MOL
1988: 393–5).
Following the initiative, the LSA was revised in 1987,6 which
introduced the 40-hours-per-week principle. Since the change was
expected to be too radical, transitional measures were adopted
to gradually introduce the new principle. Tables 4.1 and 4.2 are
examples of the transitional treatment of two industries, manu-
facturing and commerce. The gradual implementation of the new
principle was differentiated by industry and firm size. Large firms
were expected to implement the new principle by 1994, but small
firms in, for instance, the commercial sector were still allowed to set
scheduled working time at 46-hours-per-week even ten years after
the revision.7
The shortening of the scheduled working time obviously put pres-
sure on companies to reduce the overall working hours because of the
increasing payment of the overtime premium if workers work as long
Table 4.1 Gradual implementation of 40-hours-per-week (manufacturing)
Firm size 1988 1991 1993 1994 1995 1997 2001
301– 46 44 44 40 40 40 40
101– 300 46 44 44 44 44 40 40
31–100 48 46 46 44 44 40 40
10– 30 48 46 46 44 44 40 40
1–9 48 46 46 46 44 40 40
9780230_209084_05_cha04.indd 99 11/25/2010 8:12:56 PM

Table 4.2 Gradual implementation of 40-hours-per-week (commerce)
Firm size 1988 1991 1993 1994 1995 1997 2001
301– 46 44 44 40 40 40 40
101– 300 46 44 44 44 44 40 40
31–100 48 46 46 44 44 40 40
10– 30 48 46 46 44 44 40 40
1–9 48 48 48 46 46 46 44
as before. Thus the revised LSA introduced some new working time
systems that enabled firms to allocate scheduled working time more
flexibly, depending upon the business conjuncture. These measures
included the Irregular Working Hour System (henkei rōdōjikan-sei: here-
after, IWHS), the Flextime system, and the Discretionary Work System
(hereafter, DWS). The IWHS includes several types such as IWHS- One
Week, One Month, and One Year, which enables firms to allocate
scheduled working hour more flexibly within a week, a month or a
year.8 For instance, in the case of IWHS- One Year, it allows firms to
extend scheduled working hours with a regular wage rate for longer
during the busy season, but then requires those firms to allocate a
shorter scheduled working time during the slack season. The Flextime
system encourages the discretionary setting of starting and ending
times (for mostly white- collar workers) as long as they work a negoti-
ated amount of scheduled working hours per week. Firms could use
these measures upon agreement with labor unions following the con-
vention in the case of overtime work. IWHS- One Month does not even
require agreement.
The DWS was qualitatively very different from other measures of work-
ing time. While other measures offered flexible coordination of sched-
uled working time, the DWS was a measure that annuls the concepts of
scheduled working time and overtime work (therefore, cancelling the
concept of ‘overtime premium’), and thus disconnects the relationship
between working time and wages.9 The establishment of this excep-
tional measure was based on the recognition on the changing nature
of work “because of the industrial structural transformation toward the
service economy driven by technological advancement” (MOL 1991b:
108). It was designed for jobs and occupations “that require a certain
amount of discretion to complete their tasks and does not fit the nor-
mal line of command” (MOL 1991b: 108–9). Thus the application of
the system was strictly limited to workers involved with research and
9780230_209084_05_cha04.indd 100 11/25/2010 8:12:56 PM

development, editing and reporting, information systems design, and

film and broadcasting production.10 This original DWS, established in
1987, is called the DWS for professional occupations (senmon gyōmu-gata
sairyō-rōdō-sei).
With these efforts at regulative reforms, the national campaign to
reduce working time became, in a way, successful. Given the tight
labor market during the bubble economy, employers tried to present
the shorter working hours as a sign of a good workplace in order to
attract job seekers (MOL 1991a: 65; 1991b), and labor unions took this
as a good opportunity to improve working conditions11 (OISR 1989,
1990; Rengo 1991). The labor ministry facilitated the campaign by pub-
lishing the White Paper of Working Time in 1992 that evaluated and
encouraged further efforts to reduce working time by the cooperation
between employers and labor unions.12 The combined efforts by pol-
icy coordinators, employers and labor unions achieved a significant
reduction of ‘scheduled working hour.’ Figure 4.4 shows the reduction
in scheduled working hours, from which it is clear that the numbers
decline in all segments of firm size especially after the revision of the
LSA in 1987.
In the large firm sector, where the effect of the reduction of official
scheduled working time was immediate (see Table 4.1 and 4.2), firms
180
500– 100–499 30–99
175
170
165
160
Hours
155
150
145
140
135
130
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Figure 4.4 The amount of scheduled working hours by firm size (hours per
month)
Source: Monthly Labour Survey: MHLW 2008c.
9780230_209084_05_cha04.indd 101 11/25/2010 8:12:56 PM

45
40
Firms larger
35 than 1,000
30 Irregular Working Hour

System – One Month
System – One Year
20
Flextime System
15
DWS for Sales Workers
10
DWS for Professional
5
Occupations
0
1988
1990
1992
1994
1996
1998
2001
2003
2005
2007
Figure 4.5 Expanding use of various working hour systems (large firms: %)
Source: General Survey on Wages and Working Hours System: MOL 1989, 1990b, 1991c,
1992, 1993c, 1994b, 1995b, 1996b, 1997, 1998c, 1999e, 2000c; General Survey on Working
Conditions: MHLW 2001c, 2002b, 2003, 2004c, 2005c, 2006c, 2007b, 2008a, 2009b.*
* The data are drawn from the General Survey on Wages and Working Hours System (chingin
rōdō jikan seido-tō sōgō chōsa) and the succeeding General Survey on Working Conditions
(shūgyō jōken sōgō chōsa). These are basically the same survey, conducted annually, by
the labor ministry, focusing on different aspects of employment such as wage systems,
working time practices, conditions of welfare facility and retirement allowance. Subjects
(about 5,300 to 6,200 companies) are selected from all firms employing more than 30
workers from thirteen major industries except for public and a few other service industries.
Response rates vary from about 70–80 percent. In 2008, the ministry sent 5,937 question-
naires, and response rate was 68.2 percent (4,047 responses) (In 2006, it was 82.7 percent:
4,416/5,341).
began to use these flexible measures right after the revision, especially
IWHS- One Month and Flextime system. Figure 4.5 shows the uses of
flexible time measures at the firms larger than 1,000 employees. The
use of Flextime is characteristic in this company sector, corresponding
with the fact that white- collar workers were increasing, which will be
discussed in the following section.
The effect of transitional measures including the state subsidy to com-
pensate the reduction of schedule working time13 is clear if including
all sizes of firm. The reduction began at the same time as large firms,
but the uses of the new measures increased after the burst of the bubble
economy that forced firms to allocate scheduled working hours more
flexibly to cut labor costs14 (see Figure 4.6).
9780230_209084_05_cha04.indd 102 11/25/2010 8:12:57 PM

45
40
All firms
30 System – One Month
Irregular Working Hour
25 System – One Year
Flextime System
20
15 DWS for Sales Workers
10 DWS for Professional

Occupations
5
0
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2001
2002
2003
2004
2005
2006
2007
2008
Figure 4.6 Expanding use of various working hour systems (all firms: %)
Source: General Survey on Wages and Working Hours System: MOL 1989, 1990b, 1991c,
1992, 1993c, 1994b, 1995b, 1996b, 1997, 1998c, 1999e, 2000c; General Survey on Working
Conditions: MHLW 2001c, 2002b, 2003, 2004c, 2005c, 2006c, 2007b, 2008a, 2009b.
Although ‘scheduled working hour’ declined, it did not mean the

reduction of the amount of overtime work and unpaid overtime. Rather,
it was a mandatory reduction of scheduled working time when there
was no indication of the decreasing amount of work or the loosening of
effort control. The trend of overtime in Figure 4.1 actually shows that
overtime slightly increased until the end of the bubble economy, sug-
gesting that there was enough work to be done at Japanese companies.
In addition, the high level of unpaid overtime shown in Figure 4.3 tells
that a part of the increasing cost caused by the reduction of scheduled
working hour was absorbed by the ‘ability to be flexible’ demonstrated
by workers.
The movement to reduce working time, which realized the reduc-
tion of scheduled working time complemented with flexible meas-
ures, pushed up the labor cost. This put pressure on employers to
reorganize the relationship between working time regulation and
effort-bargain: costs increased as workers could not work as long as
before due to the reduction of scheduled working hours. As I will
discuss in the next section, this was especially the case with regard
to the white- collar workforce that was increasing in the large firm
9780230_209084_05_cha04.indd 103 11/25/2010 8:12:57 PM

sector. Thus, employers needed to require more effort from workers,

first, within the limit of scheduled working hours and/or second, by
turning working time into the result of work- effort rather than the
prerequisite of it. In both cases, it is necessary to rely on, but rear-
range, company citizenship.
Shifted aim of the reform of working time regulation

The burst of the bubble economy became an opportunity for Japanese
employers to review the cost structure of the firm, and they started
to recognize redundancy in white- collar personnel. This recognition
led them to shape renewed interest in the expansion of the DWS
as they needed to carry the burden of the mandatory reduction of
scheduled working time in the midst of the economic downturn.15
Figure 4.7 shows that they see redundancy of personnel in manage-
rial and clerical jobs. In the period between April 1992 and February
1993, the percentage of firms that reported the redundancy of man-
agers grew from about 11 percent to 15 percent, in which the majority
claimed that less than 5 percent or 5–10 percent of their manage-
rial workforce were redundant. The recognition of the redundancy
(Apr. 1992, Feb. 1993)
18
16
14 20%*
10–20%
12
10 5–10%
(%)
8
6
5%
4
2
0
Managerial Professional/ Clerical Sales Blue-collar Skilled Unskilled
technical
Figure 4.7 Changes in the proportion of firms reporting excessive labor by

occupation and firm size from 1992 to 1993 (manufacturing)
Source: Survey on Labor Economy Trend** (MOL 1993a: 35)
* The percentage of firms that recognize “more than 20% of managerial workers are
redundant.”
** Survey on Labor Economy Trend (rōdō keizai dōkō chōsa) is conducted four times a year by
the labor ministry to capture the influences of business conjuncture on the various aspects
of employment including recruitment, working time and wage. Subjects are chosen from
all industries with more than 30 employees.
9780230_209084_05_cha04.indd 104 11/25/2010 8:12:57 PM

of unskilled workers exceeded other categories of work, but it was

constant.
Redundancy was strongly recognized at large firms. The White Paper
on Labor (1993) reports that clerical and managerial workers consisted
of about 60 percent of the workforce in the firms that employ more
than 500 employees while it was just above 40 percent at the smaller
firms (MOL 1993a: 39).
Redundancy of white- collar workers and the concern over their
‘productivity’ became the major issues of the New Age Japanese
Management; it mentions that blue- collar workers in Japan are
very ‘productive’ (cost- effective), but white- collar workers are
not (Nikkeiren 1995: 42). The report proposes comprehensive
countermeasures to the problem while it reaffirms that main-
taining long- term employment is still crucial for Japanese firms.
The proposed countermeasures include the following: 1) diver-
sification of the career track,16 2) strict control of total personnel
costs, 3) introduction of the results- oriented evaluation and wage
system, and 4) coordination of working time flexibility (Nikkeiren
ibid.: 35–43).
All of these measures associate with each other deeply, but the
motivation behind these measures is rooted in employers’ frustration
over the low responsiveness of working time control on white- collar
productivity.
White- collar productivity varies depending upon the variance of

individual workers’ competency. Work results are not in propor-
tion to the length of working time [compared to blue- collar work-
ers] (Nikkeiren ibid.: 91).
In the case of blue- collar work, control over working time is one of the
major elements that directly affect the productivity of a manufacturing
line as well as the quality of production facilities and workers’ skills. In
other words, given a set of production facilities and a certain level of
workers’ skills, working time decides the amount of work that results.
This extract, however, points out the difficulty to do the same for white-
collar workers, and the rising concern over white- collar productivity
led employers to claim that “[for white- collar workers] working time
does not decide work results, therefore it is not an appropriate base of
wage determination” (Nikkeiren ibid.: 92). This is the point that pushes
employers to look beyond the working time flexibility that could be
9780230_209084_05_cha04.indd 105 11/25/2010 8:12:58 PM

achieved by the Flextime system. In Flextime, it is still necessary to

pay an overtime premium once working hours became more than the
scheduled working hours. The DWS ends the concepts of scheduled
working time and overtime work altogether, and therefore the calcula-
tion of personnel costs can be completely detached from the concept
of working time.
Further, ending the concepts of scheduled working time and
overtime work altogether justifies unpaid overtime. By coupling
the introduction of the DWS with the results- oriented labor man-
agement system, which is associated with the stronger direction of
work- effort and the individualized performance measurement, work-
ing time becomes the consequence of work- effort rather than the
prerequisite of it. The DWS in this sense is the institutional base
for employers to effectively claim that the wage is the consequence
of the work- effort regardless of the length of working time workers
spend at workplaces. Thus the demand for the DWS was usually cou-
pled with the intention to introduce a results- oriented labor man-
agement system. Figure 4.8 shows the list of reasons why employers
want to introduce the DWS, drawn from the survey conducted by
Rengo (2000).17
Figure 4.8 shows that there are three major reasons: 1) to intro-
duce a results- oriented labor management system, 2) to facilitate
creative works, and 3) to respond to workers’ demand towards results-
orientation. The figure also enables a comparison between the DWS for
professional occupations and the DWS for white- collar workers, which
highlights the specific motivations for employers to use different types
of the DWS. Comparing the two systems, expectation for the expan-
sion of the DWS to white- collar workers is clear: to introduce results-
oriented labor management practices. It is the top reason in terms of
the DWS for white- collar workers with more than 90 percent, while it
is ‘to facilitate creative works’ in the case of the DWS for professional
occupations.
Based on motivation, the employers’ strategy was to extend the exist-
ing system of the DWS for professional occupations to cover white-collar
jobs. They tried to argue that white- collar jobs started to contain similar
elements as professional jobs in conjuncture with the industrial struc-
tural changes to knowledge/service economy. They emphasized the
planning and decision making as the major elements of white-collar
jobs, and claimed that the following categories of white- collar work are
especially suitable to the expanded DWS;
9780230_209084_05_cha04.indd 106 11/25/2010 8:12:58 PM

93.7
DWS for professional occupations
DWS for white-collar workers

79.4
72.1 73.2
9780230_209084_05_cha04.indd 107
36.5
28.6
13.8
8.7
4.8 4.1
1.6 3.2
To introduce results- To facilitate creative Workers’ request To reduce working Because competitors Others
oriented labor works towards results- time (and overtime also introduce
management orientation premium)
Figure 4.8 Employers’ reasons to introduce the DWS (multiple answers: %)
Source: The Special Survey on the Discretionary Work System: Rengo 2000, created by the author.
11/25/2010 8:12:58 PM
● Tasks such as planning, policy-making, and research and analy-

sis, which belong to the divisions located in the headquarters and
important business places.
● Sales and negotiation, in which workers can make independent
decisions.
● Tasks such as legal affairs, tax accounting, financial affairs, account-
ing, patent practice, public relations, investment management and
real estate, which require highly professional knowledge. (Nikkeiren
1995: 92)
Combined with their employment diversification strategy, diver-

sifying their employees into long-term employment, professional
(including workers both from internal and external labor markets),
and flexible employment groups, employers claimed the necessity
to introduce the DWS for the first two groups (Nikkeiren ibid.) (see
Table 4.3).
Nikkeiren also argues that the coverage of the new DWS should be
discussed at labor-management committees at each company – conven-
tional arrangement of the negotiation with regard to the working time
regulation.
Table 4.3 Nikkeiren’s strategy for the application of the DWS
Category in
employment
diversification
strategy Details Types of the DWS
Long-term Career-track managerial A part of the workers in

employment (limited numbers this track is applicable to
group of core long-term the DWS for white- collar
employees) workers
Career-track professional DWS for professional
(e.g. workers in R&D occupations
section)
Professional group Employed in limited-term DWS for professional
from external labor occupations
market
Flexible Employed in limited-term Not applicable
employment from external labor
group market
Source: The table is assembled by author based on Nikkeiren 1995.
9780230_209084_05_cha04.indd 108 11/25/2010 8:12:58 PM

Labor union representatives were opposed to the idea of the expan-

sion of the DWS for white- collar jobs, suspecting that the employers’
true goal was to reduce the personnel costs of white- collar workers.
Rengo argued that “the new system is just simply not necessary, and
practically, the current Flextime system is enough to encourage discre-
tionary work” (Rengo 1997e). Rengo also listed the following reasons
for their opposition, emphasizing that the expansion would fundamen-
tally ruin workers’ rights and that it does not contribute to reduce work-
ing time at Japanese companies;
● There is a danger that the DWS would merely legitimate unpaid over-
time work, and we cannot deny the possibility that intensified labor
without proper working time management would lead to karōshi
(death from overwork).
● We do not admit the argument that all the nonroutine work has dis-
cretion. It is just too vague to use it as the standard for the coverage
of the DWS.
● In Japanese corporate organizations, tasks are done on a group basis
without any individualized and clearly defined assignment. Under
these circumstances, the DWS can be only applicable to the excep-
tional cases
● (Rengo 1995a).
The first concerns the labor intensification without rewards. The sec-
ond concerns the coverage, and the third points to the nonexistence
of individualized discretion at Japanese workplaces. Labor union repre-
sentatives insist on the necessity of strong social regulations, especially
on the coverage and the method of coverage determination to protect
workers from the possible abuses of the system, even when the DWS was
expanded to white- collar workers.
The labor ministry claimed the necessity of the DWS for white-
collar workers, emphasizing the changing nature of work. In 1995
the Preliminary Discussion Committee for the DWS (sairyō-rōdō-sei ni
kansuru kenkyū-kai)18 in the labor ministry, which was expected to sub-
mit a preliminary report about the possible expansion of the system,
made a report to the Director of Labor Standards (rōdō kijun kyokuchō) of
the ministry. The report concludes that there is a broad-based expect-
ation regarding the expansion of the system for white- collar workers,
reflecting environmental changes, such as industrial structural trans-
formation, the redesign of the work process, and a change in work-
ers’ values (Rengo 1997a: 80–2). The report suggests that the DWS is
9780230_209084_05_cha04.indd 109 11/25/2010 8:12:58 PM

Table 4.4 Summary of opinions on the expansion of the DWS by related actors:
early stage
Major points Public

of discussion representatives Labor unions Employers
Necessity of Necessary Unnecessary Necessary

the system
Coverage Due to the There may be some Most of the
industrial workers who may white- collar
structural be applicable to the workers do
changes, there system. But even non-routine
are increasing for them, current jobs.
number of Flextime system is
white- collar enough.
workers who are
applicable to the
system.
Level of Mix of social and Social-level regulation Organizational-
regulation organizational is absolutely level regulation
levels (new necessary is desirable
labor- (considering (supporting
management the current the current
council organization rate of arrangement
and strong the labor unions, of labor-
supervision by labor-management management
Labor Standards council is not committee).
Supervision enough).
Office).
Effort- Some white- collar It is doubtful if Many white-
bargain workers have Japanese workers collar
(and view discretion. have discretion workers have
on worker Since some considering the discretion like
discretion) workers become existence of long independent
responsible for and flexible contractors.
their working overtime and It is necessary
time, their karōshi (death by to measure
consent is overwork). their work
necessary. It is not possible effort based
for workers to on results,
have complete not based on
discretion since working time.
Japanese workplaces
emphasize
teamwork.
Source: Rengo 1997b, rearranged by the author.
9780230_209084_05_cha04.indd 110 11/25/2010 8:12:58 PM

necessary for white- collar workers especially those who have highly
specialized skills and creativity that could be comparable with inde-
pendent contractors (Rengo 1995b).
As introduced above, related parties have already publicized their ideas
on the possible expansion of the DWS for white-collar workers in the first
half of the 1990s. This issue however was not a central issue at tripartite
bargaining sessions at advisory council until 1997 as there were other issues
such as the implementation of the 40-hour-per-week system. Employer-led
deregulation committees pushed+ to make the issue at the forefront of the
reforms of employment relations. Table 4.4 summarizes the opinions by
major actors based on the conceptual framework that stressed three points
including coverage, level of regulation and effort-bargain.
The political dynamics of the working time deregulation
Marginalization of labor in the politics of deregulation

From 1997, the discussion on the expansion of the DWS for white-collar
workers was fueled by pressure from the deregulation committee. The
process is the same as that characterizing the reforms of the labor market
regulations. The increasing influence of the deregulation committee, par-
ticularly the second public announcement from the Special Committee
on Deregulation (kisei kanwa shō iinkai) in December 1996, had a strong
influence on the process of tripartite bargaining at the advisory coun-
cil.19 After the public announcement, the topic of the DWS immediately
appeared on the agenda of the advisory council in February 1997. The
labor ministry also requested the council to have a midterm report on
the issue of the DWS by July 1997. Under such pressure, advisory council
started to discuss the expansion of the DWS intensively. Having had
difficulty in reaching any compromise, the labor ministry made a draft
proposal in July 1997 to facilitate building consensus on the discussion
on the possible expansion of the system. This was considered as a sign of
the strong influence from the deregulation committee as the labor min-
istry had never made such a proposal to facilitate a discussion at advis-
ory council (Nakamura 2001).20 The proposal suggested the expansion of
the DWS for some white-collar workers.
The draft proposal by the labor ministry suggested the establishment
of the new DWS for white- collar workers in addition to that for profes-
sional occupations in the LSA. The contents of the draft proposal are
much closer to that of employers than the labor unions especially in
terms of the coverage21 (Nakamura 2001). The draft proposes that the
new system covers those who are assigned to the work of planning,
9780230_209084_05_cha04.indd 111 11/25/2010 8:12:58 PM

policy-making, research and analysis at headquarters and related

branches, and the jobs to which managers are not able to give concrete
directions in terms of the methods and the allocation of time to exe-
cute the tasks. The proposal that mandated the establishment of the
new labor-management council was also closer to employers in terms of
the regulation of the new system. Although it was designed to facilitate
more labor participation than the conventional arrangement of a labor-
management committee, it allows the organizational-level regulation of
the coverage of the new system at each firm.22 In addition, the role of
the new council was restricted by the report of the Study Group23 that
pre- examined the possibility of the expansion of the DWS to white-
collar workers.
Employers agreed with the draft proposal prepared by the labor minis-
try. Rengo was against it, but they failed to form a strong collective front.
This was due to internal dispute within the labor unions. Two major
industrial level factions within Rengo, Japanese Electrical Electronic
and Information Union (Denki Rengo) and the Confederation of Japan
Automobile Workers’ Unions (JAW, Jidosha Soren),24 were actually posi-
tive about the expansion of the DWS, while many other member organ-
izations were against (Nikkei 1998c; Mainichi Shimbun 2003). Since an
increasing proportion of white- collar workers have relatively high levels
of autonomy due to the changing nature of work in these industries,
the DWS was not considered by many as radically unjust. Suzuki,25 the
chairman of the Electrical Workers Union, once said in a conference
that “we should look at the positive side [of the DWS]. To work with
discretion should be the basic right of workers” (Suzuki 2000). Thus,
despite a request to repeal the bill, Rengo had to negotiate a ‘realistic’
compromise with the labor ministry and employers even during the
discussion at advisory council right before the Parliament sessions in
1998 (Interview with Rengo official, 22 February 2001).
The following tripartite bargaining at advisory council was not favor-
able to labor because of the increasing influence from the deregulation
committee. Nakamura describes the negotiation at this stage as “public
representatives and employers vs. labor” (Nakamura 2001: 477). With
this political juxtaposition, the expansion of the DWS to white- collar
workers became unavoidable. The discussion on the revision of the
draft proposal by the labor ministry was mainly focused on the actual
design of the expanded DWS, especially the clarification of the cover-
age and the process of coverage determination. Having failed to reach
any compromise, the proposal by the advisory council was sent to the
Parliament session with notes on the conflicting opinions on coverage,
9780230_209084_05_cha04.indd 112 11/25/2010 8:12:59 PM

who will be the decision-making body, and other items such as the
necessity of workers’ consent.26
While the declining power of labor was clear within institutional
politics, the revision of the LSA caught the public attention, and that
helped labor to fight back at the Parliament sessions. As radical as the
change was supposed to be, social discussion on the revision of the LSA
picked up steam in early 1998. It concerned negative impacts of the
DWS, including longer working hours and physical and mental health.
Various symposiums were organized by lawyers and scholars, and
Rengo organized the first successful May day (labor day) in the 1990s
(Nakamura 2001: 487). The media also started to cover the issues and
concerns related to the revision of the LSA. For instance, Nikkei, the
newspaper for business and economic issues, reported on a court case
that recognized the death of one system engineer who worked under
the conditions of the DWS as karōshi (death by overwork) due to the lack
of working time management (Nikkei, 1998a). Nikkei also introduced
one study showing that workers who work under the DWS have less
time with family, and suggests careful implementation of the system
(Nikkei, 1998b).
From spring 1998, the Parliament session started to discuss the revi-
sion of the LSA. As Rengo could not repeal the bill at tripartite bargain-
ing of the advisory council, they tried to increase restrictions on it by
using their ties with opposition parties, such as the Democratic Party
and the Social Democratic Party. Backed up by strong mass appeal,
such as May day, this strategic move of Rengo was relatively successful
(Nakamura 2001: 487). The loss of the ruling Liberal Democratic Party
at the upper house election in August 1998 further helped the opposi-
tion to add more restrictions. The restrictions were there to discourage
employers to actually use the system, which, for instance, included: a
mandatory confidence-vote (once a year) to choose the members of the
new labor-management council, and unanimous agreement at labor-
management council on the issues that will specify the conditions and
practices of the new act.27 All these needed to be recorded and sub-
mitted to the Labor Standards Supervision Office. The revised LSA was
passed in the Parliament session in September 1998. As a sign of the
relatively successful opposition efforts, the enactment of the expanded
DWS was postponed until April 2000.
Due to the onerous restrictions, the use of the new system stayed
at quite a low level after the enactment of the revised LSA. According
to the General Survey of Employment Conditions, only 1.9 percent
of firms larger than 1,000 employees used the new DWS in 2004,
9780230_209084_05_cha04.indd 113 11/25/2010 8:12:59 PM

whereas about 7.3 percent used the one for professional occupations.
The procedure to establish new labor-management councils and the
necessity for a unanimous agreement about the various items for every
year seemed to be especially demanding. Another survey showed that,
among the 63 companies that used the new system, a significant
majority expressed frustration regarding items such as the “necessity
of agreement once every year” (82.5 percent), “necessity to get consent
from individual worker” (60.3 percent), “setting measures for health
and welfare” (60.3 percent), “unanimous vote at the council” (58.7
percent) and other such topics (MHLW 2002c). 28 Employers associ-
ations claimed that all these restrictions should be lifted (Keidanren
2001; JBF 2002, 2003, 2004).
Although the formal system of the DWS has been underutilized, the
aspiration among the employers to adopt the system has been con-
tinuously high. To avoid the complexity of the new DWS, Japanese
firms started to approximate the DWS by the use of the Flextime
system coupled with the results- oriented labor management system.
Major electronics companies, such as NEC, Toshiba, Fujitsu, and
Hitachi, established such systems, in order to decouple working time
from wage determination. 29 They set a fixed length of overtime work,
and paid only the fixed overtime premium regardless of the actual
working time. The fixed length of overtime is typically set around
about 20 hours per month (Yomiuri Shimbun 2000). Such practices
are criticized as a quasi-DWS (nise sairyō-rōdō-sei). As long as actual
working time is shorter than the fixed length of overtime work, the
practice is legal. However, in many cases, it ends up with an underpay-
ment for workers. Triggered by complaints made by a group of workers
who organized an alternative labor movement, 30 the Labor Standards
Inspection Office has investigated some cases and ordered companies
to pay the actual amount of overtime premium for the workers (see
Akahata 2002).
Following a labor ministry’s analysis of the underused DWS and the
illegal practices spreading within firms, a number of the burdensome
complexities of the DWS were relaxed by the most recent revision effec-
tive in 2004. The major points of relaxation were as follows:
1. A condition about the coverage that limits applicability to those who

work at workplaces where ‘important decisions are made’ is lifted.
2. The report of the establishment of the labor-management council to
the Labor Standards Supervision Office is not necessary (and it is not
necessary anymore to report if they really meet).
9780230_209084_05_cha04.indd 114 11/25/2010 8:12:59 PM

3. The voting system at the labor-management council is less strict:

instead of mandating an unanimous vote, now 4/5 of the total votes
is acceptable.
4. The labor-management council does not need to report ‘complaints’
to the Labor Standards Supervision Office.
Rengo opposed all the deregulations, but could not stop it (Rengo 2002,
2003).
With this further deregulation, some well-known companies
started or expanded their use of the system after April 2004 (for
example, IBM Japan). 31 Figure 4.9 shows the increasing popular-
ity of the DWS systems – both for professional occupations and
white- collar works – after the loosening of restrictions. The data
in Figure 4.9 include large companies that employ more than
1,000 employees in the manufacturing sector, thus the numbers
are higher than the statistics that include all firms. Before the last
deregulation, the DWS for white- collar jobs was barely used, while
the DWS for professionals was relatively well- used. Although it still
is just above 10 percent in 2009, the number of company that use
25
Manufacturing
(larger than
1,000)
20
Companies that
adopt DWS pro
15 Companies that
adopt DWS white
Workers covered by
10 DWS professional
Workers covered by
DWS white-collar
5
0
1995
1996
1997
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Figure 4.9 Increasing use of the DWS (large firms: %)

Source: General Survey on Wages and Working Hours System: MOL 1996b, 1997, 1998c,
1999e, 2000c; General Survey on Working Conditions: MHLW 2001c, 2002b, 2003, 2004c,
2005c, 2006c, 2007b, 2008a, 2009b.
9780230_209084_05_cha04.indd 115 11/25/2010 8:12:59 PM

the DWS for white- collar workers however significantly increased

after the deregulation.
Decentralization of working time regulations

The marginalization of labor in the policy process had two conse-
quences. The one is the establishment of the new DWS for white- collar
workers, and the other is the decentralized regulation of the new sys-
tem. When the DWS for professional occupations was established in
1987, it was clear that the system is socially regulated as the coverage
was limited to the list of socially recognized occupations that require
official certificates and/or credentials. The new DWS for white- collar
workers is however different under the complicated conditions in terms
of coverage and procedure.
In the advisory council sessions, Rengo kept arguing that the cover-
age should be socially regulated considering the current rate of organ-
ization of the trade unions (Rengo 1997b, 1997c). Employers argued
that the coverage can be decided at the organizational level. Even the
public representatives rejected labor’s opinion that “the corresponding
organizational titles upon assignments are different from firm to firm,
thus the coverage is better determined at the new [organizational-level]
labor-management council” (Rengo 1997f).
The new law shows the decentralization of working time regulation
under its complicated surface that attempts to define ‘discretionary
workers’ by the level of authority workers have and the difficulty of
work contents. Article No. 38–4 of the LSA, newly added to expand the
DWS to white- collar works, defines the coverage of the system as fol-
lows (see Appendix 4.2 for the details of the DWS both for professional
occupations and white- collar workers);
[W]orkers who work at the workplace where important decisions

on the management are made, and who perform tasks of planning,
drafting, researching and analyzing matters regarding business oper-
ations for which employer does not give concrete directives regarding
such decisions as the means of accomplishment must be left largely
to the discretion of the workers.
The law further limits the range of covered employees as “workers who
have knowledge and competency to adequately perform the assigned
tasks,”32 however, ambiguity could not be avoided. In an effort to avoid
confusion, the labor ministry released guidelines to clarify what the
law means.33 The guidelines define the level of authority by the type
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of workplace that the “workplace where important decisions are made”

refers to “headquarters and regional headquarters and branches where
the authority to make important decisions are located.”34 One indica-
tor that the guidelines suggest on “the authority to make important
decisions” is the residency of the board member of the company.35 The
guidelines also define ‘discretion’ by the contents of work by establish-
ing four criteria. They include the following: 1) the tasks are related to
management, 2) planning, policy-making, research and analysis are the
main tasks, 3) the nature of the tasks requires a great deal of discretion
for workers, and 4) the employer does not give any concrete directions
on how to accomplish those tasks. These four criteria are not exclusive
of each other, but the guidelines say that it is mandatory to meet all
these four conditions.36
All these efforts only clarified that these complex conditions do
not substitute social regulation. As employers and the ministry advo-
cated, the new system essentially relies on the organizational-level
regulation. The labor ministry limits its role in defining the coverage
of the new DWS by only giving examples of the typical discretionary
works in guidelines. In the Parliament sessions, the director of the
labor ministry at that time37 explained about the guideline, and said
that “the new DWS for the white- collar covers workers who want to
take more self-initiative and take central roles at each companies”
(Shūgiin 1998) that could only be defined at each workplace. Thus
the guidelines state that “[the new] labor-management council has
to set clear and concrete standards such as the length of service and
the level of ranking and qualification”38 since the level of experience
varies among the companies and types of work. 39 As a result, the new
DWS regulations came to allow individual firms to make a range of
decisions.
After the further deregulation of the DWS in 2004, working time
regulation for some parts of white-collar workers was significantly loos-
ened and decentralized. Table 4.5 summarizes the transformation made
by the deregulatory reforms.
First of all, the establishment of the DWS segmented the workforce
in terms of working time regulation. A selected number of white-collar
workers were separated from the uniform social regulation of working
time of the past: the eight-hours-per- day system and the negotiated
amount of overtime work. Second, labor unions failed to gain a strong
grip on the selection of the applicable workers at societal level, and
the selection- decision was given to organizational-level labor relation,
where cooperative enterprise unionism is still dominant.
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Table 4.5 Changing working time regulations for white- collar workers
Legal regulation Regulation of control and effort-bargain
LSA • Societal-level regulation

• Eight hours per day • Coverage: all
• Negotiated number • Effort-monitoring: scheduled working time
of hours for (8-hours-per- day); overtime
overtime work • Organizational, workplace-levels regulation
• Effort-monitoring: labor-management committee
(rōshi kyōgikai) negotiates with cooperative
enterprise unions about the length of overtime
work; management is responsible for working time
management (to calculate overtime premium)
• Effort-bargain: flexible overtime work, relatively
organized practice of unpaid overtime work
(rewards in the forms of overtime premium and
positive evaluation)
Revised LSA • Societal-level regulation
• Discretionary Work • None
System • Organizational, workplace-levels regulation
• Coverage: labor-management council (rōshi iinkai)
negotiates with cooperative enterprise unions,
less obligation of reporting to the Labor Standards
Supervision Office
• Effort-monitoring: management’s responsibility
was significantly loosened as they do not need to
calculate overtime premium; ‘self-management’
• Effort-bargain: individualization of control –
individuals become agents of self- control in
conjuncture with the labor management reform,
which alters working time a consequence of work
effort; employers take the effort of unpaid overtime
for granted
With regard to the monitoring of work- effort, two factors mentioned

above effectively located the selected number of workers out of the
realm of the social-level monitoring. In addition, management became
less responsible for the working time management of the selected work-
ers since they do not need to keep precise records of working time,
especially overtime work.40 This loosening of working time manage-
ment makes working time management a matter of self-management by
workers, locating them out of the conventional management of work-
effort at organizational level. Thus, the establishment of the DWS can
be seen as an institutional foundation to emphasize ‘self-management’
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that has a central role in the reform of the labor management system
that emphasizes results- orientation. Under the new arrangement, the
coupling of the DWS and the results- oriented labor management sys-
tem, management now manages results, rather than working time, to
control work- effort.
The DWS: a legal base for the renegotiation

of effort-bargain
The DWS was first established and introduced as a part of a series of

measures to reduce the working time of Japanese workers; an initiative
designed to improve quality of life. However, after the burst of the bub-
ble economy, the DWS was recast in a different light. In the early 1990s,
employers were under pressure to cope with the gradual implementa-
tion of a 40-hour-per-week system, and an increasing ratio of white-
collar workforce urged them to be aware of the relationship between
their personnel costs and work- effort. While controlling working time
is closely linked with the amount of work- effort by blue- collar workers,
there was growing recognition that it was not the case for white- collar
workers. It was in this context that employers started to be interested
in the DWS that decouples working time and wage, in conjunction
with the introduction of the new results- oriented labor management
system.
The process of the establishment of the DWS for white-collar work-
ers was similar to that of the expansion of the external labor market.
Employers initiated the reform, but labor was completely against it. The
labor ministry was willing to establish the DWS from the start and there
was increasing pressure from the deregulation committees. After 1997,
due to this pressure, the tripartite advisory council had no choice other
than to consider the realistic design of the new DWS. After heated social
debates over the revision of the LSA, the new DWS for white-collar work-
ers was made effective in 2000. In the first version of the new DWS,
many restrictions were attached to the use of the system, as labor unions
regained momentum backed up by popular support shown in media
and in the election. These restrictions were to stop decentralization of
working time regulation by not making the DWS user-friendly. However,
these restrictions were significantly loosened by the revision in 2004, by
which societal-level regulation of working time was lifted, and the regu-
lation was effectively decentralized to organizational level.
This employer-led deregulation of working time had significant
impacts on the contract/effort aspect of employment relations. First,
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the politics of deregulation allowed the segmentation of the workforce

through different working time contracts. At the societal regulatory
level, working time regulation in Japan set up normal hours of work
that covered all workers uniformly. However, the introduction of the
DWS meant that there emerged selected numbers of white- collar work-
ers who are separated from the societal-level regulation. In addition, it
decentralized the coverage decision of the selected workforce to organ-
izational level so that employers became able to decide to whom to
apply the DWS. Labor unions demanded to regulate it at societal level,
but it ended up with the same level of regulation as the conventional
arrangement of overtime based on organizational-level agreement,
where managerial prerogative is assumed with regard to the issues of
labor management.
Second, it significantly decentralized the level of working time
monitoring, namely the level of work-effort monitoring. The DWS lifts
the societal-level monitoring of work- effort by ending the concept of
scheduled working time, which also acquits employers of their respon-
sibility to manage working time at the organizational level. Thus the
application of the DWS means placing selected white- collar work-
ers out of societal and even organizational-level monitoring of work-
effort through working time, and it essentially makes working time an
issue of self-management. For workers, it is potentially an intensifica-
tion of work- effort. In the workplaces before the deregulation, workers
accepted flexible use of overtime and unpaid overtime, but they were
also rewarded in the form of overtime premium and the recognition as
a committed member of the company, mostly through positive evalu-
ation. However, under the DWS, employers became able to take these
efforts for granted.
The introduction of the DWS changes the institutional foundation
of workplace control for some segments of white- collar workers, which
allows the renegotiation of effort given the different expectation shown
by employers in conjunction with the new labor management system.
This is the point where the detailed analysis of the linkage between
the expansion of the DWS and the introduction of the results-oriented
labor management practice becomes necessary. First, the decoupling of
the wage determination and working time enabled employers to control
work- effort based on work results rather than the length of working
time. This also means the increasing importance of performance meas-
urement within the system of labor management as that of working
time declines. This raises the question of how to measure work results.
As discussed in Chapter 2, the measurement of work- effort at Japanese
9780230_209084_05_cha04.indd 120 11/25/2010 8:12:59 PM

firms has been highly subjective, thus the renegotiation about the crite-
ria of measurement will be a major issue of contention between employ-
ers and workers.
Second, the introduction of the DWS transferred the responsibility of
working time management largely to the hands of individual workers,
which potentially means the transfer of responsibility of work-effort
control to individual workers. This emphasis of self-management may
cause renegotiation of other aspects of employment relations in the
attempts of labor management reforms. Japanese firms relied on the
unclear demarcation of work responsibility and on the management
prerogative on worker relocation, which were the sources of their com-
petitive strength. However, the reforms pushed these practices on to
the table for renegotiation, since workers may be frustrated about the
selflessness about these issues even though they are under pressure to
carry self-responsibility with regard to effort.
These points imply that to fully understand the meaning of the DWS
on Japanese employment relations, it is necessary to investigate the
reform efforts at organizational and workplace level, executed as the
introduction of the results- oriented labor management system. These
are the issues that will be examined in the next chapter.
9780230_209084_05_cha04.indd 121 11/25/2010 8:12:59 PM

5
Re-bargaining Effort: The
Introduction of
Results-Orientation at COMPUJ
Labor management reform and white-collar effort
The legal regulative reforms examined in the last two chapters were
strongly initiated by employers to cover the deregulation of the labor
market and working time. Employers established their claims based
on the actual needs of companies that had been undergoing signifi-
cant reforms of labor management practices to cope with globalization
and industrial structural change. This reform was to introduce results-
orientation in the labor management system, and employers demanded
legal regulative reforms to fully achieve the purposes of the reform.
This chapter focuses on this reform effort at organizational and work-
place levels, which on the one hand was the seedbed for the regulative
reforms and on the other hand was significantly facilitated by these
legal reforms.
The introduction of the results- oriented labor management system is
an attempt by employers to transfer result responsibility to the hands
of individual workers. The most visible aspect of the reform is the reor-
ganization of the wage system for most white- collar workers. Employers
tried to erode the seniority and/or age components of the life-stage
adjusted wage system, and emphasized the performance element in
wage determination. This change was associated with the change of the
mode of control from unclear job demarcation coupled with long-term
accumulation of subjective evaluation to clearly defined organizational
roles with relatively short-term results- oriented personnel evaluation.
The legal regulative reforms, especially the reforms of working time reg-
ulation, helped support the change by emphasizing ‘self-management.’
122
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Re-bargaining Effort: Case Study at COMPUJ 123
Labor market reforms preserved the institutional base of workplace

control by not affecting the mobility aspect of employment relation of
regular workers.
This process of reform involved the renegotiation of effort for regular
white- collar workers. Drawing evidence from the case study of a large
electronics company, this chapter argues that the ‘self-management’
emphasized in the new labor management system actually strengthens
the control by management due to the declining significance of labor
unions in effort control at workplaces – it was through the stronger
alignment of individual work effort with corporate goals, while elimi-
nating a major part of the life-stage component from the wage system.
The movement of labor management reform:

the case of COMPUJ
Employers’ movement to introduce results- oriented labor

management
From the early 1990s, and especially in the mid-1990s, there was a sig-
nificant expansion of interest in introducing a results- oriented labor
management system among Japanese employers. The introduction of
the new system primarily attempts to transfer result responsibility to
individual workers through changes in how wages were determined as
a core of the new system. Recognizing the rigidity of life-stage adjusted
wages, the demand to introduce a more flexible wage system became
stronger – in particular at large firms of some industries that faced
harsher international competition and faster product/service changes.
In fact, Sekizawa Tadashi, the president of Fujitsu, one of the giants in
the industry of computer and electronics devices, is said to be the first
to have claimed the necessity of the new system by announcing the
“declaration of results- orientation (seika-shugi sengen)” in 1994. Having
dispatched the inquiry commission members to Silicon Valley counter-
parts, he tried to push the managerial reform movement forward.
Figure 5.11 shows that Sekizawa was not alone. Rather, it looks as
if it was almost inevitable in 1994 for someone to voice the necessity
to transform the way the white- collars work and to change the legal
regulation necessary to implement the reform. The publication of the
New Age Japanese Management from Nikkeiren in 1995 was a part of this
movement.
At the start of the 1990s, there were already very few employers
who expected to rely on a seniority- oriented system in the future. A
significant majority, slightly more than 60 percent in 1990 believed
9780230_209084_06_cha05.indd 123 12/3/2010 6:50:21 PM

100
90
80
70 unknown
60 difficult to tell
50 seniority and results
40 results oriented
30 seniority oriented
20
10
0
1990 1993 1996 1999 2002
Figure 5.1 Future principles of labor management (firms with more than 5,000
employees: %)
Source: Survey on Employment Management*: MOL 1990a, 1993b, 1996a, 1999d; MHLW
2002d.
* Survey on Employment Management (koyō kanri chōsa) is conducted every year by the
labor ministry by sending questionnaires to a stratified sample of about 5,800 firms that
employ more than 30 employees. The response rate was, in the case of 2002 survey, 73.9
percent
that the introduction of a results- oriented system was necessary. This

figure jumped between 1993 and 1996, at the time of Sekizawa’s dec-
laration and Nikkeiren’s publication, reaching nearly 80 percent in
2002, and was part of the society-wide movement to introduce results-
orientation.
This increasing interest in the new principle of labor management by
employers shared the background contexts with the establishment of
the DWS for white- collar workers. As seen in the previous chapter, more
than 60 percent of the workforce at large firms (more than 500 employ-
ees) were white- collar workers in 1990, while it was about 40 percent at
smaller firms. This was due to the industrial structural changes to the
knowledge/service economy and the increasing international division
of labor during the last half of the 1980s. The increase in white- collar
workers became a source of frustration for employers since it is gener-
ally more difficult to control the productivity of white- collar workers
than that of blue- collar workers, as the length of working time is not
in proportion to the amount of work results. Given the frustration, two
factors further pushed employers to look for a solution to the situation
in Japan. First is the reform of working time regulation from the late
1980s, that had been a source of rising personnel costs. Second is the
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economic downturn and the following recession from the early 1990s.
These made employers strongly recognize the necessity to seek further
provisions to achieve higher flexibility and productivity of the white-
collar workforce.
As Figure 5.1 shows, the growing expectation to the ‘results orientation’
was clear, but there was no fixed ‘package’ of results-oriented labor man-
agement systems. It is rather a frame of management’s movement to reform
labor management practices that targets white-collar workers, which has
the common feature of transferring result responsibility to individual
workers. Thus the introduction of the results-oriented labor management
practices inevitably involves the politics at organizational and workplace
levels with regard to the design, contents and implementation of the sys-
tem between management and workers. To understand the impacts of the
reform on the employment relations of core regular white-collar workers, it
is necessary to examine the process of the movement. The analysis of this
chapter, therefore, will be based on a case study of one electronics com-
pany, which is given the name of COMPUJ as a pseudonym.
COMPUJ in context
COMPUJ is one of the largest electronics manufacturing companies
in Japan, leading the industry domestically and internationally. It was
founded about a hundred years ago, and soon emerged as the largest pro-
vider of telephone equipment for Japan’s communication ministry and
affiliated to one of Zaibatsu corporate groups. After the Second World
War, it maintained its status as a major supplier for Nippon Telegraph
and Telephone (NTT), and in the 1950s and 1960s NTT related business
represented over 50 percent of the sales of COMPUJ (Hoovers 2005: 3).
Communication technologies became their firm technological founda-
tion including broadcasting equipment for radio, TV and satellite sys-
tems. Transistor technology became integrated circuits and computers,
inevitably related to their leading roles in the field of semiconductors
and microprocessors (Fransman 1995: 260).
Based on these technological foundations, the businesses of COMPUJ
grew significantly from the period of rapid economic growth to the
end of the 1980s. The amount of capital was 20 thousand million yen
(approximately 200 million US dollars) in 1950, and expanded more
than ten times in 1990. The sales exceeded 1,000 hundred million yen
(1 billion dollars) for the first time in 1964, but it surpassed 40,000 hun-
dred million yen (40 billion dollars) in 1990. At the end of the 1980s,
COMPUJ had three broad areas of business. One was the ‘communi-
cations systems and equipment’ area that includes digital switching
9780230_209084_06_cha05.indd 125 12/3/2010 6:50:22 PM

systems, fiber optic and radio transmission systems, and mobile com-
munication systems. The second was the ‘computers and industrial
electronic systems’ that included mainframe computers, PCs, and VAN
(value-added network). The third was ‘electron devices’ that included
VLSI (very large scale integration) memories, microcomputers, and
other conductors. These three main businesses respectively had about
30 percent, 45 percent, and 17 percent of the total sales according to the
corporate report.
At the time of the first round of our research in 1995–6, it was operat-
ing in the computer industry that was faced with international compe-
tition and developments such as the shift from hardware to software.
Due to the harsher international competition and especially facilitated
by the high appreciation of the yen by the end of the 1980s, COMPUJ,
like many other Japanese manufacturers, transferred its production sites
overseas, having established more than 60 production sites abroad by
April 1994. In addition, due to the shift of focus within in the industry,
COMPUJ hired many new employees in the early 1990s to cover the
expansion of the software markets (the increase pushed down the aver-
age age of employees by three years). In 1992 and 1993, the number of
employees at COMPUJ recorded a historical high; it has been gradually
declining since then.
(80% of the domestic employees are white-collars)

100
80
managers
60
(%)
clerical worker
40 engineers
technicians
20
0
1985 1990 1995 1997
Figure 5.2 The growing proportion of white- collar workforce at COMPUJ

Source: COMPUJ 2000: 18 (internal document).
9780230_209084_06_cha05.indd 126 12/3/2010 6:50:22 PM

These moves led to significant changes in the domestic composition

of employees.2 The former contributed to the decline in the number of
blue- collar workers, and the latter expanded the number of white-collar
workers. Figure 5.2 shows the consequences.
Figure 5.2, made by the personnel department of COMPUJ, shows that
the ratio of white- collar workers, including managers, clerical workers
and engineers, goes up from about 65 percent in 1985 to nearly 80 per-
cent in 1995 and 1997 (in other documents, it is counted as more than
90 percent, for example, COMPUJ 2000). Under the circumstances,
it became clear that the main target of labor management is shifted
from blue- collar workers to white- collar workers. The internal docu-
ment of COMPUJ rightly pointed out the necessity of this shift, and
COMPUJ became one of the forerunners of the reform movement of
labor management practices aimed at white- collar workers. To improve
the ‘productivity’ of white- collar workers, COMPUJ took two strategic
initiatives:
1. the establishment of semi-autonomous product/service divisions

responsible for sales/profit in a specific segment of market, with the
authority for labor management to cope with market environmental
changes, and
2. the establishment of policy and concrete measures that supported the
‘self-management’ by white- collar workers, in which the main proc-
ess was the implementation of management by objectives (hereafter,
MBO) and a new personnel evaluation system (COMPUJ 2000).
The organizational reform had two meanings. First, it was to cope

with market environmental change, which emphasizes ‘customer
orientation’ that was seen as the future direction of the indus-
try and the company. It is beyond the scope of this chapter to go
deeper into the details of the design of the organizational reform,
which was quite frequent throughout the 1990s. It is summarized
in Figure 5.3.
For the purpose of this chapter, more important was its intention that
the success (and failure) of units in the respective markets should be
directly reflected in the wage, thereby the results-responsibility should
be transferred to the units and individuals. This is why the organiza-
tional reforms were coupled with wage system reforms (see Table 5.1
about the history of labour management reforms at COMPUJ). The
organizational restructuring in 1990 was coupled with a ‘group bonus
9780230_209084_06_cha05.indd 127 12/3/2010 6:50:23 PM

Vision
In 1977, Matsuyama, the president of COMPUJ at that time, presented the corpo-
rate slogan, which soon became famous in the electronics industry. This slogan
represents a long-term vision of the gradual convergence of the technologies of
computers and communication systems. The slogan was renewed in the 1980s,
which represents an important recognition by the COMPUJ top managers that
all technological convergences will seek the ‘user friendliness’ that will (and
should) require significant customization of products and services. This recog-
nition led to the strategic re-organization of the firm from a ‘product-oriented’
one to a ‘customer’ or ‘end-user-oriented’ one. Throughout the 1980s and well
into the 1990s, COMPUJ continuously sought to implement this vision.
Outcomes
COMPUJ started a series of organizational restructurings from 1990. The first
round of reform was to abandon divisions and departments based on the lines
of products/services, and to establish them on the lines of customer/market
segments. In addition to shifting the organizational principle toward a customer/
market orientation, the organizational restructuring turned the major divisions
into semi-autonomous units, responsible for their own profit performance. In
1993, COMPUJ executed another round of restructuring to enhance the mar-
ket-orientation and profit responsibility of each semi-autonomous business unit.
They restructured the organization into eleven divisions (with ‘Infrastructure,’
‘Corporate System,’ and ‘Personal Computing’ as main divisions) and five mar-
keting support groups.
The Organizational Chart as of July, 1994 (see Appendix A5.2)

The figure describes eleven groups and five marketing groups as independent.
But other documents and interviews suggest that they are integrated and should
function as a ‘matrix organization.’ In a ‘matrix organization,’ each of the eleven
groups has four focuses on customer segments; NTT, public sector, domestic
firms, and international, into which lower ends of the four marketing sections
are integrated.
In the late 1990s, these semi-autonomous business units became firm
internal ‘kanpanī’ (company). Kanpanī is not a legal entity despite of the clear
reference to ‘company.’ The purpose of the reference is to emphasize the
responsibility of each of the business units on sales/profit as if they were inde-
pendent business enterprises. The kanpanī system continued until 2003.
Figure 5.3 Organizational restructuring at COMPUJ
system’ that distributed the funds for bonuses in proportion to the

performance of each semiautonomous business unit, although the dis-
tribution principle within the business units was not changed. The
organizational reform in 1993 was coupled with a ‘new wage system for
managers’ that transferred results-responsibility finally to individual
workers, even though it only applied to managers. With this reform,
managers’ wage was divided into two parts: ‘basic annual salary’ and
‘performance.’ The basic annual salary is determined by the ranking
9780230_209084_06_cha05.indd 128 12/3/2010 6:50:23 PM

Table 5.1 The chronology of the labor management reforms at COMPUJ
--------------------------
--------------------------
Year Results- Orientation Fairness of evaluation Self management
Opportunity
1988 announcement
1989 Flextime system
1990 Group bonus system
MBO evaluation and skill/career development system
-------
1992 Reorganization of ranking/qualification
(introduction of ‘wage band’ system)
1993 DWS for professional occupations
New wage system for managers
----------------------------
1994 Revision of the promotion standards Career development
1995 system for managers
---------------------
Revision of the wage

component for shunin
1996 Revision of the training
system for prospectus
managers
1997 A Style (quasi DWS for white- collars) for shunin in staff and sales
1998 A Style for all shunin workers
----
Reorganization of ranking/qualification
2000 New system of evaluation (konpitenshī manejimento)
2002 DWS for white- collar works
Role Grade System (managers)
Source: Internal material of COMPUJ.
that reflects mid-to long-term comprehensive evaluation. The perform-

ance part reflects short-term performance results of the individuals.
These reforms of the wage system were implemented in close association
with the introduction and elaboration of the MBO and a new personnel
evaluation system. However it is immediately clear that it is difficult to
evaluate the ‘results’ and ‘productivity’ of white-collar workers as they are
essentially ambiguous. Thus the strategy was to give workers clear ideas
about their responsibilities and to mobilize consent and effort from work-
ers more strongly towards the responsibilities under the circumstances
of the gradual change of the wage determination system. This line of
reform was officially launched in 1990, named as ‘management renova-
tion movement’ (keiei kakushin undō) called ‘Best COMPUJ’.3
These efforts at labor management reforms started without any
struggle as the labor union supported them. The labor union at
COMPUJ, a traditional labor union in the manufacturing industry,4
9780230_209084_06_cha05.indd 129 12/3/2010 6:50:23 PM

had a clear policy on the management of blue- collar workers; it

should be based on seniority, and the results of personnel evalua-
tion among workers should not be too wide. However, a full- time
union official at COMPUJ insisted that it is not appropriate to apply
the same labor management system to white- collar workers as it is
‘lukewarm.’ The official admits that making more of a difference
in wage and promotion is completely ‘rational,’ and further claims
that it is even desirable in order to achieve ‘fairness’ at COMPUJ.
He said;
Until recently, labor union movements emphasized the necessity of

‘stability’ of workers’ lives, like, represented in the demands of vari-
ous types of fringe benefits. It is still important, but we neglected
the aspect of ‘fairness’ to reward more to high achievers. ... We still
need to maintain ‘stability,’ but are trying to make a shift to expand
‘fairness.’ I think the implementation of the MBO is a right direc-
tion in this sense, but necessary to improve openness and objec-
tivity [of labor management system] (interview: full-time union
official, 16 June 1995).
Thus it is clear that there was no serious contention between manage-

ment and labor unions at organizational level. In the following sec-
tions, the analysis will focus on the contents of the new systems and the
workers’ response to them that shaped the future direction of the labor
management reform.
Initiating the results-oriented labor management
Management by objectives
The role of MBO is big and intense. But the vision of COMPUJ was clear;
it was to tighten the association between organizational objectives and
the direction of workers’ work effort. The philosophical concept created
by the top management of COMPUJ about the reform asserts that the
organization should be both a harmonic whole, and individual parts. It
is the tight- coupling of organizational objectives and individual goals,
which is believed to achieve the ‘coordinated autonomy’ of business
organization. With this recognition, the introduction of the MBO and
a new personnel evaluation system was central in their reform effort,
which attempts to motivate workers towards clearly defined organiza-
tional objectives and evaluation that emphasizes achievement. Targeting
9780230_209084_06_cha05.indd 130 12/3/2010 6:50:24 PM

the workers, the personnel department explained the purposes of the

labor management reform as follows:
● Emphasis on the communication between managers (supervi-

sors) and workers: to improve consent on the results of personnel
evaluation.
● Integration of the MBO with personnel evaluation: to make the eval-
uation standards open.
● Thorough management of objectives: to install results- orientation
based on the spirit of challenge and the high motivation towards
self- development.
● Implementation of self- evaluation: to actively develop human
resource through on-the-job training (internal document of
COMPUJ).
The personnel evaluation sheet was revised to facilitate these ideas, and
renamed as ‘Communication Sheet.’ This four-page sheet is subtitled
‘self-assessment / supervisors’ evaluation and development suggestion
sheet’ (jiko shinkoku/hyōka ikusei shīto), and workers and supervisors are
supposed to fill in their self-assessment and evaluation in terms of; 1)
performance measures, 2) competency and ability, 3) career develop-
ment, and 4) others. In terms of the procedure, workers fill in their
assessment about each of these four areas first, and two supervisors
evaluate them (see Table 5.2).
It is important to note that the sheet is divided into three major cat-
egories through which management intends to control workers. First,
it has an independent category that evaluates performance. In this cat-
egory, workers list their assignments from the previous year (that is
given by management in consultation with workers) and assess how
much they have achieved. Supervisors evaluate the employees using
a scale of one to five. Expansion of this category in wage determina-
tion means the increasing importance of this part of personnel evalua-
tion. The competency and ability part lists the skills that management
values, which is an attempt to direct and elicit workers’ effort to fill
the organizational necessities of skills. Interestingly, this part also
takes a form to evaluate the ‘results.’ Workers list the objectives of self-
development from a year ago, and they evaluate to what extent they
have been achieved. The space for the evaluators is quite detailed for
this section. Largely it is divided into two parts; ‘basic knowledge’ and
‘management competency.’ The latter is further divided into four parts;
9780230_209084_06_cha05.indd 131 12/3/2010 6:50:24 PM

Table 5.2 The MBO evaluation sheet at COMPUJ (translation of the performance
measures by rank)
Buchō Kachō/Shunin Tantō
Performance I. Achievement of work ● Degree of ● Degree of

measures ● Overall performance achievement achievement
● Strategic and innovative in the work in the work
qualities responsible for responsible for
of decisions made ● Supervision of ● Supervision of
● Achievement of target subordinates subordinates
II. Strategic employment of ● Degree of ● Degree of
subordinates’ abilities achievement achievement of
● Assignments of of challenge challenge targets
appropriate tasks to targets
subordinates
● Developing
environment and
opportunities that
enhance subordinates’
abilities
● Degree of trust given by
subordinates
III. Employment of specialist
qualities
Competency I. Planning ability ● Operational ● Operational
and ability ● Theoretical and knowledge knowledge
effective business ● Ability to ● Ability to
directions pinpoint the pinpoint the
II. Organizational ability issues (problem issues
● Flexible and realistic setting) ● Planning ability
distribution of work ● Planning ● Execution ability
III. Leadership ability ● Leadership
● Information gathering ● Execution ● Ability to review
● Prompt decision ability the process and
making ● Leadership refocus on the
● Strong leadership ● Ability to new issues
IV. Specialist abilities review the
● Quality knowledge and process and
skills in specific fields refocus on
● Creative R&D the new
V. Coordination ability issues (ability
● Liaison and of critical
communication assessment)
VI. Suitability to the current
position
VII. Capability for more
senior positions
Continued
9780230_209084_06_cha05.indd 132 12/3/2010 6:50:24 PM

Table 5.2 Continued
Buchō Kachō/Shunin Tantō
● Career ● [Called ‘Future Roles’ ● Enthusiasm for ● Enthusiasm for

Development for Bucho, and limited to current work current work
choices of line manager, ● Aptitude for ● Aptitude for
sennin, senmon] current work current work
● Future ● Future direction
direction of of roles
roles ● Aptitude for
● Aptitude overseas
for overseas posting
posting ● Career
● Career planning for
planning for the foreseeable
foreseeable future
future ● Work fields
in which
experience is
necessary for
his/her career
development
● Work fields not
suitable for him/
her
Other ● Personality ● Personality

traits, etc. traits, etc.
Source: COMPUJ personnel evaluation sheet.
‘problem setting,’ ‘planning,’ ‘execution/negotiation/leadership,’ and

‘critical assessment.’ In this way, the evaluation sheet enables the eval-
uators to assess workers’ competency on the phases of typical workflow
(see Table 5.3).
Corresponding to each of these categories, two evaluators assess these
items using five ranks and they also provide short written comments.
Further, both of the evaluators are required to make summary com-
ments on ‘competency and ability’ in the context of future skill for-
mation and career development.5 Lastly, the career development part
checks the matching of the personnel with the job, and provides a space
for employees to show future career aspiration. This is a tricky part. As
discussed in Chapter 2, to be able to adapt to whatever jobs workers
9780230_209084_06_cha05.indd 133 12/3/2010 6:50:24 PM

Table 5.3 Required capabilities in workflow
Basic and applied knowledge on the

Basic operational knowledge assignment
Ability to pinpoint the issues, Capability to find problems with strategic

problem setting vision by gathering information
Management cycle
Planning ability Capability to design effective plan

considering various environmental
conditions
Execution/negotiation/ Capability to organize related parties,
leadership ability and to make appropriate decision, and
execute the plan by effective leadership
Ability of critical assessment Capability to critically assess situation,
and to foresee future based on the
assessment, and to set new problem
Source: COMPUJ personnel evaluation sheet.
are assigned to is the core competency that Japanese firms want from
workers. On this basis, demonstrating that ‘I am fine with the current
assignment’ is a norm at Japanese firms. At the same time, it is the only
space that workers can show their aspirations. Thus the part requires a
social skill to express the future career preferences while not seeming to
complain about the current assignment.
Old practice of rotation, old attitude of adaptation

The implementation of the MBO and the new personnel evaluation sys-
tem was instituted without formal opposition from the labor union.
However, at the workplace level, it was not without conflict. In this sec-
tion, drawing evidences from the workplace study at the newly formed
F department6 in 1994, the area and the contents of the conflict will be
specified to reveal the dynamics that currently influence the develop-
ment of the new systems of workplace control.
The forming of F department, and other integrated sales and sys-
tems departments within Corporate System No. 4 jigyō-bu (No. 4
business unit) were a part of the organizational reformation started
in 1993. In the Corporate System group, one of the eleven products/
services groups, Corporate System No. 4 is established as one of 17
business units (jigyō-bu). And in Corporate System No. 4, departments
were designed to be responsible for various types of customers, typi-
cally segmented in detail by industries. Department F was assigned
9780230_209084_06_cha05.indd 134 12/3/2010 6:50:25 PM

Corporate System No. 4
9780230_209084_06_cha05.indd 135
Intelligent System
Overseas Planning Marketing Seizo No. 1 Seizo Seizo
Bldg. Dept. Dvlp.
Dept. Dept. Dept. No. 2 No. 3 no. 2
Dept.C Dept.F: non-

Dept.A: non- transportation
electronics ferrous and heavy
companies material machinery
industry industries
Figure 5.4 Corporate System No. 4 jigyō-bu, organizational chart

Source: Jigyō honbu soshiki taisei (organizational structure of business divisions), published by Keikaku-bu (Business Planning Division) in July, 1994.
12/3/2010 6:50:25 PM
to the industries such as transportation and heavy machinery (see

Figure 5.4).
The establishment of F department was to deal with the market
change that became evident in the early 1990s, characterized as a
‘down- open’ trend.7 The trend, combined with the declining sales at
the end of the bubble economy, encouraged COMPUJ to add value
through consulting activities and have more networking and software
knowledge than the customer. This required COMPUJ to generate
the necessary skills, resulting in F department being formed, by allo-
cating engineers from the R&D section, working together with sales
people. This new endeavor sought to establish a new type of worker,
usually referred to as an SI- er (systems integrator), who is specialized
in ‘value-adding’ skills: consultation and problem-solving for the spe-
cific demands of the customers.8 The creation of the concept of the
SI- er, as well as the training of workers with these necessary skills,
became the strategic focus of dealing with the customization trend of
the market.9
The establishment of the F department was in 1994, a year after the
radical restructuring of the work organization at COMPUJ. The forma-
tion of the new organization and the relocation of workers were carried
in a top- down manner. The labor union was informed about the crea-
tion of the new organization and the subsequent move of workers a year
before its actual establishment. The ultimate goal of the labor union
was to fight against the plan to establish the new department as the
change in work coordination for the staff appeared too radical. A real-
istic request, however, was to ask for adequate treatment of the workers
who would not be necessary for the new department, which means to
ask not to leave them in the old department to keep their motivation. A
full-time union officer10 claimed that these objectives could not be fully
met, although there were no layoffs.
There was also no direct negotiation between managers and workers
who were relocated to the new department. The manager of the busi-
ness unit did not even recognize that negotiation was necessary for the
relocation of workers. Before the actual relocation, a notice was sent
to the workers, especially engineers, informing them that there would
be a significant change in their jobs and that they would be relocated.
However, it was a one-way notice that did not assume any challenge
against it. There were a few workers who informally showed reluctance
to move to their immediate bosses but they were also relocated to the
new department despite their efforts. The department manager of the
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F department claimed that the practice was not specifically COMPUJ’s,

and continued that;
It is not difficult to control workers’ careers in Japanese companies.

We do not see it is necessary for workers to be involved in this proc-
ess of decision making of the relocation. Since it is about the strategic
reform of the organization, it should not be announced to anyone
until it is actually executed. (interview: department manager, 9 June
1995)
These facts about the process of the creation of the new department
confirm that COMPUJ implemented this strategic organizational reform
relying on the conventional manner that is commonly used in Japanese
companies. First, the organizational adaptation toward environmental
changes was executed by the relocation of workers rather than hiring
new employees from outside. Second, management basically under-
stood that this kind of change is an area of management prerogative
where they do not need to negotiate or ask for agreement from trade
union and workers.
Old norms were used to encourage workers to accept the relatively
radical change of work content. The actual comments in the personnel
evaluation sheets, filled in a year after the formation of F department,
show ample evidence of the reliance on old norms. In literally all parts
of the evaluation, workers show their achievements and the potential
of development to emphasize their aspirations of self- development
with forward-looking attitudes and desire to take on future challenges.
Making efforts to achieve goals and take on challenges – all together, to
demonstrate willingness to adapt to the new assignments – is shaped as
the central message of workers’ contributions.
Evaluators’ comments clearly encourage this attitude. The following
lines are from evaluators’ comments.
● He had positive will (maemuki na iyoku) and made every effort (dory-
oku) to achieve the goals including the process to call for assistance
from member companies [subsidiary companies].
● He has a difficulty in planning, but I’d rather evaluate his willing-
ness (netsui) to meet objectives and the accuracy of his work opera-
tion highly.
● He had to have struggles to organize different divisions within
COMPUJ, but he has never lost forward-looking attitude (maemuki
na torikumi).
9780230_209084_06_cha05.indd 137 12/3/2010 6:50:27 PM

● Although his assigned task was too difficult for him in terms of the
technology level, he is diligent enough to meet the expectation (yoku
doryoku shiteiru). He is very positive (sekkyoku-teki) to learn new fields
of knowledge.
● The assignments of company Z was too difficult for him. But he still
made every effort in his way (jibun nari ni doryoku shiteiru). He is very
positive about taking on a challenge (sekkyoku-teki ni charenji suru) to
the assignments given to him.
● He is very proactive (maemuki ni taiou) to the new change in the mar-
ket. To do so, he is positive (maemuki) to improve himself.
● He is devoted to make effort (hitamuki) to achieve difficult tasks.
(Translated and underlined by the author.
Italicized words are from original comments).
The terms such as ‘make effort,’ ‘positive,’ ‘proactive,’ ‘having strong

will,’ ‘forward-looking,’ are constantly used in various contexts, such as
execution of the assignments, cooperation with coworkers, skill forma-
tion and career development. Corresponding with the workers’ entries,
‘making effort’ is proved to be a part of a regular contract, and an adap-
tation to new market environments and relying on this is a typical
move for Japanese firms. However in conjuncture with the introduction
of results- oriented labor management, there emerged some frictions at
F department.
Conflict
Despite such encouragement based on old norms, the pressure to take
a new focus on results was gradually undermining the effectiveness of
this encouragement. Especially for workers having an engineering back-
ground, the pressure toward ‘results’ in a ‘sales department’ (in their
words) resulted in some sporadic protests and grievances against the
organizational restructuring and their new role as SI- ers. The following
case demonstrates how the pressure to achieve results created conten-
tion over evaluation criteria and over assignment allocation.
Haraki is a young worker (tantō-sha) who was transferred from the
engineering department, and who made a request to transfer back to
the engineering department in his personnel evaluation sheet (in the
‘career development’ section). It is rare for Japanese workers to clearly
state such a transfer request as it might be understood as an obvious
complaint against one’s immediate supervisors. Haraki was not happy
with the transfer to the F department, as his new assignment contained
a sales role. He wished to transfer back to the engineering division
9780230_209084_06_cha05.indd 138 12/3/2010 6:50:27 PM

saying, “I am really concerned that in a sales department [although the

new organization is supposed to be a combined development of sales
and engineering departments, he uses the term ‘sales department’ to
describe F department] the role of a system engineer cannot be properly
evaluated.”
Although he assesses himself as having ‘no aptitude’ for the current
assignment, his managers’ evaluation suggests that he is competent and
should be able to assume these new responsibilities. Especially, as far
as his knowledge of the assignment is concerned, two of the evaluators
mentioned that “he is very willing to develop credibility and efficiency”
and “in the aspect of learning of the necessary knowledge, he achieved
enough. He is also very willing to learn about application technology.”
As the standard expectation towards tantō-sha is just ‘learn and grow,’
the evaluations Haraki earned were more than satisfactory.
Haraki’s immediate supervisor is embarrassed by his subordinate’s
maladaptation. As such a request cannot be accepted, he is looking for
the second best solution; have Haraki stay in F department but make
a slight adjustment of his assignment. The immediate supervisor pro-
poses to put him into a slightly revised role, which is a little closer to the
engineering role, although it is still in the F department. However, the
department manager, buchō, the second evaluator, seems not to believe
such a consideration is really necessary.
Buchō’s complementary comment: From the assignment change of last

December, it seems he had a bit of struggle, especially about the sales
role he was newly assigned. But after that, as a core member of IT,
he started to have clear objectives, and I believe he has a good back-
ground to take an active role in this department.
Buchō’s overall comment: He has a problem in orientation. It is neces-
sary to reinforce the instruction through the immediate supervisor.
This last comment reflects the expectation that workers should submis-
sively accept assignment change and fulfill new job requirements as
best they can. It is a statement suggesting a corrective sanction on any
negative attitude that emerges out of the installation of the new labor
management system.
After a year of resistance, Haraki was transferred to a different role
in the department as his immediate supervisor originally proposed. He
could not move to the engineering department, but he partially fought
for his career back. Thus, his public protest against the new evaluation
system and rotation practice was half successful. Although his case is
9780230_209084_06_cha05.indd 139 12/3/2010 6:50:27 PM

clearly considered as exceptional, many employees simply did not make

their grievances public. They just expressed their concerns in informal
conversations with their immediate supervisors.
Rising concerns over the new system

Haraki’s story demonstrates that the introduction of the results-
orientation evoked interest among workers on the practices of person-
nel evaluation. As with the labor union, workers at COMPUJ are not
strongly opposed to the results-orientation per se, but have strong con-
cerns over the evaluation criteria. Table 5.4 shows the results of a survey
conducted at F department.
The survey results show that employees are generally satisfied
with the personnel evaluation, but a relatively high ‘neither/nor’
category implies there is still a great deal of ambiguity about the
evaluation. It particularly signals that only less than 20 percent
of the employees agree with the item that asks if evaluations were
based on fact rather than management opinion. Labor union recog-
nizes the concern and claims that the evaluation process should be
more open, and the evaluation should be fairer based on objective
criteria.
Table 5.4 Employees’ assessment of the personnel evaluation, F Department (%)*
Q. Regarding the last time you were agree disagree neither

formally evaluated, how much do strongly/ strongly/ agree
you agree or disagree with each of the agree disagree nor
following? somewhat somewhat disagree
The evaluation was conducted in an 53.8 7.7 38.5

appropriate way
The evaluation was based on fact rather 19.2 23.1 57.7
than management opinion
The criteria for evaluation were made clear 46.2 23.0 30.8
to me well ahead of time
(N=40)
* The data is drawn from the questionnaire survey conducted at F department, COMPUJ
(N=40). There are 33 regular employees (including 1 midterm hire) and 5 shukkō workers from
regional subsidiary companies (2 missing). With regard to the career background (except for
5 shukkō workers), 15 are from the engineering department, 14 are from the sales department,
and 2 have clerical backgrounds. With regard to the hierarchical rank, 7 occupy managerial
positions (one buchō, one sen-nin buchō, and 5 kachō). Low end managerial (but still have
union membership), shunin, counts 11, and there are 22 nonsupervising staff (tantō).
9780230_209084_06_cha05.indd 140 12/3/2010 6:50:27 PM

Making an evaluation ‘objective’ does not mean for COMPUJ

employees to simply rely on a ‘sales amount’ as evaluation criteria.
Evaluators also claim difficulty, and express concern about the evalua-
tion standards and criteria, saying that they generally downplayed the
importance and relevance of sales targets in their evaluations, even
though the corporate policy insists on the centrality of ‘results’ in
evaluation.
It is difficult to measure the performance of staff just by the amount

of orders received, especially at my level. Apart from the results, I try
to evaluate the process. (shunin)
We could not simply give an evaluation based on figures. After all,
we can only give a Japanese way of evaluation. (buchō)
Among all the managers we interviewed, only one manager from the
personnel department (who was responsible for establishing the new
system) claimed that the personnel evaluation should be done purely
based on results. In the actual evaluations, it was possible to observe
the ambiguity managers express in the above citations. In some cases,
evaluators tend to try to commend the effort a worker made even when
the worker could not achieve the expected results. They see that some
tasks take more time than others, and that some tasks are important
regardless if they make profit. For example, maintaining good relation-
ships with customers is often considered more important than profit.
Therefore, managers tend to have a more process- oriented view on per-
sonnel evaluations than it is designed to be. However, at the same time,
these ‘voluntary arrangements’ of evaluation by managers became the
sources of employees’ concern that the evaluation is conducted based
on ‘opinion rather than fact’ as shown in the survey.
The case also demonstrates that the concern over evaluation criteria
is subsequently associated with the concern over the appropriateness
of the assignment. This increasing interest on the appropriateness of
the assignment looks new, and it looks as if there is an emerging sense
of independence among employees who want more control of their
own career and development. Haraki’s case and other informal griev-
ances about the rotation prove that it is partially the case – but it is
only partial, and the sense of independence does not go beyond the
walls of the firm organization. The same survey shows that an over-
whelming majority of employees see their career prospects as best
with COMPUJ (80.6 percent). Given this, the new labor management
system was later developed in this respect to set up an additional
9780230_209084_06_cha05.indd 141 12/3/2010 6:50:28 PM

system of internal job mobility, which improves job matching by

mobilizing motivated individuals, in addition to the traditional prac-
tice of rotation.
Intensification of results-orientation
Deliberation of the MBO and the diversification of career track

In April 1995, COMPUJ dispatched an inquiry commission to inves-
tigate companies located at Silicon Valley in the USA, in connec-
tion with their work organization and labor management systems.
The companies they interviewed included IT giants such as, Hewlett
Packard and Quantum and also some IT venture companies. They
mainly interviewed representatives from each companies regard-
ing: 1) the way American workers work, 2) the wage system, and 3)
the design and content of personnel evaluations. The first question
included sub- questions: a) how long do engineers work? b) when and
where they work? and c) what is the best strategy to satisfy employees
and to improve the turnover rate? The third question specifically asks
about a) how to allocate assignments, b) what and how they evalu-
ate workers, c) what kind of efforts and measures are implemented
to successfully manage personnel evaluation, and d) how they con-
sider time and results in proportional relation for engineers and sales
personnel.
Among other things, the inquiry mission seemed to repeatedly ask
about the importance of the MBO in the labor management system.
One CEO of an IT venture company was a little annoyed by the
question.
COMPUJ: [Responding to the answer saying his workers work 50 to

60 hours per week] How can you make them work so hard
(even without paying overtime premium)?
CEO: Are you talking about motivation [management] strategy?
It is clear. We manage for employees to involve with the
organizational objectives. It is important to give them clear
individual missions, and let them achieve high objectives.
This is it.
...
COMPUJ: So, you say, at the moment, the most important motivator
for employees is stock options?
CEO: No! Don’t ask me the same question again and again. The
important thing is to let employees believe in the mission
9780230_209084_06_cha05.indd 142 12/3/2010 6:50:28 PM

and the success of the firm, and give them clearly defined
missions. We also need to make them believe that it is fair
to measure their achievement against goals.
(Internal document of COMPUJ, translated
and arranged by the author)
In the report, there are no specific comments about what the COMPUJ
investigator learned from the interviews or indicators of what they were
going to adopt from the policies of their American counterparts. However,
judging from their initial interest and the summary of the reports, it is
clear that they wanted to find tips to improve the results-oriented labor
management system that had not yet fully filtered down at COMPUJ.
Since then, the reform movement has entered a new phase in terms of
the implementation of the MBO. The clarification of assignments/respon-
sible areas of tasks and evaluation criteria are the two major issues in the
improvement of the new system. The clarification of the assignments
resulted in clear and detailed descriptions of organizational roles for
the individual workers, which started to intersect with the employment
diversification strategy. For the workers in the managerial ranks, COMPUJ
expanded ‘expert’ track in addition to the conventional managerial track
and specialist track. For the workers below managerial level, four career
tracks were formalized with different prospects of wage and promotion.
Managerial rank
For the management of COMPUJ, the expansion of ‘expert’ track had
two meanings. One is to reduce the number of core management posi-
tions, and the other is to put a part of mid-career to senior employees
into ‘expert’ roles, in which it is easier to introduce results-orientation.
The following Table 5.5 summarizes the diversification of career tracks for
the workers in managerial ranks. They are divided into line management,
expert, and specialist, in each of which specific roles are defined as fol-
lows. These tracks already existed in the mid-1990s, but the plan was to
significantly expand the ‘expert’ track. The labor union was not entirely
satisfied with the strategy, but passively admitted that the expansion is
unavoidable under the current business circumstances.
From 2002 onwards, the ranking system was completely abandoned
for managers. Instead, the ‘role grade system’ was introduced, by which
managerial roles are stratified into seven levels by organizational impor-
tance. Managers in the same grade earn the same salary alongside the
results-sensitive bonus that theoretically makes up the 100 percent differ-
ence between the highest and lowest achievers. In wage determination,
9780230_209084_06_cha05.indd 143 12/3/2010 6:50:28 PM

seniority is not designed to play any role. The retirement benefit was
also changed to make the new system effective. The amount of the
retirement benefit was detached from the length of service and the wage
at the time of retirement. Instead, it came to be determined by the con-
tribution points that workers accumulated by the grade of roles they
occupied and the results they achieved in those roles.
Each role grade is defined by the combination of the ‘results-
responsibility’ and the ‘necessary competency,’ which was written down
in detail and publicized on an intra- organizational network. Figure 5.5
Table 5.5 Three types of role in managerial rank
Line management As a manager of a team and organization, line

managers are expected to take leadership in pursuing
organizational goals, and to perform appropriate
coaching for their subordinates.
Expert Experts are those who have highly specialized knowledge
of the specific field.
Specialist Specialists are those who have highly specialized
knowledge of the specific field and may have a reputation
outside the company.
WHAT:
Results
responsibility
Scopes of Organizational Role

responsibility
expected to
worker in:
• Strategy
• Performance
• Coaching
HOW: Practice
Behavioral traits, skill and knowledge to perform
assigned organizational role
Figure 5.5 An overview of the organizational role

Source: Jinzai Kyōiku 2001: 24.
9780230_209084_06_cha05.indd 144 12/3/2010 6:50:28 PM

shows that the concept is defined by ‘responsibility’ (‘what’ managers

should do) and ‘competency’11 (‘how’ to do them). The former consists of
one’s responsibility on organizational objective and strategy, perform-
ance, and coaching of young subordinates. The latter includes skills and
knowledge to perform one’s assigned organizational role, and behavio-
ral traits (competency).
Another notable point of the role grade system is that it was intro-
duced with the expanded position announcement system called,
‘position entry system,’ and the intent was to encourage managers to
take the roles that fit their aspirations. ‘Role openings’ are listed on
the intra- organizational network, and workers can apply for them.
Managers can also publicize their resumés on the net, and they can wait
for contact from an internal ‘personnel scout’ from other departments.
Workers below managerial rank

Typical for a Japanese firm, there was officially only one career track set
in the ranking and qualification system at COMPUJ, treating all work-
ers as a single entity of ‘employees.’ In this system, there are generally
six rankings, which determine the level of wages.12
In the radical reform of ranking and qualification system enacted
in 2001, COMPUJ set four types of career track for the workers below
managerial level, which are defined in Table 5.6. The most significant
aspect of this reform is the official division of career track between white-
collar and blue-collar workers, and white-collar workers are formally dif-
ferentiated between ‘main’ and ‘support’ track, which mostly overlap with
the conventional division between ‘career’ and ‘clerical’ tracks. Most of
the ‘career’ white-collar workers are included in group A. Eventually the
white-collar workers need to choose to be one of the three types of role in
the managerial rank listed in Table 5.5.
This differentiation of employee category was meant to officially
launch four different sets of wage and promotion prospects. For the
workers in group A, the ranking was streamlined into three while it was
kept as six or seven in other groups. This was to reduce the relevance
of age and seniority in both wage determination and promotion speed
within this group and thus expand the difference between high and
low achievers (see Figures 5.6 and 5.7 about the design of the expanded
difference in wage and promotion for group A).13
The formal differentiation of workforce with differentiated labor
management is the basis to further diffuse the results- orientation at
workplace level. To implement thorough MBO to cover the differenti-
ated workforce, it was necessary to set clear evaluation criteria in terms
9780230_209084_06_cha05.indd 145 12/3/2010 6:50:29 PM

Table 5.6 New categorization and definition of workforce
In the old system of

classification, they
Definition were: Wage system
A Workers in this group are Planning, Customer Merihari

supposed to create new value solutions (SE, (make clear
for customers in the fields of SI), Research, differences
planning, customer solutions, Technology between
R&D, and production, by development, high
their creative inspiration Production and low
and method based on highly technology, Logistics achievers)
discretionary decision making
on the work process.
B Workers in this group are Clerical, Support Odayaka
expected to achieve efficiency for customer (moderate
and quality improvement solution (SE, SI), differences)
in the fields of planning, Technological
customer solutions, R&D, and support, Production
production. support
C Workers in this group are Production, Inspection Odayaka
expected to achieve efficiency
and quality improvement
in the fields of production
and inspection by using
specialized skills.
D Workers in this group are Security, Key puncher, Odayaka
expected to achieve efficiency Typing, Driver,
and quality improvement Pharmaceutical
in the fields that require technician, Nursing,
particularly specialized skills etc.
such as security.
Source: Adapted and translated from internal material of COMPUJ.
of the performance and self- development. The introduction of the new

idea of personnel evaluation – competency management – appeared in
this context to cope with the demand on the ‘objectiveness’ of evalu-
ation criteria that is considered to achieve ‘fairness’ in labor manage-
ment practices.
Formalization of evaluation criteria: ‘competency’ management

COMPUJ adopted the new idea of personnel evaluation, called ‘kon-
pitenshi manejimento’ (literally, competency management: hereafter,
‘competency’) as a key to solve the problem. The idea of ‘competency’
9780230_209084_06_cha05.indd 146 12/3/2010 6:50:29 PM

Monthly salary
(Ranking)
(grade 1)
(grade 1) (grade 1)
(grade 2) (grade 2)
(grade 2)
(grade 3) (grade 3)
(grade3)
(grade 4)
(grade 4)
(grade 5) (grade 5)
(grade 6) (grade 6)
(Salary band) (grade 7)
(Group A) (Group B) (Group C)
Figure 5.6 An overview of the ‘salary band’ for workers in groups A, B, and C
fast management
track
normal
track
1 shunin
Rank
2
slow track
0 2 4 6 8 10 12 14
length of service
Figure 5.7 An overview of promotion by tracks within group A

9780230_209084_06_cha05.indd 147 12/3/2010 6:50:29 PM

became popular among Japanese companies starting in the late 1990s,

and again, COMPUJ became one of the first to tailor it for its labor
management. It is a new idea as it defines ‘results’ by listing the
detailed behavioral traits that describe high performance in a particu-
lar work context. These behavioral traits are called ‘competency,’ which
is a collection of the ‘best practices’ of the most successful workers of
the organization in the past. In most cases, the personnel department
interviews managers about the behavioral attributes of their high per-
formers, and then interviews those workers about their involvement
and commitment to the work processes; their preparation, their ways
of thinking, and networking. The personnel department then extracts
the common elements of their behavior, and sets them as the evalu-
ation standards.
COMPUJ established their ‘competency’ system as a two-tier structure:
basic competency and role-specific competency. Basic competency is applied
to all groups of workers, and role-specific competency is set based on the
specificity of assignments of workers. The relationship between the two
is set out in Figure 5.8.
‘Basic competency’ is the general trait that fits well with the corporate
philosophy including corporate ethic, profit orientation, customer ori-
entation, self- management, coworker relation, attitude of challenge,
and commitment. The personnel department interviewed department
and division managers to set the criteria as seen in Table 5.7.
A different approach was employed to set ‘role-specific’ competency.
The personnel department provided information they collected from
Updated
knowledge
Role specific competency

Skill,
know-how
Behavior Basic competency
Value, belief
Character,
personality
Figure 5.8 The structure of ‘competency’

Source: Internal document of COMPUJ.
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Table 5.7 Basic competency at COMPUJ
Items Definition Contents for the level 1 workers
Moral Comply with the Fully understand the moral standards of

moral standards set by COMPUJ,– use them in actual situations,
COMPUJ and give advice to subordinates based on
them.
Profit Always put priority on Pursue the following to improve
orientation behavior to maximize profitability: 1) concentrate resources on
profit and reduce cost carefully selected projects, 2) conduct
necessary follow-ups, 3) negotiate with
customers with necessary concerns
about the profitability.
Customer Construct trust To earn trust from customers, respond
orientation with customers and quickly and follow-up carefully on their
behave to maximize demands by coordinating with related
customer’s profit departments. To maximize customers’
profit, fully understand what benefits
customers, and make a proposal beyond
customers’ expectations.
Self- Make effort on Set objectives, make an adequate schedule
management self- development, and manage projects by him/herself by
voluntarily set goals fully understanding the organizational
and schedule objectives and future vision. Constantly
develop him/herself and design career by
analyzing his/her skills.
Coworker Respect for each other, Communicate with team members
relations and try to maximize and managers adequately to pursue
team achievement assigned projects smoothly. Make an
effort to coordinate his/her teams. Make
necessary advice for subordinate team
members to develop their skills. Share
his/her resources, such as personnel
relations, with team members.
Attitude of Set higher goals for Set difficult goals which cannot be
challenge him/herself solved by the conventional framework by
coordinating with related departments.
Not set any limit on his/her areas of
work, and try to expand them.
Sense of Have strong will to Take responsibility in any cases of
responsibility solve problems by difficulty. Take leadership to solve
him/herself problems by adequately coordinating the
related departments.
Source: Internal material of COMPUJ, translated by the author.
9780230_209084_06_cha05.indd 149 12/3/2010 6:50:30 PM

Table 5.8 Excerpts from the role-specific competency (system engineers)
Items Sub-items Contents for the level 1 workers
Sales promotion Marketing Have information about the competitors, and

have better plans. Have information about the
international market environment.
Planning Fully understand the corporate-level strategy,
and plan his/her own sales promotion. Use
various measures effectively. Plan promotion
based on the full understanding about
customers’ needs. Know about legal restrictions.
Execution Make an effort to attract repeaters. Choose
appropriate channel of promotion with
appropriate plans. Clarify target consumers,
and plan to stimulate their buying inclination.
Make a clear explanation of the technology
while making sure customers to understand
its superiority. Know about the services which
are taken care of by other departments and
sections.
Planning, Information Try to be the center of the information flow
Consultation gathering inside and outside the company. Effectively use
information to visualize the indefinable needs
of the customers.
Problem Set new and creative solution theme, and
setting customize the theme depending upon the
situations of the customers.
Analysis Analyze the strength and weakness of the
competitors, and try to offer our strength to
the customer. Understand various sources of
information and express opinion in his/her
own words. Understand the policies of the top
management, and analyze the challenges from
a wider perspective.
Planning Set concrete objectives in numbers. Respond
to customers’ request using ‘yes, but’ principle.
And offer back appropriate plan considering out
profitability.
Understand the market situation, and locate
one’s strategy in a broader situation.
Proposal Always make efforts to realize profit while
bringing satisfaction to the customer.
Continued
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Table 5.8 Continued
Items Sub-items Contents for the level 1 workers
Presentation
Negotiation, Always taking initiative. Clarify risks, and plan
Execution necessary actions, and execute them in the
best timings. Try to develop consensus among
related departments and sections.
Development,
Implementation
Customer support Make a better plan from the analysis of
customer claims. Report to supervisors when
s/he appropriately judges that the claim is
important.
Quality control Make a strategic plan to improve customer
satisfaction with positive efforts with necessary
consensus building with related departments
and sections. Provide effective feedback.
Others SE qualification, TOEIC 470, etc.
Source: Internal material of COMPUJ, translated by the author.
the interviews to each division and department. At each division

and department, entry-level managers discussed the characteristics
of the high performers among their subordinates and set the criteria
in terms of the expected behaviors, required OffJT, official qualifica-
tion, and English competency. Table 5.8 summarizes the results of
the discussion in the case of the workers with system engineering
role.
This new system of evaluation has a distinctive character. It intends
to clarify the expectations in greater detail on the behavioral level
while the overall criteria largely remain the same as in the old system.
In Table 5.8, for instance, the excerpts from the role-specific compe-
tency, especially the ‘items,’ is equivalent to the one cited from the old
evaluation sheet introduced earlier in this chapter (see Table 5.2). The
expansion is clear. The new system specifies detailed behaviors for each
item of evaluation. For each different role-specific competency (there are
about 250 kinds), there are, on average, 15 items to check ability, com-
pared with only 5 in 1995.
It is also notable that the ‘competency’ system focuses on ‘behavior.’
For instance, the section, ‘challenge objectives’ in the past evaluation
9780230_209084_06_cha05.indd 151 12/3/2010 6:50:30 PM

form, is now called ‘competency improvement plan,’ and workers are

required to report it in the following fashion:
● The objectives of improvement should refer to the appropriate

behaviors that are based on the expected level for the worker’s
ranking.
● The objectives should be written in words indicating concrete behav-
ior rather than the expected contents of achievement.
● The objectives should be written in the words indicating concrete
behavior for the concrete contexts of work process, such as assign-
ments and projects.
● The objectives should mention the specific timing of training pro-
grams and the acquisition of qualifications. (internal material of
COMPUJ).
What is emphasized here is the constant reference to ‘concrete behav-

iors.’ For both the basic and role-specific competency, workers are also
required to assess themselves on each item on the basis of “if you are
able to execute constantly” or “if you are able to use what you learned.”
The instruction emphasizes that the self- evaluation should be done
not on the basis of “if you have potential” or “if you may be able to
use what you learned,” but should be done “if you actually execute or
executed”.14
This focus on behavior is actually the core new idea introduced to
measure ‘results’ in this evaluation method. As the anxieties and com-
plaints showed at the F department, the idea to measure ‘results,’ only
by using sales and other numbers or based on the subjective judgment
by evaluators, faced strong resistance from workers, regardless of their
positions. In the new system, every desirable behavior in the work proc-
ess is listed on the evaluation sheet. This behavior-based evaluation is
increasingly considered as an ‘objective’ and ‘fair’ measure of ‘results’ at
Japanese workplaces.
Self-management under control: job announcement and the DWS

The motivation control was considered to be the key to the success of
the reform movement, and it was designed to be set in the provisions
that emphasize ‘self-management.’ There were two lines of provisions
that encourage self-management at COMPUJ: the one is the firm-
internal job announcement system that concerns mobility prospects
for workers, and the other is the introduction of the DWS to reform
working time.
9780230_209084_06_cha05.indd 152 12/3/2010 6:50:31 PM

Mobility
Thorough implementation of the MBO and the clarification of the
evaluation criteria always occupied the central position in the reform
movement at COMPUJ. However, observations in the previous section
indicated that attention should be paid to the reform of the mobility
arrangement as concern over the evaluation criteria among workers
evoked the interest in the appropriateness of their assignments. The
firm-internal job announcement system has a long history at COMPUJ,
started in 1988 for workers who wanted to be assigned to the newly
established departments or sections15 (see Table 5.1). The reform move-
ment after the 1990s included the improvement of the job announce-
ment system too.16 At the latest renewal in 2000, a manager from the
personnel department said;
[W]ithout securing the system to support voluntary change of

assignment by workers, it is not possible to fully let a results-based
personnel system work. It is unavoidable to set the career system
in which workers can choose their careers with a voluntary and
challenging mind. (Jinzai Kyōiku 2001: 25)
It is however questionable to see this as a sign of the changing attitude of

COMPUJ towards career formation where management prerogative on
one hand and passive attitude among workers on the other is so preva-
lent. As the union representative once worried in a 1995 interview, being
responsible for one’s own development would be too hard for most of
the workers except for a very few “strong individuals” (interview: full-
time union official). Thus, on the surface, the improvement of the job
announcement system seems to allow workers to have more discretion
regarding their career formation. However, given the fact that external
labor mobility is still not realistic for most of the workers, it is reasonable
to understand that the renewal of the system is a part of the labor man-
agement reform to give responsibility for results and self-development
to individual workers. It makes it easier to acquire consent from work-
ers about the consequences of performance evaluation because workers
chose the current assignment themselves. In addition, mobilization of
the “strong” workers who have high motivation to take new assignments
satisfies the purpose of the labor management reform.
Working time
The diffusion of the principle of self-management was also sought by
the reform of the working time regulation. The basic idea about the
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relation between working time regulation and the development of self-

management can be seen in the COMPUJ’s policy to abandon the time-
card system made effective in April 1995. A full-time union official
explained that the reason was to facilitate self-management.
Yes, management proposed it, and we agreed upon it. ... Since the sys-
tem automatically calculates working time, workers tend to lack self-
management. The basis of self-management is the self-management of
working time. So, this was the first step to facilitate self-management
among white- collar workers.
Based on such recognition, the second step was the introduction of the
DWS or the working time system that has a similar effect as the DWS.
The union official continues that;
Abandoning the system of time- card is not enough at all. We still

measure the amount of work by working time, and the overtime
work is rewarded in the form of overtime premium. It is not right,
and it should be fixed. We should not assume that working time will
be rewarded.
The major characteristic of the DWS (and the system that has a simi-
lar effect) is the decoupling of wage determination and working time.
According to the remark by the union official, the introduction of the
DWS helps terminate the wrong association between working time and
work results that was still commonly assumed by workers, therefore help-
ing to raise consciousness on self-management and results-responsibility.
This is why a series of reforms to introduce results- orientation after 1995
at COMPUJ were implemented together with the introduction of the
working time reforms (as shown in the chronology of reform, see Table
5.1). The introduction of the DWS coupled with the introduction of the
results- oriented labor management effectively shifts the measurement
of effort from working time to results that is increasingly captured by
the detailed behavioral traits and organizational objectives.
The DWS is coupled with the system of wage determination in the
following way, and it is clear from the example that the DWS also helps
firms to improve financial predictability. At COMPUJ, the DWS for pro-
fessional occupations was introduced in 1993 for about 300 workers in
R&D sections. At the same time, the wage system for these workers was
changed together with the implementation of the individual perform-
ance evaluation to make a greater difference in bonus payment between
9780230_209084_06_cha05.indd 154 12/3/2010 6:50:31 PM

Monthly salary Bonus
Bonus in December
Extra amount based on
Bonus in June
Extra amount based on

individual performance
individual performance
Basic monthly salary
Dependent allowance,
night-shift, and work on a
regular day off overtime
Special allowance for

the DWS
Figure 5.9 The composition of salary of the discretionary workers at COMPUJ

high achievers and low achievers. Due to the reform, the components of
the monthly wage and bonus were changed as shown in Figure 5.9.
There were two highlights in this reform. One is the expansion of
‘performance’ element that is reflected in the ‘extra’ bonus. The other
is the introduction of the ‘DWS special allowance’ that replaced the
regular overtime premium. These changes are beneficial for firms in
two ways. First, the bonus payment is increasingly relying on the short-
term performance of the company. Second, the system enables firms to
avoid the overtime premium that may increase regardless of corporate
performance. In other words, it set a fixed cap on the payment for over-
time work.
Thus, overall, the introduction of the DWS helps COMPUJ in three
ways. It helps diffuse the principle of self-management, helps fix the
overtime premium, and helps introduce a marketized wage system. It
is no surprise that the COMPUJ was so eager to introduce it even when
the DWS for white- collar workers was not legally established. To real-
ize the same effect, COMPUJ invented a system called A-style. A-style
system is the combination of the Flextime system and the fixed over-
time premium system. In this system, employers still need to manage
working time and to pay an extra overtime premium in cases where the
working time exceeds the one equivalent for the fixed amount of the
premium. However in reality, only the allowance called A-style allow-
ance was paid as in the case of the ‘special allowance for the DWS’ for
R&D workers. In April 1998, A-style was applied to about 7,000 shunin
workers (90 percent of all shunin workers at COMPUJ).17 It was used
9780230_209084_06_cha05.indd 155 12/3/2010 6:50:31 PM

until October 2002 when the company finally decided to replace it

with legal DWS,18 which was partially due to the accusation by a part
of COMPUJ workers19 who claimed the abusive use of the Flextime
system.20
The analyses of the two provisions related to mobility and working
time prove that the ‘self-management’ developed and encouraged in
the reform of labor management is fully controlled by, and is bene-
ficial for, COMPUJ management. The job announcement system was
introduced under the circumstance of limited mobility beyond firm
organization. Thus it is rather a measure to emphasize workers’ respon-
sibility for self- development than the total transfer of control to work-
ers over one’s career development. In addition, it successfully mobilizes
motivated workers to challenging tasks. The introduction of the DWS
supports and facilitates the introduction of the results- oriented labor
management system. It releases firms from the burden of the overtime
premium due to its core function to annul the idea of overtime and
overtime premium, and it also has an effect on decentralizing labor
management. At COMPUJ, the DWS and quasi-DWS system are effec-
tively used to help the diffusion of the principle of self-management
among the workforce.
Marketization, formalization and individualization of

labor management
The focus of this chapter was on the (re)negotiation of control and

authority relations of a core white- collar workforce at the organiza-
tional and workplace levels, taking as an example, the introduction
of the results- oriented labor management practices at a case company,
COMPUJ. As white- collar became the majority of workforce after the
late 1980s, directing and eliciting more effort from white- collar workers
became the urgent managerial issue for the company. The introduction
of the results- oriented labor management system has been facilitated
since then. Coupled with the transfer of result responsibility to work-
ers in terms of wage determination, the MBO and the new evaluation
system were central measures in the re-bargaining process. Figure 5.10
summarizes the dynamics.
Industrial structural change and globalization/international com-
petition are the two major market environmental shifts that firms
need to interact with. The endogenous necessity of labor manage-
ment reform is rooted in the concern over the increasing proportion
of the white- collar workforce. Focusing on the interactions between
9780230_209084_06_cha05.indd 156 12/3/2010 6:50:32 PM

Globalization/International competition
within firm organization A
White-collar Organizational Introduction of the results-oriented

increase reforms labor management
Industrial structural change
Figure 5.10 Diagram of the dynamics accompanied by the labor management

reform
the business organization and market environmental changes, it is

possible to distinguish two fields, in which specific issues of labor
management emerge. They are shown in the diagram as A and B.
A points to the issues of coping with the globalized market compe-
tition that urges firms to employ various global standards (such as
accounting practice) and to increase financial flexibility. B represents
the issues associated with the adaptation efforts by firms to industrial
structural change.
In these fields, issues of labor management are negotiated between
management and workers at organizational and workplace levels, thus
the characteristics of the outcomes, the actual labor management prac-
tices, are shaped by the power relations and the pattern of labor rela-
tions. In the process of the negotiation, we observed that there were two
major characteristics at COMPUJ in this regard. First, the labor union
at organizational level was very cooperative with the managerial efforts
at reforms. The labor union representatives did not recognize any prob-
lem with the basic principles of the reforms. Rather, they were active
collaborators to make pay and promotion differences larger than before
as they believed that it promotes ‘fairness’ of labor management. What
they were concerned with was the ‘openness’ and ‘objectiveness’ of the
evaluation process that produce these differences. Second, workers were
also largely concerted with the basic principle of making pay and pro-
motion differentials, but have shown frustration at the related changes
caused by the reforms. Under the new personnel evaluation that empha-
sizes results, old norms that encourage effort to take new assignments
sometimes deadlocked when workers were not fully satisfied with the
evaluation criteria and assigned tasks. Management recognized the
necessity to secure ‘fairness’ in these matters when improving the new
9780230_209084_06_cha05.indd 157 12/3/2010 6:50:32 PM

labor management system. The following are the major consequences

of the dynamics.
Consequences of the changes within COMPUJ

Marketization of wage
In the effort to cope with globalization (A), the COMPUJ management
attempts to increase the linkage between corporate performance and
wage through a new personnel evaluation that emphasizes the role of
short-term performance in wage determination. The process can be
characterized as marketization of wage. Since we did not examine the
actual payment of wage under the new system, this statement is still a
hypothesis. However, as far as we examine the changes in the design
of the wage system and the ways labor union responded to the reform,
it is certain that the element of short-term performance becomes more
important in wage determination, and the difference between high
achiever and low achiever will grow.
Although the COMPUJ labor union was largely cooperative, wage
determination is the issue where Japanese labor unions had relatively
strong influence. It was the case at COMPUJ too. They were favorable to
the principle of the reform, but it did not mean that they agreed with
the complete elimination of ‘life-stage’ adjustments from wage deter-
mination. Thus the change was gradual, and the reform was always
implemented for the workers in managerial ranks first. This is because
COMPUJ adopts a closed-shop system with regard to union member-
ship that includes all workers who are not in managerial ranks. Thus
the promotion to manager usually means losing membership of the
labor union. Marketization of wage occurred in the wage determination
for managers, and it later started to trickle down to the wage for other
workers.
Workforce segmentation by career diversification

More important for the purpose of this book is the change of control
and authority relations at organizational and workplace levels. From the
dynamics in an effort to cope with industrial change (B), the diversifi-
cation of career track became clear. The career track at COMPUJ, which
was at least nominally a single track system, was formally divided into
four types of workforce with different prospects of career and wage.
In addition, the managerial track was further divided into three, by
which COMPUJ became able to reduce the number of managers and
increase the numbers in expert and specialist tracks where it is easier
9780230_209084_06_cha05.indd 158 12/3/2010 6:50:32 PM

to introduce results- oriented labor management. Within each of the

four career tracks, different systems of wage and promotion were cre-
ated. The most radical change was made for workers in the core career
track that leads up to managerial positions. Under the principle of
results- orientation, this change was designed to make more of a differ-
ence between high and low achievers. It is notable that new employees
became able to reach managerial track in three years in theory if s/he
kept achieving the highest evaluation.
The change introduced at COMPUJ could have historical signifi-
cance as it formerly divided the workforce into plural categories with
regard to wage and promotion prospects. It was the major feature of
labor management at Japanese firms that they treat all workers as
‘employee’, to whom the same prospects of wage and promotion were,
at least nominally, provided. The change at COMPUJ has an impact in
that this could be the moment when Japanese firms start to leave the
practice that treats all workers as a single entity of ‘employee’.21
Formalization of the MBO and evaluation criteria

The introduction of the results- orientation turned out to be a trigger
for the formalization of ‘role’ description (instead of job description) by
the thorough implementation of the MBO and the detailed evaluation
criteria for individual workers. This is the result of the workplace politi-
cal dynamics. When the results- orientation started to be emphasized at
COMPUJ, workers had shown that they were not fully satisfied with the
evaluation criteria and assigned tasks. The labor union at COMPUJ also
took up the problems, especially the evaluation criteria as the issue of
‘fairness’ of the labor management system, and demanded an objective
and transparent system of personnel evaluation. Management under-
stood that the thorough implementation of the MBO is crucial for the
diffusion of results- orientation, and took the issue of evaluation crite-
ria seriously to develop a type of ‘competency’ management. The results
were the formalization of a ‘role’ description, and the objectification
of evaluation criteria that set the new idea on ‘results,’ focusing on the
behavioral traits in the work process.
Individualization of control
Diversification of career track, the implementation of the MBO, and
the detailed criteria of evaluation, in combination, facilitates the indi-
vidualization of workplace control. It achieves the higher level of inte-
gration of workers’ effort to organizational objectives while giving
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individualized responsibility for results. The introduction of results-

orientation emphasizes self-management, and the self-management is
institutionally supported by the reform of working time regulation. The
introduction of the DWS (and quasi-DWS) was recognized as increasing
the firm’s financial flexibility as well as facilitating the self-management
of workers. By decoupling the connection between working time and
wage determination, the DWS was used to emphasize the importance
for workers to meet the evaluation criteria in order to become a high
achiever. In this way, self-management is becoming a core of workplace
control at Japanese firms.
The control by self-management was also facilitated in the mobility
aspect by the expansion of the job announcement system. On the sur-
face, it looks like an increasing discretion for workers to choose assign-
ments by themselves. This is also the first impression at COMPUJ as the
expansion of the system was partially an answer to the grievances from
workers with regard to the appropriateness of work assignments under
the pressure of increased result responsibility. However, it was manage-
ment that had sought to facilitate the self-management of career devel-
opment from the late 1980s, making individual workers responsible
for self- development. With this reform, management becomes able to
mobilize motivated workers to challenging jobs, and to legitimatize the
new labor management system by mobilizing consent to the assign-
ment allocation. Thus, the new system is rather an effective mean of
workplace control than the empowerment of workers’ mobility bargain
since changing employer is still a risky choice for regular workers, and
COMPUJ workers are not the exceptions.
9780230_209084_06_cha05.indd 160 12/3/2010 6:50:33 PM

6
Conclusion: Changes and
Future Directions of Japanese
Changing employment relations
In this book, I have examined the transformation of Japanese employ-

ment relations realized by the reforms at various levels of regulation
since the 1990s within the contexts of globalization and industrial
structural change. The analyses were carried out from the sociological
perspective that sees social institutions as political-cultural constructs.
Thus the establishment of employment relations is seen as the political
and cultural dynamic to set up various institutional arrangements that
regulate the inherently political issues of unequal power relationships
between buyer and seller in the labor market and the ‘indeterminacy’
of a labor contract. Historically, it is important to note that employ-
ment relations emerged as a part of the rise of citizenship in the context
of industrialization and state formation. Labor market rules and labor
standards were necessary in an attempt to allow individual workers to
‘freely’ dispose of themselves, and the arrangement of labor relations
and collective bargaining became a major means for workers to negoti-
ate the terms of the labor contract on an equal footing with employers.
Labor management practices transform ‘labor power’ into ‘labor,’ and
negotiations about these practices are the sites of workplace participa-
tion for workers. The historical development of politics in these domains
shapes a pattern of employment relations specific to a society.
In order to capture the complicated dynamisms of the employment
relations, I have developed a conceptual framework that concerns the
aspects and the levels of regulation of employment relations. First, I dis-
tinguished two major aspects of employment relations: contract/effort
161
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and mobility. Contract and effort point to different aspects, but are
inseparable due to the ‘indeterminate’ nature of the labor contract. The
aspect of contract refers to the formal terms of exchange of labor power,
including the job assignment and wage agreement, but also to less for-
mal ‘expectations’ attached to different forms of employment contracts.
Effort points to the agreed intensity of work that completes the labor con-
tract, which mainly concerns workplace control and consists of the core
of workplace authority relations. The mobility aspect concerns move-
ments between the internal/external labor markets, rotation, career for-
mation and promotion, and represents how ‘freely’ workers can manage
themselves in the labor markets. The patterns within each aspect show
the characteristics of the institutions that regulate employment relations,
and provide firsthand indicators for observers to understand how ‘equal-
ity’ and ‘freedom’ are organized in the institutional arrangement.
Second, I see that employment relations are subject to multiple lev-
els of regulation at the societal, organizational, and workplace lev-
els, in which state, firm and labor are the major actors. At each level
of negotiation, it is possible to list a couple of political domains that
have arisen to shape employment relations. At the societal level, social
negotiations are observed at the domains such as collective bargain-
ing and labor standards and labor market regulations, and the focus
was given to the latter in this book. The organizational level contains
enterprise bargaining and labor management practices. In this book,
the latter was the primary focus of analysis in relation to the dynamics
that establish control and authority relations at the workplace level.
All of these levels of social negotiation regulate employment relations
by establishing rules, norms and taken-for-granted notions of contrac-
tual status, effort and career. Focusing on the levels of regulation and
the politics at each level helps us to understand the dynamics of power
relations emerged and maintained behind every institutional item
specified by the analyses of the aspects of employment relations.
Based on this framework, the book analyzed the deregulatory reforms of
labor market and working time and also the organizational-level reform of
the labor management system. Major findings about the changes of employ-
ment relations of core regular workers since the 1990s are summarized in
Table 6.1. In the first section of the conclusion, I will briefly describe these
changes in the employment relations for the core regular workers.
Contract/effort
Contract
The reforms of the labor market regulations diversified the possible
forms of employment contracts in the Japanese labor market. The firms
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Conclusion 163
Table 6.1 Changes in employment relations since the 1990s (core regular
workers)
Societal:
collective Organizational: Workplace:
bargaining, labor enterprise bargaining control and
market and labor and labor management authority
Contract • Establishment • Increase of non-regular • Organizational

and deregulation contracts membership
of non-regular • Introduction of results- (company
employment oriented wage citizenship)
• Deregulation of • Diversification and
working time formalization of
organizational roles
Effort • Deregulation of • Decoupling of working • Company

working time time from wage citizenship,
(DWS) determination but shift in
• Integration of individual the mode of
objectives with control from
organizational goals symbolic effort
• Intensified performance to results
monitoring and • Shift toward
evaluation by results self- control
Mobility • Expanding • Diversification of • Increasing self-

external labor employment forms responsibility
market for • Diversification of career for career
temporary work tracks development
• Job announcement
system
started to make use of them and non-regular employment expanded to more

than 30 percent of total employees in 2007, segmented by specific skills and
gender.1 Temporary dispatched work (haken) has expanded especially in
the areas of relatively high-skill occupations. This employment form was
dominated by young female clerical workers, but male workers significantly
increased after the deregulation in 2004. Limited-term contracts (keiyaku/
shokutaku) also expanded in the wake of deregulation, an expansion which
also occurred in skilled employment. In contrast to the temporary dispatched
work, male workers comprise the majority of this status. This replacement
of regular with non-regular employment has unfolded as a generational
project. To adapt to the environmental changes while protecting the employ-
ment of regular workers, firms needed to freeze new hire and to locate young
workers increasingly into the non-regular employment statuses.
9780230_209084_07_cha06.indd 163 11/25/2010 4:16:55 PM

The deregulatory reforms of the labor market did not bring about
radical change with regard to the contractual status of regular work-
ers. The main form of employment contract is an unlimited-term con-
tract that is still the ‘regular’ form of employment, and there was no
formal deregulation of employment security for regular employees.2
Their status as regular ‘member’ employees was still largely protected
by the commitment by employers and labor unions to the existing
rights of company citizenship.3 Employers recognized the importance
of ‘long-term employment’ for regular workers in the New Age Japanese
Management, and labor unions claimed to protect the employment secu-
rity of regular workers throughout the process of deregulatory reforms.
Due to the politics, which will be discussed in the following section,
the deregulatory reforms of the labor market resulted in the growing
gap between regular and non-regular contracts in employment security,
wages, welfare coverage, and mobility.
The working time deregulation and the labor management reform were
closely associated with each other, and brought about some changes in the
contracts of regular workers. The working time deregulation, the estab-
lishment of the DWS in particular, segmented the workforce by selecting
some white-collar workers as ‘discretionary workers.’ Selected workers are
located outside the conventional contract of working time, which is based
on the concepts of scheduled working time and overtime. It is different
from the situation in the past in which negotiated terms covered all work-
ers, although long and flexible overtime was a part of the regular contract
(as it was freely negotiated by cooperative enterprise unions). Further, it is
important to note that the negotiation of the selection was decentralized
to organizational-level. The coverage of the DWS for professional occupa-
tions, for instance, was based on the socially defined credentials or cer-
tificate. However, in the case of the DWS for white-collar workers, the
selection is based on the criteria that are essentially firm specific.
The introduction of the results-oriented labor management system–
performance-based wage system and the MBO (direction and person-
nel evaluation) system – brought changes in wage determination and
job demarcation. Due to the introduction of the performance-based
wage system, the life-stage adjusted component of wages became lower
than ever, and workers could no longer expect automatic increase of
wages every year. Since wages are pegged more strongly to an individ-
ual’s organizational roles and his/her (and the firm’s) performance, the
wage differences between high and low performers are meant to grow.
Further, as wage calculation began to be based on short-term perform-
ance, responsiveness to market fluctuation was expected to be higher
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Conclusion 165
(for example, Ishida 2006). Some case studies started to report that these
features are already in practice, showing a improved responsiveness to
market fluctuation (Tsuru, Abe and Kubo 2005; Abe 2007).
In response to the increased individual responsibility to results,
there was a growing demand among workers to clarify the range of
job assignments and achievement expectation. The formalization of
management’s expectations is represented by the implementation of
the practice of ‘management by objectives (MBO).’ This system made
the details of tasks and expectations ‘formalized,’ departing from the
historical nonexistence of a ‘job description’ in Japanese firms. To thor-
oughly implement the MBO, in which a detailed ‘role description’ is
drawn from organizational objectives, it became necessary to divide
the workforce into groups based on their organizational roles, within
which different labor management practices became associated with
each group. Such division, like white- collar career, clerical and blue-
collar at COMPUJ, might be common in reality at Japanese firms, but
the formalization of the division may have further impacts on the con-
tractual division in the Japanese labor market.
Effort
The reforms intensified the effort-bargain by the increasing role
of results in evaluation and wage, the stronger alignment of indi-
vidual work- effort to organizational goals, and the emphasis of self-
management in effort- control and assignment/career decision. The
introduction of the performance-based wage and the results- oriented
evaluation triggered this intensification. Since wage and promotion are
pegged more to the evaluation of work- effort than age and seniority,
they became more competitive. The introduction of the DWS helps
this process. Since the DWS decouples the association between work-
ing time and wage, it enabled employers to control work- effort by work
results, making them easier to adopt a results- oriented labor manage-
ment system. Further, since the DWS ends the concept of scheduled
working time and overtime, employers became able to take the work-
effort, shown in the forms of flexible overtime and unpaid overtime,
for granted.
The effort- bargain was also intensified due to the MBO system of
effort direction and evaluation as it assisted the integration of work-
effort to organizational objectives. The tight coupling of the work-
ers’ effort and organizational objectives was the major goal of the
MBO, and the increased opportunity of ‘communication’ between
managers and workers was expected to achieve the goal. The case
9780230_209084_07_cha06.indd 165 11/25/2010 4:16:55 PM

study in the book demonstrated that the negotiation of effort at the

workplace resulted in facilitating the development of this tight cou-
pling. In accepting the results- orientation, workers and labor unions
demanded ‘fairness’ and ‘transparency’ in the new labor manage-
ment practices. The efforts to improve the system resulted in the
clarification of organizational roles and the objectification of evalu-
ation criteria, which are expected to help mobilize workers’ consent
to the new labor management system.
The term ‘self-management’ represents the mode of control empha-
sized in the new labor management system. The MBO is the basis of
this control because it individually tailors the assignment and evalu-
ation criteria. But ‘self-management’ means more in the context of
the reform; it is to make the individuals the agents of self- control and
the deregulation of working time helped facilitate this process. The
introduction of the DWS was to transfer the responsibility of work-
ing time management to individuals by deregulating the societal and
organizational monitoring of working time. This deregulation made
individual workers responsible for the management of working time –
therefore, work- effort – and subsequently work results under the new
labor management system. This concept of ‘self-management’ was
extended to the mobility aspect of employment relations. Due to the
strengthened results- orientation in the labor management system,
workers started to question the appropriateness of the assignments.
The MBO extended the reform to the rotation practice, giving indi-
vidual workers responsibility to choose the ‘right’ assignment, which
strengthens the workers’ commitment to the assignments and consent
to the evaluation result.
Mobility
The deregulation of the labor market did not change the mobil-
ity aspect of employment relations for regular workers. However,
in relation to the labor management reform, there is a sign of the
changing climate of bargaining with regard to mobility at the firm
organizational-level. As mentioned in the section about contracts,
the status of regular employment was still relatively protected even
after the deregulatory reforms. Labor market deregulation increased
job mobility among non-regular workers but not among regular work-
ers. This is the major issue of labor market segmentation, because it
means that regular workers are still relying on the organized career
paths within a firm, where resources of livelihood and prospects for
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Conclusion 167
skill acquisition and promotion are available. Instead, non-regular

workers move in the external labor market, where resources and
prospects are not available. Compared with societies where some
actors (state, industrial trade union, or professional association)
have an interest and influence on firm- external job mobility,4 it is a
distinctive characteristic of Japan that no major actor has influence
or active involvement over employment protection, skill formation
and career, and therefore there is no institutional support, includ-
ing the notion of career, for those who move outside the firms.
The introduction of a results- oriented labor management system trig-
gered the renegotiation of the mobility agreement within a firm. In the
past, any mobility of regular workers – horizontal and vertical – was
decided by management. Passively accepting the decision and showing
full flexibility in adapting to the changes of assignment constitutes the
notion of career for Japanese workers. The new labor management sys-
tem made the promotion more results-based, competitive and less fre-
quent than before. It is no longer quasi-automatic, fewer workers will
be promoted, and as a result, the gap is widening between high and
low performers. To mobilize consent about the promotion decision,
management partially transferred career responsibility to individuals
under the name of ‘self-management:’ workers are required to choose
the ‘right’ assignments for themselves. As mentioned in the section
about effort, it is rather part of the control than worker empowerment.
One reason for this is that regular workers still do not have a way out
to the external labor market, which is the foundation of the effective
workplace control at Japanese firms. Given the increasingly visible
gap between internal and external labor markets, changing employers
would not be a realistic alternative anytime soon for regular workers.
The declining presence of labor unions

All the findings in this book can be explained and characterized by
the declining significance of labor in all levels of social negotiation.
Two points are clear: 1) labor was simply marginalized in the policy
process of the deregulatory reforms, and 2) labor unions could not play
a significant role, as they failed to establish alternative rules, norms
and notions of employment relations, which, due to the employer-led
reform efforts, were under pressure for change. In this section, I will
summarize how these two characteristics of ‘declining significance of
labor’ affected the changes of employment relations summarized in
the last section.
9780230_209084_07_cha06.indd 167 11/25/2010 4:16:56 PM

Marginalization of labor from policy process

The changes in participation and influence of organized labor are deci-
sive in shaping employment relations. It is clear that the influence of
labor unions is declining at all levels of social negotiation, but is par-
ticularly evident at the societal level. At the societal level, the establish-
ment and growing importance of the deregulation committees in the
employment policy area marked a significant change in the influence
and inclusion of labor unions, which can be characterized as the shift
towards ‘reform without labor.’ Before 1995, when the first deregulation
committee was set up as a special committee under the Administrative
Reform Committee, a tripartite advisory council (shingikai) with labor
participation set the agenda, deliberated the regulations, and negoti-
ated the methods to implement the regulations together. These tri-
partite advisory councils had constituted the policy domain for labor
and employment issues since the late 1970s, and were the main sites of
policy deliberation that represented a Japanese version of ‘corporatism
with labor.’
After 1995, however, the deregulation committees became the sites of
employment policy initiatives and changes. The consecutive deregula-
tion committees tended to have a strong commitment to liberalization
and deregulation. They were dominated by employers and liberaliza-
tion/deregulation advocates, with weak or no formal representation
from labor. The employers’ representatives came from emerging indus-
tries and companies, with differing views to those of the employers
representing the traditional industries and the established keiretsu net-
works who still had commitment, although to a lesser degree, to the
traditional labor relations. Deregulation committees engaged in setting
the policy agenda, and eventually their proposals, were sent on to the
tripartite advisory councils, but leaving them little role to play. The
fundamental policy changes in temporary dispatched work since the
late 1990s, for instance, were realized by this shift. A similar marginali-
zation of labor also occurred in the policy process to establish the new
DWS.
The labor ministry was influenced significantly by the emergence of
the deregulation committees, and the change in their attitude towards
employment and labor market issues helped undermine the power of
organized labor in the policy process. In the case of the labor market
deregulation, the ministry first maintained commitment to the tradi-
tional mechanisms of labor mobility, but after the emergence of the
deregulation committees, they shifted attention to the expansion of
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Conclusion 169
the external labor market. In the case of working time deregulation,

the ministry was even more cooperative with the deregulation com-
mittees. When the negotiation at the advisory council deadlocked due
to the wide difference of opinion between employers and labor unions,
the ministry made the draft proposal to facilitate the discussion. The
contents of the draft proposal were much closer to the idea raised by the
deregulation committee.
No alternative against the employer-led reform initiatives

The decline of the strength of labor at organizational and workplace lev-
els is not as dramatic as that at societal level, but it is obvious. Enterprise
unions in Japan traditionally had a stronger voice on the issues of
employment protection and wage bargaining, but allowed manage-
ment prerogative in matters of labor management. This basic structure
of labor relations is largely maintained, but not without change. The
analyses drawn from the case company proved that labor union was
cooperative to the introduction of the results- oriented wage and labor
management system. Since the analyses in this book do not contain
the actual change of wage distribution after the radical reforms of the
wage system, my conclusion is necessarily tentative. However, being
cooperative in this area means the acceptance of the marketization of
wage by labor unions, undermining the leverage of wage negotiation for
themselves. Thus, one of the changes at the organizational-level labor
relation is the withdrawal of labor union from enterprise bargaining,
although this requires further investigation.
With regard to other labor management issues, labor unions accepted
management prerogatives and played a consultative role in meeting the
labor management reforms. First, increasing non-regular workers meant
the increasing acceptance of management’s control by enterprise unions
on staffing at organizational-level. Although labor unions did not have
a strong hold on this issue anyway, the acceptance of the management’s
reliance more on the external labor market than on internal flexibility
marks a clear break from the past. Second, labor unions played only a
consultative role, even having a favorable attitude towards the reforms,
even though they could result in division and competition among work-
ers and intensify workplace control. The unions’ concerns were mainly
focused on the ‘fairness’ of competition, which resulted in the formali-
zation and objectification of the system of personnel evaluation.
These labor union activities demonstrate the lack of their ability
to produce alternative notions of employment relations, and help
9780230_209084_07_cha06.indd 169 11/25/2010 4:16:56 PM

maintain the traditional notions rather than questioning them. For

instance, when workers were transferred to a new section at the case
company, the labor union expressed concern, not about the manage-
ment prerogative on the rotation decision, but to ask management
not to demoralize anyone who considered the assignment change
as unfavorable treatment. When the new labor management system
was introduced, and labor union demanded ‘fairness’ in order to
keep workers’ morale and commitment to work, rather than standing
against the increasing competition. In addition, most of the workers
did not seem to question the traditional notions of employment rela-
tions even after the reforms, which helped facilitate the reproduction
of the current arrangement of authority relations; regular employ-
ment is still a relatively privileged contractual status, thus ‘organiza-
tional membership’ is still an effective notion that legitimates their
contract relation; the introduction of competition was not necessarily
a problem for workers; despite the expansion of the external labor
market, regular workers still believe that working for the current
employer is the best choice.
Remaking employment relations: risks and

opportunities for Japanese workers
The changes of employment relations were produced by the declining

significance of labor. In this final section, I will reassess the reforms
of Japanese employment relations from the workers’ point of view,
which enables us to evaluate the risks and opportunities embedded
within the new institutional arrangement of employment relations.
There are two points in this section. Essentially, the reforms at vari-
ous levels of society in the last two decades produced the ‘deflation
of employment’ in Japan. Further, considering the observations pre-
sented in the book, the strategy to fight back against the ‘deflation
of employment’ cannot assume the rights of ‘company citizenship’
as an ideal. Labor union movements need to take an alternative
strategy.
‘Deflation of employment’ in Japan

Since employers and regular employees were still maintaining the
commitment to the institutional foundations of company citizenship,
the deregulatory reforms expanded the external labor market without
considering the issues of equal treatment. Such asymmetric deregu-
lation resulted in amplifying the economic and social gaps between
9780230_209084_07_cha06.indd 170 11/25/2010 4:16:56 PM

Conclusion 171
regular and non-regular contracts. The cleavage in Japan, overlapping

with the distinction between generations5 and sexes of workers, has
become a source of social unrest and a focus of political discussion
that may lead to a change of Japanese society in the future. The term
‘disparity society’ (kakusa shakai) has attracted society-wide attention,
and ‘equal treatment’ became a serious concern due to the growing
recognition about the cases where regular and non-regular workers are
assigned to similar jobs with significantly different employment con-
ditions. As I will discuss later, the revision of the Paato Law (tan-jikan
rōdōsha no koyō kanri no kaizen-tō ni kansuru hōritsu: Part-Time Workers
Law) enacted in 2008 was motivated by such recognition. This was a
type of ‘inclusion’ strategy to cover non-regular workers with the same
employment conditions as regular workers.
However, the status of regular employment is not as privileged as it
once was because of the erosion of various rights that regular work-
ers had previously enjoyed. With regard to wages, the marketization
of wage undermined the seniority- curve, and the introduction of the
DWS completely cut the overtime payment. Employment security
seems to be still protected, but there are growing numbers of indica-
tions that it has begun to be loosened. Moreover, the intensification
of effort- control is clear. The introduction of the results- oriented labor
management brought about the increasing importance of personnel
evaluation in wage and promotion determination, which facilitates
competition between workers. Employers were able to segment the
workforce, giving them individualized goals that are trickled down
from organizational objectives. The emphasis of self-management
made each individual an agent of self- control with regard to effort,
working time and career development. It seems that after the era of
deregulation and the organizational reforms to introduce results-
orientation, Japanese firms became able to shift gear to further
embrace the corporate warriorship.
Above all, it is possible to say that there emerged the ‘deflation
of employment’ in Japan after the decades of reform. There are vis-
ible gaps in employment, and are declines in resource and prospect
that employment can provide for workers regardless of their con-
tractual status. The consequence is devastating. Although the find-
ings indicate that the reforms are almost exploitative, even against
workers with regular contracts by the tightening of control, workers
still tend to have an aspiration to stay with their current employers.
Moreover, recent new employees are reported to be the most loyal
to their employers according to the annual surveys since 1990 (JPC
9780230_209084_07_cha06.indd 171 11/25/2010 4:16:56 PM

2009) showing a strong aspiration to stay with a firm throughout

the career. It is reasonable to speculate that the stagnating economy
and the recognition of the widening gap between regular and non-
regular employment are strengthening the aspiration for job seekers
to obtain regular contracts and for regular employees to stay in a
firm. This motivation reaffirms the basis of workplace control specifi-
cally effective at Japanese firms.
The limit of equality by ‘company citizenship’

Considering the disparity between regular and non-regular contracts
and the resulting increase in concern over various social problems, it
seems reasonable for the mainstream Japanese labor union movement
and the new grassroots movements to form a strategic coalition for
the reregulation of employment. New labor union movements such
as the local general union (chiiki or ippan rōdō-kumiai6) represent the
traditionally unorganized but increasing sector of non-regular employ-
ment. However, they do not have formal channels in which to be heard
in the policy process. The national umbrella federation such as Rengo
has such a channel, but suffers from declining membership. The alli-
ance seems to be a natural and necessary consequence. In fact, the new
general unions became eligible for membership of the federation, and
have now started to have a voice. The election result of Rengo’s board
of directors in 2005 reflected the shift within Rengo politics, when one
supposedly fringe candidate from a general union won about one-third
of the total votes.7
However, the organizational inclusion of non-regular workers by reg-
ular workers does not automatically solve the problems since the mak-
ing of non-regular employment statuses clearly shows that they were
shaped by the inherent limits of company citizenship. First, the male-
breadwinner assumption is so strong in the institutional foundation of
the company citizenship that women are effectively excluded from it,
which clearly appeared in the disproportionate ratio of women in the
non-regular employment sector. Second, the development of company
citizenship shaped a unique and wide array of rights and duties specific
to regular workers. Accepting various requirements of flexibility is the
major criteria by which regular employees see themselves as commit-
ted and responsible for organizational requirements, constituting the
full membership of a company. This notion of status is the foundation
of the firm status-based segmentation. One advocate of the deregula-
tion asserted in our interview that there are some workers who want to
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Conclusion 173
be free from the ‘duties,’ therefore it is natural that they are not enti-
tled to the same rights as regular workers (interview with a scholar 18
November 2002).
This is why seeking equal treatment of non-regular workers by an
attempt to extend company citizenship does not achieve the goal,
rather it only reassures the existing status division. The revision of
the Paato Law in 2008 is the exemplary case. The revision was said
to be about the equal treatment between regular and non- regular
contracts, and the law set the prohibition of differential treatment
of non- regular workers who fall in to the following categories:
1) whose areas of job and responsibility are comparable to regu-
lar workers, 2) whose term of contract is unlimited (or repetition
of limited- term contract), and 3) whose job and assignment may
change (or rotate) in the same scope with regular workers. The law
clearly shows the inherent limit of company citizenship to achieve
equal treatment. The third condition, for instance, pinpoints an
exact condition that practically distinguishes regular from non-
regular employees. The message of the law is clear; non-regular
workers do not deserve the same treatment as regular workers as
far as their responsibility (duty) does not meet the conditions of
company citizenship.
Right to a career without organizational membership

Therefore, the strategy for allied labor union movements should not
assume company citizenship as an ideal. The purpose should be to fight
back against the ‘deflation of employment’ under which both regular
and non-regular workers suffer. The basic principle is, if we want to
change the situation of non-regular workers, it is necessary to change
the situation of regular workers too. Non-regular workers need to have
access to resources and prospects, and regular workers need to be free
from the restrictions of control with shrinking resources and declining
prospects.
This point clarifies that the agenda for the labor union movement
in Japan is to tackle the institutional foundations of company citizen-
ship. First, labor unions need to focus on a broader set of political and
social reforms. Social policies at present have a strong gender bias, and
provide the political and legal foundations of the corporate- centered
social setting, which create disincentives for the external labor mar-
ket mobility of workers. The corporate- centered social setting does
not allow regular workers to ‘exit’ from firms and locates non-regular
9780230_209084_07_cha06.indd 173 11/25/2010 4:16:57 PM

workers in the social space without any resources or prospects. To

make workers fully capable of controlling their careers, the social and
material disadvantages for workers in job mobility have to be over-
come. It is clearly necessary to provide equal employment and social
security for all workers regardless of the organizational affiliation.
Unions should seek to establish supports for workers in external labor
markets in developing skills, making job transitions and guaranteeing
social security, and, if necessary, they need to demand legal regulative
reforms to realize the supports. A concept such as a ‘worker’s right to a
career without organizational membership’ might play a role in such
reform efforts.
For regular employees, this kind of effort fundamentally strengthens
their power in mobility bargain by giving them alternative choice –
changing employers. Once ‘exit’ is established, all the reforms exe-
cuted in the last two decades are not all negative to workers, which
is another hint for the labor union movement. The formalization of
personnel evaluation and the active role by workers in defining indi-
viduals’ objectives have increased the transparency of the personnel
evaluation process. Workers now know how they are being evaluated,
and have a chance to participate in this evaluation process. One effect
is that workers are enabled to take a more active role in their career
development, since they know what they should be achieving and can
plan by themselves to improve the skills they need to meet these goals.
These changes give Japanese workers a chance to say more in the evalu-
ation and to repossess their careers, thus curbing the traditional man-
agement prerogative in control and mobility. Making the evaluation
system more objective and shifting skill and career formation more to
workers may also lay the ground for more job mobility in the external
labor market.
Therefore, the second agenda for the labor unions is to re-involve
labor management issues. Labor unions need to start their own discus-
sions on the issue of personnel evaluation at industrial and national
center levels, perhaps by launching their own study groups with exter-
nal experts. Rengo has not seen the need to pay attention to such issues
because these have long been considered a matter for enterprise unions
at the firm-level. Labor unions need to critically examine evaluation
criteria. This effort will help individual workers who need to negotiate
about individualized tasks and evaluation, and also help labor unions
to re-participate in the issues of labor management at organizational
level. This will also help unions to become involved in setting skill
development possibilities and standards in various types and levels of
9780230_209084_07_cha06.indd 174 11/25/2010 4:16:57 PM

Conclusion 175
careers, jobs and ranks, to support workers’ autonomous mobility. The

opportunities for external job mobility would be encouraged by sec-
toral and societal level standards for evaluating workers regardless of
the situations of individual firms. In this way, it may be possible to say
good-bye to ‘company man.’
9780230_209084_07_cha06.indd 175 11/25/2010 4:16:57 PM

Appendices
A1.1 List of interviewees

Category Name Full Function Interview date
Scholars S1 Professor of Employment Policy, Chair of 13/Nov./2002

various advisory committees of the labor
ministry
S2 Professor of Law, A member of the Council 18/Nov./2002
for Regulatory Reform
S3 Professor of Law, Chair of the Advisory 19/Dec./2002
Committee on Employment Security of the
labor ministry
S4 Professor of Law, A member of the 24/Feb./2003
Advisory Committee on Labor Standards
of the labor ministry
S5 Assistant Professor of Law 18/Oct./2002
Employers E1 Executive Director of a temporary help 25/Dec. /2002

firm, an outside member of the Special
Committee on Labor Market, Advisory
Committee on Employment Security of
the labor ministry
E2 President of a temporary help firm, A 25/Dec./2002
member of the Council for Regulatory
Reform, Advisory Committee on Labor
Conditions of the labor ministry
E3 An officer of a temporary help firm, 28/Feb./2003
Public Relations Office
E4 A manager of a temporary help firm, 13/Oct./2004
President Office
E5 A manager of a temporary help firm, 30/Sep./2004
Dept. of Management Planning
Dept. of Management
E7 A manger of a temporary help firm, 6/Oct./2004
Dept. of Worker Dispatch
Dept. of Worker Dispatch
E9 A manager of an employers association, 23/Feb./2003
a member of the Special Committee on
Labor Market, Advisory Committee on
Employment Security of the labor ministry
176
9780230_209084_08_app.indd 176 11/29/2010 10:24:57 AM

Appendices 177
E10 Executive Manager, Corporate System No. 7/Jun./1995

4, COMPUJ (electronics company)
E11 Department Manager, F Department, 9/Jun./1995
COMPUJ
E12 Manager 1, Personnel Department, 10/May/1995
COMPUJ
E13 Manager 2, Personnel Department, 26/Feb./2001
COMPUJ
E14 A manager of a software development 7/Oct./2004
firm, Dept. of Public Relations
E15 A deputy manager of a software
development firm, Dept. of Public
Relations
Industry I1 A manager of the industry association for 11/Sep./2002
Association temporary help industry, Dept. of General
Affairs
I2 President of a temporary help firm, and 1/Oct./2004
the President of the industry association
for temporary help industry
I3 A manager of the industry association for 3/Jul./2003
IT service industry, Research and Planning
Department
I4 A manager of the national federation of 17/Sep./2004
medium and small-size firms, Dept. of
Research
Labor L1 A director of a national federation of 21/Nov./2002
Unions labor unions, Labor Policy Coordination
Division
L2 An officer of a national federation of labor 22/Feb./2001
unions, Dept. of Employment Policy
L3 Deputy Secretary General of a labor union 15/Nov./2002
for the dispatched workers
L4 A full-time union official, COMPUJ 16/Jun./1995
L5 A member of the alternative labor union 13/Feb./ 2003
L6 of electronics industry
A member of the alternative labor union
of electronics industry
Public P1 A section manager, Section of Private 11/Dec./2002
Officials P2 Employment Service of the labor ministry
and An officer, Section of Private Employment
Politicians Service of the labor ministry
P3 House of Councilors, Democratic Party 19/Dec./2002
of Japan
P4 House of Councilors, Social Democratic 19/Dec./2002
Party of Japan
Note: In addition to the interviewees listed above, workers at F Department, COMPUJ, were
interviewed during the field research in 1995–6.
9780230_209084_08_app.indd 177 11/29/2010 10:24:57 AM

178 Appendices
A3.1 Major reforms of labor market regulations in the

post-WWII period
1947 Employment Security Law
Prohibition of the all private personnel business: all the private
personnel business including job placement and temporary
dispatching work is prohibited by Employment Security Law for the
modernization of the labor market after the WW2. It only accepts
public job placement, and private job placement for strictly limited
occupations
1952 The revision of the Ministerial Ordinance of Employment Security
Law
Loosening of the condition for illegal dispatching: this revision made
a part of illegal dispatching (kōnai ukeoi) legal.
1978 Admonition by the Administrative Management Agency
Caution toward the expansion of the illegal situation of kōnai ukeoi:
this admonition warned that there had been growing misuse of ESL
by the lax regulation of the illegal dispatching.
1986 Temporary Dispatched Work Law
Legalization of temporary agency dispatching of workers in 13
specific occupations (called the ‘positive list’).
1990 Revision of the Temporary Dispatched Work Law
Extension of ‘positive list’ of occupations from 13 to 16; extension of
the term of dispatch from nine months to one year.
For elderly workers (older than 60 years of age) replacement of
‘positive list’ with a short ‘negative list’ of occupations, prohibiting
temps only in a few occupations.
1996 Revision of the Temporary Dispatching Work Law
Extension of ‘positive list’ of occupations from 16 to 26.
1997 Revision of the Employment Security Law
Under the 1947 law, private placement had only been allowed in a
‘positive list’ of occupations. The revision replaced the ‘positive list’
with a ‘negative list’, loosened limitations on fees and regulations on
the establishment of a private job placement service firm.
1999 Revision of the Labor Standards Act
Fixed-term contracts which had been limited to short-term project-
related work and limited to one-year duration since 1947, were
declared legal for most forms of professional and knowledge-intensive
work, with the allowable duration extended from one to three years.
The reform of 1987 law replaced the ‘positive list’ with a ‘negative list’,
set a one year limit on dispatching in newly allowable occupations,
while extending the term to three years for the 26 occupations
allowed in the 1996 revision to the law.
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Appendices 179
1999 Revision of Employment Security Law

Removed all but two occupations on the ‘negative list.’
2003 Revision of the Labor Standards Act
Duration of Fixed-term contracts for all project-related work extended
to three years, for professional and knowledge-intensive work, the
limit was extended to five years.
Partial removal of the ‘negative list’ system, especially the
occupations related to medical services.
2003 Revision of the Employment Security Law
Loosening of the conditions to start a private job placement service
firm, placement limitations lifted for side-jobs in selected service
industries, such as restaurants and hotels.
Totally lifting the limit of the term for the 26 occupations, which
were allowed for three years in the 1999 revision to the law.
Extending the limit to three years for the rest of the occupations
which was one year in the 1999 revision. Among the occupations
listed in the negative list, manufacturing was removed from the list.
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180 Appendices
A3.2 Revisions of the limited-term contract

Limited-term
contract Contents
Labor Labor contracts, excluding those without a definite period,

Standards Act and excepting those providing that the period shall be the
(1947) period necessary for completion of a specified project, shall
not be concluded for a period longer than one year.
Revised Labor Labor contracts, excluding those without a definite period,
Standard Act and except those providing that the period shall bet he
(1998) period necessary for completion of a specified project, shall
not be concluded for a period longer than one year, or three
years with respect to labor contracts that come under any of
the following items.
1. Labor contracts concluded with workers who have the
professional knowledge, skills and experience that are
necessary for developing new products, services or
technologies or for scientific research (hereafter referred
to as “professional knowledge etc.” in this Article),
and that come under the standard of possessing
the advanced level of professional knowledge etc,
prescribed by the Minister of Labor (limited to those
workers who are newly appointed to work requiring the
advanced level of professional knowledge at enterprises
where there is a shortage of workers with that advanced
level of professional knowledge)
professional knowledge, skills and experience that
are necessary for work to start up, convert, expand,
downsize or close down an enterprise which is expected
to be completed within a definite period, and that
come under the standard of possessing the advanced
level of professional knowledge etc. prescribed by the
Minister of Labor (limited to those workers who are
newly appointed to work and require the advanced
level of professional knowledge at enterprises where
there is a shortage of workers with that advanced level
of professional knowledge)(excluding labor contracts
stipulated in the preceding item).
3. Labor contracts concluded with workers aged 60 years
or older (excluding labor contracts which stipulate the
preceding two items).
Announcement, the Ministry of Labor (Dec, 1998, Enacted in
Apr. 1999)
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Appendices 181
The workers with the standard of possessing the advanced level

of professional knowledge, skills and experience can be specified
as follows.
1. Workers with PhD degree.
2. Workers with Master’s degree and have three years of
experience in the work assignments.
3. Workers with the following qualifications.
• Certified public accountant
• Medical doctor
• Dentist
• Veterinarian
• Lawyer
• First class authorized architect
• Pharmaceutical chemist
• Real estate appraiser
• Patent attorney
• Engineer
• Public consultant on social and labor insurance
(Items 4 and 5 are omitted by author)
Revised Labor contracts, excluding those without a definite period, and

Labor excepting those providing that the period shall bet he period
Standards necessary for completion of a specified project, shall not be
Act (2003) concluded for a period longer than three years, or five years
with respect to labor contracts that come under any of the
following items.
professional knowledge, skills and experience that come
under the standards prescribed by the Minister of Labor.
2. Labor contracts concluded with workers aged 60 years or older.
[author omitted the two terms: 1) responsibility of the
Minister of Labor on the conflict resolution, 2) the advisory
responsibility of the Ministry of Labor towards employers]
Announcement Plan, the Ministry of Health, Labor, and Welfare
(Enact in Jan. 2004)
Workers possessing the advanced level of professional
knowledge, skills and experience which are specified as follows.
1. Workers with PhD degree.
2. Workers with the following qualifications.
• Medical doctor
• Dentist
• Veterinarian
• Lawyer
• First class authorized architect
• Tax attorney
• Pharmaceutical chemist
9780230_209084_08_app.indd 181 11/29/2010 10:24:58 AM

182 Appendices
• Public consultant on social and labor insurance

• Engineer
• Patent attorney
3. Workers who passed the examinations of system analyst
and actuary.
4. [omitted]
5. Workers with an annual income exceeding 1,075 man yen

(approximately $90,000) per year in the following work
assignments with educational credentials and experience.
• Research scientist, system engineer, and

designer: 5 years of experience with Bachelor’s
degree, 6 years of experience with Associate
Bachelor’s degree, 7 years of experience with
H.S. diploma.
• System engineer, 5 years of experience.
[last term is omitted by the author]
Source: The table is assembled by the author from government records.
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Appendices 183
A3.3 Labor market changes

For Figure 3.8 Labor market changes by occupations (numbers in thousands)
1987 1992 1997 2002 2007
technical and 5,642 6,873 7,467 7,905 8,555

professional 12.2% 13.1% 13.6% 14.4% 14.9%
management 2,171 2,321 2,248 1,993 1,759
4.7% 4.4% 4.1% 3.6% 3.1%
clerical 10,322 12,261 12,865 12,201 12,992
22.4% 23.3% 23.4% 22.3% 22.7%
sales 6,196 7,077 7,433 7,736 7,545
13.4% 13.5% 13.5% 14.1% 13.2%
service 2,936 3,485 4,040 4,976 5,641
6.4% 6.6% 7.3% 9.1% 9.8%
security 735 785 927 1,028 1,085
1.6% 1.5% 1.7% 1.9% 1.9%
agriculture/ 428 420 407 409 635
fishery 0.9% 0.8% 0.7% 0.7% 1.1%
transportation 2,198 2,211 2,221 2,054 1,994
and 4.8% 4.2% 4.0% 3.8% 3.5%
communication
manufacturing 15,419 16,707 16,883 15,682 15,416
and 33.4% 31.8% 30.7% 28.7% 26.9%
construction*
unclassified 104 428 507 748 1,654
0.2% 0.8% 0.9% 1.4% 2.9%
total 46,153 52,575 54,997 54,733 57,274
100.00% 100.00% 100.00% 100.00% 100.00%
* Categories such as mining and day labor were separated in 1987. In this table, those are
included in ‘manufacturing and construction’ since it includes those in later years.
9780230_209084_08_app.indd 183 11/29/2010 10:24:58 AM

184 Appendices
For Figure 3.10 Haken workers by occupations (numbers in thousands)
1987 1992 1997 2002 2007
technical and 18 21 30 44 76
professional 20.7% 12.9% 11.7% 6.1% 4.7%
management 0 0 0 0 0
0.0% 0.0% 0.0% 0.0% 0.0%
clerical 39 94 180 360 588
44.8% 57.7% 70.0% 49.9% 36.6%
sales 0 0 4 48 91
0.0% 0.0% 1.6% 6.7% 5.7%
service 4 10 10 43 72
4.6% 6.1% 3.9% 6.0% 4.5%
security 0 0 0 0 0
0.0% 0.0% 0.0% 0.0% 0.0%
agriculture/ 0 0 0 1 4
fishery 0.0% 0.0% 0.0% 0.1% 0.2%
transportation 2 6 4 11 31
and 2.3% 3.7% 1.6% 1.5% 1.9%
communication
manufacturing 14 27 28 192 636
and 16.1% 16.6% 10.9% 26.6% 39.6%
construction
unclassified 10 5 0 21 110
11.5% 3.1% 0.0% 2.9% 6.8%
total 87 163 257 721 1,608
100.0% 100.0% 100.0% 100.0% 100.0%
9780230_209084_08_app.indd 184 11/29/2010 10:24:58 AM

Appendices 185
For Figure 3.11 Keiyaku/shokutaku workers by occupations (numbers in thousands)
1987 1992 1997 2002 2007
technical and 139 150 175 378 482

professional 19.0% 17.0% 18.1% 15.3% 14.5%
management 14 14 13 17 11
1.9% 1.6% 1.3% 0.7% 0.3%
clerical 200 252 283 655 876
27.4% 28.6% 29.3% 26.4% 26.4%
sales 64 69 88 297 365
8.8% 7.8% 9.1% 12.0% 11.0%
service 52 79 88 260 356
7.1% 9.0% 9.1% 10.5% 10.7%
security 36 31 35 75 100
4.9% 3.5% 3.6% 3.0% 3.0%
agriculture/ 8 9 10 15 22
fishery 1.1% 1.0% 1.0% 0.6% 0.7%
transportation 30 37 44 128 201
and 4.1% 4.2% 4.6% 5.2% 6.1%
communication
manufacturing 120 229 224 620 798
and 16.4% 26.0% 23.2% 25.0% 24.1%
construction*
unclassified 2 7 7 31 103
0.3% 0.8% 0.7% 1.3% 3.1%
total 730 880 966 2,477 3,313
100.0% 100.0% 100.0% 100.0% 100.0%
9780230_209084_08_app.indd 185 11/29/2010 10:24:58 AM

186 Appendices
A4.1 Chronology of working time regulations
Laws and policy

Year initiatives Contents Objectives
1911 The Setting working time To affiliate the

(1916) Establishment regulation for the social concern
of the Factory first time in Japanese regarding low
Law industrialization wages and the
subjecting women and long working
children under the hours of female
age 15. It set 12 hours/ and young
day limitation and the workers, after the
prohibition of night work rise of industry
from 10 p.m. to 4 a.m. due to the Sino-
Japanese War
1923 The revision of For women and children
(1926) the Factory Law younger than 16, it set 11
hours/day limitation and
the prohibition of night
work from 10 p.m. to 5
a.m.
1947 The The introduction of the To modernize and
Establishment 8-hour-per- day, 48-hour- democratize
of the Labor per-week principles Japanese
Standards Act It did not set any limitation employment
(LSA) on the amount of relations. Thus
overtime work as far as the the LSA includes
collective bargaining at the enterprises
each enterprise reach the smaller than 10
agreement. employees that
were not the
subject of any
regulation in the
prewar period.
1986 Maekawa Report Realization of the annual Expansion of
total working hours equal domestic
to other industrialized consumption
countries by shortening
Realization of the two day- working time
off a week system
1987 New Maekawa Shortening the annual Expansion of
Report working hours to less than the domestic
1,800 until year 2000 consumption
Realization of the two day- by shortening
off a week system in the working time
public sector and banking
industry
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Appendices 187
1987 Revision of the Adoption of the 40-hour- “Working time

LSA per-week principle with reduction” as
transitional measures national policy
Introduction of the modified Modified working
working schedule system schedule system
Introduction of the deemed and deemed
working time system, working time
Discretionary Work system are
System for Professional established as
Occupations transitional
measures
1988– Gradual
2001 implementation
of the 40-
hour-per-week
principle
1992– 5-year Temporary Government is responsible to To further facilitate
2006 Statute to set up the Implementation the reduction of
Reduce Plan for Working Time working time
Working Reduction to achieve 1,800
Hour (rōdō hours of annual working
jikan tanshuku hours.
sokushin rinji The law was extended twice
sochi-hō: jitan until the end of the fiscal
sokushin-hō) year of 2005-2006 (at the
end of March, 2006).
1993 Revision of the The establishment of To provide advice
jitan sokushin-hō the Support Center for and subsidized
Shortening Working Hours funds for the
The establishment of employers who
subsidiary funds to try to shorten
support shortening working hours
working hours
1998 Revision of the The establishment of the
LSA Discretionary Work System
for white- collar workers
2001 Gradual 40-hour-per-week for almost
implementation all the companies
of the 40- Exceptional treatment of
hour-per-week 44-hour-per-week for
principle the smallest category of
company
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188 Appendices
A4.2 Discretionary work regulations as of 2000

DWS Item Description
DWS for Coverage Article 38-3...duties for which it is difficult

professional for the employer to give concrete directives
occupations regarding such decisions as the means of
accomplishment and allocation of time
because the nature of the duties is such that
the methods for accomplishment must be left
largely to the discretion of the workers
1. Research and development
2. Information systems design
3. Editing and reporting
4. Designer
5. Film and broadcasting production
6. And other tasks the Minister specifies
Under the condition 6)
• Copy writer
• Lawyer
• First class architect
• Patent agent
Body of Labor-management committee discusses about
regulation the coverage and deemed working time
DWS for Coverage Article 38- 4 ... workers who work at the
white- collar workplace where important decisions on the
works management are made, and who perform
tasks of planning, drafting, researching
and analyzing matters regarding business
operations for which the employer does
not give concrete directives regarding such
decisions as the means of accomplishment
must be left largely to the discretion of the
workers
1. The workplaces where important decisions
are made are:
• Headquarters
• Regional headquarters and branches
where function to make important
decision was given
2. The duties that employer does not give
concrete directives are:
• The duties related to management of the
enterprise
• Planning, drafting, research, and
analysis
9780230_209084_08_app.indd 188 11/29/2010 10:24:59 AM

Appendices 189
• The duties which, by their nature,

employer needs to give discretion for
workers to complete them
• The duties which employer does not
give concrete directives in terms of
the methods of completion and the
allocation of working time to complete
them
The guidelines for this law suggest concrete
examples of the applicable assignments,
such as, business administration, personnel
management, financial research and planning,
public relations management, sales planning,
and production management (Guideline 3-1-
(2)-ro-(i)).
Body of Labor-management council: It is mandatory
regulation to establish a new council by labor and
management besides the usual procedure of
labor-management agreement, and the council
has to have unanimous agreement on the
following issues.
1. Applicable duties
2. Applicable workers
3. Deemed working time
4. The concrete measures to secure health
and welfare of the discretionary workers
5. The concrete measures to process
complaints from the discretionary workers
6. The process to have assent from workers,
and the prohibition of unfair treatment of
rejected workers
7. Effective period
8. Preservation of records
Note: The table is assembled by the author from government records.
9780230_209084_08_app.indd 189 11/29/2010 10:24:59 AM

190 Appendices
A5.1 Future principles of labor management (all firms: %)
100
90
80
70 Unknown
60
Difficult to tell
50
Seniority and results
40
Results-oriented
30
20 Seniority-oriented
10
0
1990 1993 1996 1999 2002
Source: Survey on Employment Management: MOL 1990a, 1993b, 1996a, 1999d; MHLW
2002d.
9780230_209084_08_app.indd 190 11/29/2010 10:25:00 AM

Appendices 191
A5.2 The COMPUJ organizational chart as of July, 1994
Board of Directors
Chairman of the Board
President
Executive Committee, Corporate Management Committee
Corporate Staff:
Corporate Planning, Government Relations, General Affairs, Public Relations, Legal and
Administration, Human Resource Development, Industrial Relations, Controller and Internal
Auditing, Treasury, Credit Control and Collection, Corporate Design, Engineering Planning and
Coordination, Intellectual Property, Customer Satisfaction and Quality Management Promotion,
Manufacturing Coordination, Environmental Management, Purchasing, etc.
5 Marketing Groups
NTT Sales
Government and Public Sector Sales
Domestic Sales Group
International Operations Group
Advertising
11 Operating Groups
Research and Development Group
Software Development Group
Production Engineering Development Group
IT Infrastructure Group
Corporate Systems Group
Computers Group
Personal Computing Group
Semiconductor Group
Electronic Component Group
Home Electronics Group
Special Projects Group
Source: COMPUJ CI DATA, published by Corporate Design Division, 19 October 1994, mod-
ified by the author.
9780230_209084_08_app.indd 191 11/29/2010 10:25:00 AM

Notes
1 Sociological Theory of Employment Relations

1. The years around 1995 and 1996, especially 1996, may be exceptions. The
relatively strong figures of economic performance for the year were seen as
the signs of recovery from the post-bubble recession. The year 1997, how-
ever, marked a clear downfall again due to another round of financial crises.
According to Kikkawa, economic growth rate was lower than western coun-
terparts at least until 2002 (Kikkawa 2005).
2. The advocates of the argument include prominent economists such as
Shimada, Nakatani, Takenaka, and Yashiro. They claimed that Japanese style
management and supporting employment institutions, which once was the
best practice in the world until the end of the 1980s, is now obsolete, and has
to be changed. Further, they urged that all white- collar workers should stop
relying on their employing organizations, rather they should become inde-
pendent professionals able to choose their employing organizations through-
out their careers (Shimada 1996; Nakatani and Takenaka 2000; Yashiro
1999).
3. By using the broad term of ‘regulation,’ I mean that formal and informal
dimensions of contract/effort and mobility are negotiated in terms of the
rules, norms and cognitive framework (meaning system) at the domains in
all levels.
4. Streeck argues that “if the resources of the parties are distributed so asym-
metrically that much more depends for one party than for the other upon
the conclusion of a contract, then while contracts may be concluded, they
are contracts only in form; in reality they are commands” (Streeck 1992:
41).
5. According to T.C. Smith, Japanese labor movements at that time claimed
‘the right to benevolence’ within each organization rather than the uni-
versal rights as workers that can be observed in western counterparts. They
demanded better treatment and respect as ‘organizational members.’ In con-
crete terms, they required to make the boundaries between occupational/
educational groups less distinct, to open up avenues for promotion into
higher occupational groups based on experience and regardless of educa-
tional qualification, and the rewarding of benefits based on service in a work
community accepting the performance monitoring by management (Smith
1988). The process of labor dispute assembled ‘organizational membership’ as
the notion of authority relations at Japanese workplaces (see Chapter 2 for the
contemporary version of the formation of the same notion).
6. For the scholars of labor law, this is the very definition of ‘employee’ (Araki
1999).
7. It is important to note that there are societal, organizational and workplace
levels of politics as they help generate, maintain and change the institu-
tion that cover rules, norms and cognitive frames (Scott 2008: 89; Sato and
192
9780230_209084_09_not.indd 192 11/29/2010 8:34:08 PM

Notes 193
Yamada 2004). Fligstein argues that what the state-firm-labor politics cre-
ate is the patterns of institutions that cover rules to local cognitive frame-
work (culture) (Fligstein 2001). Particularly, he highlights that the politics
shape a local cognitive framework that makes sense therefore legitimizing
the structure of power relations and the pattern of stratification for those
who participate in labor markets.
8. The studies of neo- corporatism are typical cases. They investigated the
structure of resource mobilization of labor union movements as the sign
of their strength to achieve favorable results for workers. The structures
are largely categorized into pluralism and corporatism (and possibly other
variants) reflecting the degree to which these regimes are able to reflect
workers’ interests (Schmitter 1974; Inagami et al. 1995).
9. Campbell and Lindberg argue that “[s]tate may manipulate property rights
in different ways in different sectors of the economy, and this will influence
governance regimes in these sectors accordingly” (Campbell and Lindberg
1990: 635).
10. In this strand of thought, the market is not an automatic and completely
autonomous system that regulates the transaction between the par-
ties. Market transactions are enabled by a set of rules enforced by state
authority under which related actors need to define ‘property rights’ and
to set ‘rules of exchange’ in various markets through the negotiation
with other actors. In general, ‘property rights’ refer to the right to claim
profit in a capitalist society covering the rules that determine the con-
ditions of ownership, control of the means of production, and social
relations between owners and everyone else (Campbell and Lindberg
ibid., also refer Fligstein 2001). Without this concept, a market cannot
be organized. ‘Rules of exchange’ define the qualification of the parties
of transaction, and standardize the conditions of product in addition
to the settings of social technologies of exchange (common standards,
monetary exchange and the enforcement of contracts) (Fligstein ibid.).
These concepts are necessary to be defined and practiced under state
authority, and then realized to secure an individual’s freedom “to con-
clude valid contracts, to acquire, and dispose of, property” (Bendix 1996
[1964]: 92).
11. In most of the cases, exogenous states are discussed as only hindering
market processes or, at best, setting incentives for actors in the markets.
12. Ujihara had already in the 1980s, pointed out that the roles of labor stand-
ards and labor market regulations in defining contract relations are unrea-
sonably downplayed by the scholars of social policy who only emphasize
the importance of labor relations and collective bargaining (Ujihara 1989a:
Chapter 1).
13. This is again where ‘free contract’ and ‘free mobility’ matter. Given the dis-
proportionate power relations in the labor markets, there are lurking risks
for workers to lose their autonomy to move due to dominating employers,
exploitative labor market intermediaries and all kinds of discrimination.
Thus ‘free’ mobility requires regulation. The most fundamental one is the
constitutional endorsement to secure free mobility of workers (freedom
of choosing occupation) in any modern industrial society as a part of the
universal rights of citizenship.
9780230_209084_09_not.indd 193 11/29/2010 8:34:08 PM

194 Notes
14. In Japan, some of these regulations are summarized in a newly established

Labor Contract Act (rōdō keiyaku-hō) from March 2008.
15. Labor sociologists who work on the topic of workplace authority relations
and culture often downplay this association between the negotiation of
labor-management practice and the establishment of authority relations.
Clawson and Fantasia’s critique on Burawoy (1979) clarifies this point.
Burawoy is concerned that the culture among workers, which is supposed to
give autonomy for workers, actually ends up giving consent to a specific pat-
tern of workplace authority relations (Burawoy 1979). Clawson and Fantasia
argue that such culture appears only when workers agree on the working
conditions negotiated at organizational level bargaining, and would be rene-
gotiated once the conditions are changed (Clawson and Fantasia 1983).
16. In this book, I will use the term ‘labor ministry’ to mean the Ministry of
Labour (MOL: 1947–2001) and the Ministry of Health, Labour and Welfare
(MHLW: 2001–) unless the exact name is not necessary.
2 Employment Relations in Postwar Japan

1. Nimura says “what looks exceptional that requires explanation seems to me
the characteristic of labor movements of the western Europe and the US in
which workers of same occupation unite instead of making unity among
workers who work together at the same workplaces seeing with each other
everyday” (Nimura 1987: 83). He speculates that the reasons for this ‘excep-
tional’ characteristic can be traced back to the occupational guild tradition
and the very specific structure of medieval cities (Nimura 1987).
2. Kawanishi notes the fact that some industries still use the variation of
this densan-gata chingin to show the strong influence of this wage system
(Kawanishi 1999).
3. The integration was achieved in most sectors of the economy by the end of
the 1960s (Hisamoto 1998).
4. The spring labor offensive started in 1955, and consisted of bargaining
for so- called ‘bēsu appu’ (base-up) of average wage. Negotiations are done
in every industry. The standard of base-up negotiations at shuntō in lead-
ing industries also affects other industries. The wage levels, even in public
service and nonunion organizations, are decided with reference to these
negotiations.
5. In terms of the practices of job transfer, a detailed analysis can be found in
the works by Inagami (2003). Inagami argues that job transfer, shukkō, was
first executed to dispatch workers with required skills, such as managers
and technicians/engineers, to expanded areas of business, mostly done by
subsidiary companies. Negative connotations of job transfer, which means
labor force trimming, appeared after the oil shocks in the 1970s (Inagami
2003).
6. This policy was also shared by the labor ministry at that time. This was
accompanied by the idea to abolish ‘lifetime’ employment and to estab-
lish external labor markets with stratified system of occupational training
(Hamaguchi 2004).
9780230_209084_09_not.indd 194 11/29/2010 8:34:08 PM

Notes 195
7. Externalization of some parts of organizational functions became com-

mon during this period, which was called ‘outsourcing.’ The maintenance
of office buildings, data processing, some miscellaneous tasks of R&D, and
some clerical jobs were outsourced (Ujihara 1989b; Takanashi 2001a). And
since the workers in this outsourcing industry frequently needed to work at
clients’ work sites, this form of employment became the base of haken (tem-
porary dispatched) form of work, which was legalized in the late 1980s (see
Chapter 3 for further details).
8. Kume evaluates it more positively as the highest achievement of labor in the
postwar history (Kume 1998). Inagami et al. tried to determine if Japanese
policy making in the field of labor is corporatist or not, and, if it is, what
type of corporatist regulation it is. Even though their studies were carried
out in the late 1980s to the early 1990s, right after the successful concentra-
tion of labor movements to the new national center, Rengo, they reserved
the conclusion, although it is not “corporatism without labor” (Inagami
et al. 1995).
9. In Japan, workers in the public sector are prohibited from striking. It was
workers of Japan National Railway who claimed the right to strike in 1975.
10. Later, Nakasone, the former prime minister, stated in interviews with print
and television journalists that the purpose of privatization was to achieve
the collapse of labor movements within the public sector. “I wanted to
smash down Sohyo. I was clearly aware that if Kokuro (the trade union of
Japan National Railroad) was destroyed, it would automatically collapse
Sohyo” (AERA 1997, January).
11. Dore found the preference structure of labor trimming among Japanese
companies. That structure consists of reducing board members’ remunera-
tion, cutting wages, cutting paid hours of work (chiefly overtime), freezing
recruitment, the hiring of temporary and seasonal workers, reassignments
and transfers, calls for voluntary retirement, and dismissal (Dore 1986). He
describes that “of these the easiest institutionally to cut is paid employment
in the form of overtime” (Dore ibid.: 91).
12. The graph demonstrates that the difference of overtime among firm sizes
decline. One clear reason for this is that smaller companies were able to
set longer scheduled working hours (shotei nai rōdō jikan) than large ones
after the LSA revision in 1987. For instance, smaller companies have been
treated as an exception from the 40-hour-per-week principle during most of
the 1990s. Another reason is that large companies are more strongly bound
by the norms of lifelong employment, under which companies need to
maintain the practice of long-term employment. Subsequently, they need
to adjust overtime to cope with business conjuncture rather than adjust-
ing wages and employment. Smaller firms may find it slightly easier to
adjust wages and employment than large firms (see Chapter 5 for further
details).
13. Takanashi points out that paato started to expand at the end of the 1960s,
but it became truly visible in the 1970s from the aftermath of oil shocks
(Takanashi 1993: 103–4).
14. The number includes ‘director.’ The number that excludes the category is
74.9 percent.
9780230_209084_09_not.indd 195 11/29/2010 8:34:08 PM

196 Notes
15. Without directors, the percentage is 88.2 percent. Larger firms tend to
employ workers as regular employees more than the smaller ones, which
indicates that lifelong employment practices (for regular workers) are more
strongly maintained at the large firms. At medium and small size firms, the
idea of lifelong employment is not entirely practiced, while it is considered
as an ideal. Scholars found a dualistic structure in the Japanese labor market
based on the size of the company. Wage and welfare programs are much bet-
ter in the larger companies throughout the postwar history. The dualistic
structure was strengthened in the 1960s and 1970s. It was slightly relaxed
in the 1980s, but there is no significant sign of change after the burst of the
bubble economy (Watanabe and Sato 1999; Hashimoto 1999).
16. The number is also from the Employment Status Survey in 1987. This year,
the number of male employees was 29,154 thousands, and workers who are
employed by private enterprises (eliminating the ones employed by public
entities) that employ more than 1,000 workers counted 5,732 thousands.
Among them, 5,612 thousands were regular employees (97.9 percent). This
number includes directors.
17. Recently, the category of paato started to also cover young female workers.
18. Kisetsukō means seasonal workers and gaikokujin rōdōsha means foreign
workers. The author classifies these categories of workers as employed from
the labor market, which means that many of them are employed through
intermediary agencies and/or networks that connect the foremen of small
firms. Especially in the case of foreign workers, some researchers such as
Tan-no point out the importance of the intermediary agencies and networks
(Tan-no 1998, 1999).
19. There are two types of enterprise groups: horizontal keiretsu and vertical
(hierarchical) keiretsu. The formation of the former type was more like a
revival of prewar zaibatsu relations. In our context, the formation of the
latter is more important. Vertical keiretsu was first formed in the midst of a
wartime economy by a different name to coordinate production and price
control. The occupation government and the new Japanese government
failed to completely dissolve this wartime organization, rather starting to
rely on it to establish Japan as an independent capitalist economy, espe-
cially after the outbreak of Korean War. After this period, the interfirm rela-
tion started to be called vertical keiretsu (Lincoln and Gerlach 2004).
20. To clarify this point, Shire notes the example of those young workers who
favor leisure time and family life over working life are considered childlike
and therefore selfish (Shire 1999). Kumazawa completely agrees with this
point. He criticizes the surveys that ask workers to make a choice between
a ‘date or overtime work’ since such a ‘choice’ simply does not exist in the
reality of the Japanese workplace (Kumazawa 1997: 96).
21. Ota’s observation is consistent with the historical study of working time at
Japanese workplaces by Smith, who argues the embeddedness of working
time in social relations among Japanese workers (Smith 1988).
22. Changing employers was stigmatized in Japan. Some proverbs portray work-
ers who change jobs lacking guts, seriousness, and a sense of responsibility.
23. The age distribution of women’s labor force participation assumes a stronger
M-form in Japan. This is because large numbers of women temporarily leave
the labor force and then return in their late thirties and forties mostly as
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Notes 197
paato workers (for further details, see for example, Brinton 1993). In Sugino
and Yoneyama’s definition, the term ‘shufu-ka’ (becoming a housewife) is
used to describe their withdrawal from the labor market to become full-time
housewives. By this term, the authors mean those women who leave the
labor market a year before or after marriage and stay out of the labor market
for at least three years.
24. To solicit scientific advice before deliberation, the advisory council some-
times creates study groups composed solely of scholars.
25. The results of the last survey indicate a potential turnaround of the trend.
As shown in the table, the total number of labor disputes marked a histor-
ical low in 2007. However, it shows the increase of the number of strike to
156 from 116 in 2006. The number of participants in the labor disputes also
increased. It recorded its historical low in 2005 (27,295), but it marked 54,105
in 2007. Man- days lost to strikes also increased from 5,629 (2005) to 33,236
(2007).
26. Iida Yotaro served as president, and then chairman of Mitsubishi Heavy
Industry from 1985 to 1989. He also served as vice president of Nikkeiren
from 1989 to 1991 and then as vice president of Keidanren from 1990 to
1994. He chaired the Administrative Reform Committee from 1994 to 1997.
27. See the first public announcement by the committee in December 1995,
called ‘the opinions on the deregulation: seeking to be a brightly shining
country (kisei kanwa no suishin ni kansuru iken: hikari kagayaku kuni wo meza-
shite)’ by the Administrative Reform Committee for further detail.
3 Political Segmentation of the Labor Market: The

Establishment and Expansion of New Employment Forms
1. Nikkeiren was one of the major management associations that specialized in
labor-management issues. It merged with Keidanren, the top management
association that makes economic and social policy proposal, in 2002. The
new management association is called Nihon Keidanren, and its English
name is Japan Business Federation (JBF).
2. The labor supply business was the most serious issue faced in modernizing
and democratizing the postwar Japanese labor market. The dispatching of
labor in the prewar era was common for the lowest rank of jobs in industries
such as construction, mining, and transportation, in which labor bosses
and laborers did not have a regular employment relation (Takanashi 2001a:
34; Goka 1999: 101).
3. The list of applicable occupations includes 29 occupations such as medical
technician, house helper, hairdresser, cleaning technician, cook, bartender,
interpreter, and model. This list first started as 11 occupations, and grad-
ually expanded to 29 by 1990. For a detailed analysis of this gradual expan-
sion, see Goka (1999: 136).
4. After the 1950s, especially following the rapid economic growth triggered
by the Korean War, public job placement functioned largely to support allo-
cating newly graduated students to the focused industries and industrialized
regions (Kariya, Sugeyama, and Ishida 2000). After this period, however,
the importance of public job placement began to decline. Workers started
9780230_209084_09_not.indd 197 11/29/2010 8:34:09 PM

198 Notes
to use other routes to employment. New graduates from high schools and
universities used the formal and informal networks of their schools. The
placement of new labor market entrants by educational institutions became
a widespread practice in the Japanese labor market and counted as one of
the major characteristics of Japanese management (Yoroi, Wakita, and Goka
2001: 219). Thus, the role of the public job placement declined significantly
after the rapid economic growth, and job placement in general became the
issue of privatization during the 1990s.
5. See Lincoln and Gerlach (2004) about the historical development of
Japan’s network economy. According to Lincoln and Gerlach, there is
historical continuity between before and after the Second World War
in terms of the organization of the network economy in Japan. During
the war, in addition to the horizontal network, small and medium size
firms were organized under large firms for the purpose of war, which is
now seen as the roots of vertical keiretsu. After the war, the occupation
government wanted to dissolve all wartime economic structures but was
incomplete due to the eruption of Korean War. Key components such as
horizontal and vertical networks, as well as main bank and main trad-
ing company systems, were utilized to support rapid economic growth
(Lincoln and Gerlach 2004).
6. Ukeoi means subcontracting, and is the same as shitauke in that the term
is more sensitive to the hierarchical nature of vertical keiretsu relations.
Shagaikō is typical of company external labor being dispatched from
subcontractors.
7. For further details about the development of the regulations that tried to
distinguish between regular kōnai ukeoi and illegal ones, see Imai (2004).
8. In the context of the chaotic situation after the war in the 1950s, the mis-
sion of the labor ministry was full employment (in Japanese, it is called as
kanzen koyō) besides modernization and democratization of the labor mar-
ket. In an expanding economy, full employment was defined as no unem-
ployment or precarious employment (Ujihara 1989b).
9. The first eight companies established the industry organization as The
Japanese Association of Clerical Service Contracting (nihon jimu-shori
sābisu kyōkai) in 1984 (JASSA 2002).
10. One of the major clerical jobs at that time was telex operator. Due to the inter-
nationalization of commercial activities, there were increasing demands for
telex operators working at irregular working times at, for instance, trading
companies (Takanashi 2001a, 2001b).
11. The law was made as the special law of the ESL, and was primarily a regu-
lation that controls temporary dispatching work business. For the further
details of the process of law making, see Imai (2004).
12. It allowed the triangular employment relationship, unusual as an employ-
ment relationship because of the disconnection between employer and user
of the labor, as the workers are employed by the dispatching companies and
protected under the law.
13. The 1988 White Paper on Labor (rōdō hakusho) published by the labor min-
istry, for instance, argued that structural changes in the service sector are
best undertaken through business diversification and internal relocation of
workers within diversified corporation (MOL 1988a).
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Notes 199
14. Although some occupations were added to the positive list by the requests
from industrial associations (gyōkai), there were some occupational groups
that either did not request or were declined to be added to the list. For
instance, port labor is specifically excluded from the list because of
the argument that this labor market system was already established by
the Longshoring Employment Law (kōwan rōdō-hō). The Longshoring
Employment Security Association (kōwan rōdō antei kyōkai), established in
1980, may have had an influence on this decision. The same can be said
with respect to construction labor. It is excluded since relevant laws were
already in place, which were designed to improve the employment relations
in this industry. Therefore it was not considered appropriate to adopt a new
system of temporary dispatching work.
15. These plans include Comprehensive Plan for Employment Activation (koyō
kassei-ka sōgō puran) in 1998, Emergency Plan for Employment (kinkyū koyō
taisaku) in 1999, Employment Measures in Economy Rebirth Plan (keizai
shinsei taisaku ni motoduku koyō taisaku) in 1999, and Employment Measures
to Dissolve Mismatches (misumacchi kaishō wo jūten to suru kinkyū koyō tai-
saku) in 2000.
16. ILO Convention no.181, which is called Private Employment Agencies
Convention, generally accepts the activities of private employment agen-
cies, including THAs, and facilitates worker protection as implied in
the Recommendation no.188, called the Private Employment Agencies
Recommendation, which is attached to the Convention. Japan rati-
fied the Convention (and the Recommendation) in 1999. In this process,
Rengo and the Japanese government voted for both the Convention and
Recommendation while Nikkeiren only voted for the Convention (Rengo
1999:.132). It is said that the ratification of the Convention was the direct
trigger to liberalize the temporary dispatching work system to the negative
list system.
17. ILO Convention no.096 is called Free- Charging Employment Agencies
Convention (Revised).
18. About these first two occupations, this limitation is applicable to only the
tasks which can be done by new graduates having left school within the
previous year.
19. Service occupations do not include housekeeper, hairdresser, cleaning tech-
nician, cook, bartender, and model.
20. It is said that this revision added ‘white- collar’ occupations to the original
29 occupations (Goka 1999: 151).
21. Koike Kazuo was a professor of labor economics at Hosei University, Tokyo.
22. Sugeno Kazuo was a professor of labor law at the University of Tokyo.
23. Suwa had been a chair for the Special Committee of Private Job Placement of
the Advisory Committee on Employment Security at the Ministry of Labor,
and was responsible for the revisions of the TDW Law in 1994, 1996, and
1999.
24. For the further details of the revision, see Imai (2004: 20) and Goka
(1999: 151).
25. The ministry’s announcement specifies 11 occupations, such as medical
doctor, lawyer, authorized architect, and pharmaceutical chemist. Most of
them are professionals that have their own established labor markets already.
9780230_209084_09_not.indd 199 11/29/2010 8:34:09 PM

200 Notes
Workers with doctoral or master’s degrees were also chosen, although work-
ers with master’s degrees were required to have three years’ experience.
26. The LSA Article No. 14–2.
27. The examples of the combination of these criteria are shown in the min-
isterial ordnance as “master’s degree with 3 years of experience,” “bach-
elor’s degree with 5 years, associate bachelor’s degree with 6 years, and high
school diploma with 7 years of experience.” Except for engineers, earning a
master’s degree is still uncommon in Japan. Thus, the revision was consid-
ered to expand the applicability of the limited-term contract to the regular
white- collar workers.
28. The trend looks to be independent from the deregulatory reforms. Rebick
(2005) however reports that there has been trend of inflow to paato sector
of employment from self- employed and family employment sectors. This is
partly due to the deregulatory reforms that lift the protective regulations for
the self- employed sector, which became the pressure for women to partici-
pate in employment leaving self- employed or family employment. Thus, it
is not completely independent from the deregulation.
29. The problem is named furītā problem. The word ‘furītā’ does not have a clear
definition, rather it broadly signifies a group of young workers who do not
get on the standard track of employment. The White Paper of Labor (2000)
defines it as young workers ages between 15 and 34 who work or wish to
work as paato and/or arubaito (MOL 2000a). The White Paper of Lifestyle
(2003) defines it a little more broadly including those who wish to work as
paato, arubaito, and sei-shain but do not currently have a job (Cabinet Office
2003). In both definitions, students and housewives are excluded. It is con-
sidered as a problem since most of these workers are said to be characterized
as not having ‘appropriate future prospects.’ The government started to sub-
sidize funds to give young workers occupational training, and to reestablish
the channels between education and work.
30. 11.2 percent or 887,000 out of 7.9 million were IT (information technol-
ogy) engineers in 2002. The number of IT engineers is only available
from the 2002 survey. Therefore, the dynamics of this category cannot be
discerned.
31. Since deregulation, the types of industries demanding temporary work-
ers have also shifted, from traditional areas of finance and insurance, to
ICT (information and communication technology) and other high-value-
added service industries (haken rōdō ni kansuru jittai chōsa, reported by Imai
2004).
32. Although the equal treatment of haken workers became an issue for the first
time in 1999, which encouraged THAs to participate in employment insur-
ance, it has never become a central issue until very recently. The TDW Law
was established as a law to regulate business but was less to protect workers
(see note 11 of this chapter).
33. Important formal legal change that is not included in the discussion of this
book but might have significant impacts on employment security and other
labor conditions of regular workers is the revisions of the Commercial Code
(shōhō). There were several waves of revision after the mid-1990s as a part of
deregulatory reforms. The revisions include the one in 1997 that introduced
the system of stock option and the one in 2000 that enabled a company
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Notes 201
to split to ensure smooth corporate restructuring. The latter linked closely

with the issues of labor contracts and mobility as it allows a company split
as well as the transfer of workers without their consent that may degrade the
terms of contracts.
34. Tokyo Metropolitan Government has conducted surveys four times on tem-
porary agency work since the enactment of the TDW Law. The latest sur-
vey was carried out in 2006 subjecting all related actors including temporary
agencies, client firms and registered-type temporary workers. In 2006, 2000
agencies, 2000 clients, and 2000 workers were chosen, and collection rates
were 36.3 percent, 37.9 percent and 36.0 percent respectively. Results are pub-
lished as Survey on Temporary Dispatching Agency Work 2006 (haken rōdō
ni kansuru jittai chōsa 2006) (Tokyo Metropolitan Government 2007). The last
survey was done in 2002 using the same research design and published in
2003.
35. In Japanese, different vocabulary is used to mean ‘layoff’ for non-regular
workers. In the case of a non-limited term contract, layoff is ‘kaiko.’
36. Labor Standards Act, Article No. 14, Item 2. MHLW Announcement
No. 357.
37. According to the Basic Survey on Wage Structure (chingin kōzō kihon tōkei
chōsa) in 2009, non-regular workers typically earn 65 percent (men) or 70
percent (women) of regular employees on the basis of monthly wage (MHLW
2009c).
38. Employment Diversification Survey in 2007 (shūgyō keitai no tayō-ka ni
kansuru sōgō jittai chōsa: MHLW 2008b) was conducted by MHLW. It con-
tains surveys for firms and individuals. In the 2007 survey, it was sent to
15,638 firms and 56,212 individuals working in these firms, and response
rates were 69.0 percent and 51.2 percent respectively.
39. This result is consistent with the conclusion shown by Lee and Shin using
the newest SSM survey data that points out the high boundary between
regular and non-regular employment in Japan compared to the equivalent
in the South Korean labor market (Lee and Shin 2009).
40. For further details of the increasing importance of THAs as the mediators
of external labor market in Japan, please see Imai (2009) and Sato, Sano and
Hotta (2010).
41. We have not found a reliable source on the number of THAs in Japan. The
enterprise count is based on the Business Report of the Temporary Help
Industry.
4 The DWS: Deregulation of Working Time and Its Impact

on the Effort–Bargain
1. In Japan, the restriction for women to work late at night was abandoned in
1999 as it was claimed ‘discriminatory.’
2. Inspection by the Labor Standards Supervision Office was often seen as
nominal, and it was just after 2001 that the number of correction orders
(zesei kankoku) by the office was made public, given the increase in the
abusive use of various flexible measures of working time especially the
DWS.
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202 Notes
3. Japan does not ratify ILO Convention No. 1 that sets upper limits on the
working hours per day and week. Japan actually does not ratify any of work-
ing time related ILO conventions.
4. The subjects of the Monthly Labor Survey (maitsuki kinrō tōkei chōsa) used
in this figure are firms larger than 30 employees. The numbers are cal-
culated by the following formula: average monthly working hours x 12.
Before 1983, the numbers are simply the accumulation of monthly working
hours. The numbers of overtime working hours are calculated from ‘annual
working hours’ and ‘scheduled working hours.’ The survey shows relatively
shorter hours of working time than the Labor Force Survey (see difference
in Figure 2.4 in Chapter 2).
5. See Chapter 3 about the doctrine of abusive dismissal.
6. The revision was prepared at the Working Group of Labor Standards (rōdō
kijun-hō kenkyū-kai) started in May 1982 as an informal advisory committee
for the labor ministry. The group consists of 24 members divided into three
sessions and was headed by Ishikawa Kichiuemon, Professor Emeritus at the
University of Tokyo. The purposes of the group was to conduct research and
make proposals on labor contract (session no. 1), working time (session no.
2), and wages (session no. 3) (OISR 1983: 302–3). They proposed the final
report in December 1985 (OISR 1987: 479).
7. To facilitate the gradual implementation of the 40-hours-per-week system,
the five-year statute of the Reduction of Working Time Law (jitan sokushin-
hō) was established in 1992, which offers state subsidy to encourage reducing
working time. Its revision in 1993 established the Support Center for the
Reduction of Working Time (rōdō jikan tanshuku shien sentā) to facilitate the
funding especially for medium-small size companies. The law was extended
twice until the end of the fiscal year of 2005–6 (at the end of March, 2006).
8. Originally, in the revision of the LSA in 1987, there was the IWHS for three
months. The IWHS for a year appeared in the 1994 revision by the exten-
sion of the three months system. Under the system of the IWHS for a year,
for instance, it is possible to let workers work up to 52 hours per week with
a regular rate of wage.
9. In legal theory, the DWS is categorized as one of the ‘deemed working hours
systems (minashi rōdō jikan sei),’ distinguished nominally from the ‘white-
collar exemption’ that completely annuls the concept of ‘working time.’ In
‘deemed working hours system,’ employers and workers negotiate about the
‘deemed working hours’ such as 9 hours a day, which consists of 8 hours of
scheduled working hour and 1 hour of overtime. Regardless of the actual
working hours, like 12 hours or 3 hours, the wage contains the overtime
premium fixed at 1 hour. Thus, substantially, it is possible to say that it
annuls the concept of working time, although it still contains the element.
10. Later, some occupations such as copy writer, certified public accountant,
lawyer, first class architect, real estate appraiser, and patent agent were
added to the list.
11. Labor unions set 1989 as the ‘new year’ of working time reduction (jitan
gan-nen).
12. It, for instance, presented its own research on the relationship between
productivity and working time reduction, and emphasized that it improves
productivity rather than reduces productivity (MOL 1991b: 77–90).
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Notes 203
13. About the government subsidies that compensate for costs produced by the
reform, see note 7 of this Chapter.
14. The table shows that the most used among the newly established working
time systems was the IWHS- One Month, then replaced by the IWHS- One
Year by 1996 after the IWHS-Three Month was revised to One Year in 1993.
The effects of these two measures on cost reduction are similar (while some
practitioners argue that the latter is slightly more cost effective than the
former), but major industries in Japan such as manufacturing and construc-
tion prefer IWHS- One Year to One Month, but it is the opposite at trans-
portation/communication and electricity, water and gas industries (Yoroi,
Wakita and Goka 2001: 77–8).
15. Japanese firms tried to cope with the situation by 1) flexible allocation
of overtime work, 2) stricter control of total personnel cost, and 3) using
the government subsidies for employment adjustment (koyō chōsei-kin)
(Nikkeiren 1995: 31).
16. The first one is to establish a ‘professional’ track for regular white- collar
workers to reduce the number of workers in the ‘managerial’ track. This
partially relates to the employment diversification strategy examined in
Chapter 3.
17. The data is from The Special Survey on the Discretionary Work System
(sairyō- rōdō-sei ni kansuru tokubetsu chōsa). The survey was conducted
by Rengo in April 1999 for member trade unions. The questionnaire
was distributed to the trade unions of those companies where the DWS
(for professional occupations) was already introduced. 36 trade unions
responded.
18. The Preliminary Discussion Committee for the DWS (sairyō-rōdō-sei ni
kansuru kenkyū-kai) is an informal working group for the Director of the
Division of Labor Standards in the labor ministry. It was headed by Sugeno
Kazuo, the professor of law of the University of Tokyo. The committee com-
menced discussions in April 1994, and made the report in April 1995.
19. The Central Advisory Committee on Labor Standards, Section on Working
Time (chūō rōdō kijun shingikai, rōdō jikan bukai)
20. Nakamura notes that the proposal by the labor ministry was rather unex-
pected (Nakamura 2001: 467).
21. One public representative of the tripartite advisory council reluctantly
admits that the discussion was hastily driven by the interest on product-
ivity skipping the discussion about how to locate the concept of ‘discre-
tionary workers’ in the labor law. From the legal point of view, the question
of whether white- collar discretionary workers are actually ‘employees’ in
the legal definition should have attracted more attention. Under labor laws,
‘employees,’ by definition, do not have discretion, but are under someone’s
direction. So he argues that this point should have been clarified before
actually planning the structure of the DWS. He described the process of the
discussion that “strong emphasis was on the effect of the system to decouple
working time and wage reflecting the employers’ interest to activate corpor-
ate activities” (Araki 1999: 7).
22. Even when there was already a labor-management committee, it was neces-
sary to establish a new labor-management council (Rengo 1997d; Araki
1999).
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204 Notes
23. The ‘Study Group’ is officially the Study Group on the Discretionary Work
System (sairyō-rōdō-sei ni kansuru kenkyū-kai), established in 1994 under the
division of labor standards at the labor ministry. The final report was made
in April 1995.
24. These industrial unions organize about 700,000 members each. They repre-
sent two of the most influential industries in Japan, and have strong posi-
tions in Rengo.
25. Suzuki Katsutoshi was the chairman of the Central Executive Committee
of Denki Rengo and the vice chairman of Rengo at that time. He started his
career as an unionist when he worked at Komukai factory of Toshiba. He
later became the chairman of the Toshiba union. He was considered one of
the most outspoken union leaders.
26. This also proves the increasing influence from the deregulation committee.
Traditionally, the tripartite advisory council discusses issues until they can
come up with the compromise. However, this time, due to the time limit set
by the deregulation committee, the advisory council needs to pass the unre-
solved proposal with notes on conflicting opinions on to the Parliament
session. Miura sees it as an increasing role of the Parliament session as well
as the deregulation committee (Miura 2002).
27. The issues include the coverage of the system in terms of the tasks and
the types of workers; health and welfare measurements; complaint process-
ing; workers’ consent; the prohibition of the unfair treatment to those who
reject to be covered; and the preservation of records.
28. The data are from The Survey on the DWS (sairyō- rōdō- sei ni kansuru
chōsa) conducted by the labor ministry in 2002 by sending question-
naires to all the companies that reported their use of the DWS for profes-
sional occupations and white- collar workers to the ministry during the
fiscal year of 2001. It includes 1,693 companies and business sites. 684
companies responded (response rate is 40.4 percent). Among the 1,693
companies and business sites, 126 of them use the new discretionary
system; 63 of them replied (response rate 50.0 percent). In the table, the
N for professional occupations is 630, and the N for white- collar works
is 63.
29. These systems are called, for instance, Vital-Work at NEC and SPIRIT at
Fujitsu.
30. For further details of the alternative labor movement, please see footnote
no. 19 in Chapter 5.
31. Employers started to see the introduction of the system of white- collar
exemption (from working time regulations) as a realistic alternative (or
extension) of the DWS (JBF 2002, 2003, 2004).
32. The LSA article no. 38–4–1–2
33. The guideline is based on the discussion at the Study Group on the Guideline
of the DWS (sairyō-rōdō-sei no shishin no arikata ni kansuru kenkyū-kai) led
by Koichiro Imano, a professor at Gakushuin University. The report was
released in September, 1999 (MOL 1999c).
34. The guideline 2–2 to secure the appropriate working conditions for work-
ers who work for the tasks which are set in the article no. 38–4–1–2 (MOL
announcement no. 149, 1999)
35. MOL, 1999, op. cit. The guideline 2–1
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Notes 205
36. MOL, 1999, op. cit. The guideline 3–1–i. And it notes that the employer does
not give any concrete directions only in terms of the methods of work and the
allocation of time, but can give directions or make changes on the purpose
and the objective of the tasks, the due date and the reporting coordination.
37. Mr. Itoh, the director of the section on working time regulations of the divi-
sion of labor standards, at the Parliament session in April 1998
38. It says that the applicable workers have to have more than three to five
years of experience (MOL, 1999, op. cit. The guideline 3–2–(2)). The internet
home page of the labor ministry shows, for example, the range of “more
than five years of experiences, and higher than shunin- class (e.g. rank XX in
ranking and qualification: MHLW, ‘On the DWS for white- collar workers,’
http://www.mhlw.go.jp/general/seido/roudou/kikaku/#q2).”
39. MOL, 1999, op. cit. The guideline 3–2–(1)
40. There still remains the responsibility to keep records, if not precise, of work-
ing time, not in order to calculate the overtime premium, but in order to
negotiate the appropriate length of the fixed nominal ‘deemed working
hours’ necessary to use the DWS under the current regulation.
5 Re-bargaining Effort: The Introduction of

Results- Orientation at COMPUJ
1. Figure 5.1 only includes firms with more than than 5,000 employees.
See Appendix A5.1 for the figures that include all firms. The numbers are
slightly lower than for the large firms, although the trend is similar.
2. With regard to the number of employees, it was less than 10,000 in 1950.
It increased to about 20,000 in 1960, 30,000 in 1970, and reached 40,000
in the early 1990s. The majority of the workforce changed from blue- collar
workers to white- collar workers in the mid 1960s. Since then, the propor-
tion of blue- collar workforce has gradually declined.
3. This series of reforms is increasingly considered to be the best practice of its
kind in the field of labor- management practices. Various management jour-
nals reported the new developments in this company as leading examples
of the reform movement. Experts also recognized COMPUJ as an exemplary
case. Kusuda Kyuu, the founding father of the ranking and qualification
system at Japanese firms, praises the case of COMPUJ, as the model in the
future of Japanese labor management (GRIPS 2003: 282).
4. As COMPUJ adopted union shop principles, employees who are eligible
for union membership are all union members; the organization rate is 100
percent. However, the union official showed serious concern about the rai-
son d’etre for the labor union as literally nobody cared about what the labor
union does.
5. These comments were sent back to the workers, but all other parts – espe-
cially the parts where supervisors evaluate subordinates by grades (of five
ranks) were not. They were kept confidential.
6. The demographic composition of the members of the new department is
as follows. Total number of the worker is 57: 42 are regular employees, and
shukkō workers from regional subsidiaries count 14 with one regular worker
of midterm hire. Among 42 regular employees, 19 are from the engineering
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206 Notes
department, 16 are from the sales department, 5 are from the marketing
section, and 2 have clerical backgrounds. Among the total number of 57,
11 occupy managerial positions (one buchō, two sen-nin buchō, and 8 kachō).
Low end managerial (but still have union membership), shunin, counts 15,
and there are 31 nonsupervising staffs (tantō).
7. It consists of three trends that summarize the technological and product
situation of the company: 1) the growing importance of PC’s and networks
over mainframe systems, 2) the importance of software over hardware, and
3) the ‘openness’ of systems, meaning the use of a number of different com-
panies’ products.
8. The creation of the new type of worker is not specific to COMPUJ, and is
used commonly among Japanese electronics companies. The division man-
ager of Corporate System No. 4, who later became the CEO of COMPUJ,
explained that “the concept of SI- er emerged out of the developing open-
ness of the market.” He said that “it [SI- er] is not a job to just coordinate
various hardware and software available, but is a role to give customers a
total solution.”
9. The division manager believed that COMPUJ’s business had been passive
in its sales style: just receiving orders. As there was no necessity for cus-
tomization before, active marketing was not necessary. He wanted organiza-
tions and workers to be much more “proactive.” He expressed that the core
of such capability is “teian-ryoku” (capability to make proposals), and he
expected SI- ers to be able to learn and to use ability in the newly established
department.
10. After working full-time for the union for several years, union officers of
COMPUJ tend to return to the work organization as managers. This inter-
viewee implied that this job transition is different from union officers in
other companies in the same industry.
11. For further details of the term ‘competency,’ see the next section of this
chapter.
12. Interestingly, the ranking and qualification system at COMPUJ had its basis
on occupational categories. This is because the system was established in
the 1960s when employers in Japan had still not given up the introduc-
tion of the job-rate system. Although the system has an occupational basis
that actually categorizes 112 occupations within four broad categories, the
system at COMPUJ had already lost its initial intention and was used as a
regular ranking and qualification system. Workers are assigned and rotated
across these occupational categories, and most importantly, only six rank-
ings, not the occupational category, matter in wage determination and
promotion.
The reform in 1995 finally abandoned the occupational category. The
revision of the wage component for shunin in that year was to increase
the performance component in their wage system, and it was necessary to
officially abandon the category that in face value had a place in the wage
system. Until this time, there were five components in wage of nonmanage-
rial workers: honkyū (main wage), kakyū (additional wage), shigotokyū (per
assignment), shikakukyū (per ranking and qualification), and sho-teate (vari-
ous allowances). The revision is to reorganize these components into two
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Notes 207
categories, gekkyū (monthly salary) and sho-teate (allowances), in order to

exclude the component of shigotokyū. The component was already nomi-
nal, and was unnecessary to direct workers’ effort to organizational goals.
Although it was nominal, it was still necessary to officially eliminate this to
strengthen results- orientation and to increase and emphasize ‘performance’
component. One manager of the personnel department, who was responsi-
ble for the reforms of the labor management systems, emphasized that “we
should not use the occupational classification here. This blurs our [compa-
ny’s] expectations toward workers” (interview: a manager of the personnel
department, 10 May 1995).
13. The role of performance was expanded in wage determination and promo-
tion for the workers in the group A. For workers in B and C, performance is
less relevant, although their salary is pegged more to the role than to age.
In theory, the fastest can promote to managerial rank in three years in
group A.
14. The evaluation process became a little more open than before partially
reflecting the labor union’s request for ‘openness’ of the system. Following
the workers’ self- evaluation, supervisors evaluate workers in six grades using
the principle of relative evaluation. Workers are now able to access results
of the evaluation on each item of competency on the intranet. However the
overall evaluation results can be only known by the salary band where work-
ers can find themselves. The table showing the relationship between wage
increase (or decrease) and total evaluation points is accessible for workers
on the intranet (Rōmu Gyōsei Kenkyūjo 2001, interview: alternative labor
union member, 13 February 2003).
15. In the earlier system of job announcement, workers were not allowed to
move to existing departments or sections as it was seen as discontent against
the immediate supervisors.
16. It was implemented 16 times from its establishment in 1988 until 2001, but
the system had been rarely used.
17. The 10 percent who did not apply include; 1) shukkō workers, 2) those who
have relatively little discretion in their work because of the nature of the
work and the workers’ ability, 3) those who are assigned to time- consuming
jobs, and 4) those who are assigned to the jobs that are suitable for time
management. From item 2), we know that the “low achievers” are not
included to the system.
18. One board director who was responsible for the expansion of the DWS
needed to frequently visit the labor ministry to explain that most of the
white- collar workers were actually suitable to be included in the DWS
(Nikkei 2002b).
19. This group was formed in 1996 to hold study sessions and to conduct sur-
veys on employment and labor-management issues in the hope of reflecting
the results on the policies of main stream labor union at COMPUJ. They
constructed ties with other alternative labor union movements at other
companies in electronics industry, and the alliance is called ‘denki rōdōsha
kondan-kai’ (the Association of Workers at Electronics Industry). This alli-
ance was established in 1988 as a small group of labor union activists con-
sciously criticizing the ‘cooperative’ policies by the main stream enterprise
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208 Notes
unions that are members of Denki Rengo. The alliance is strongly backed
up by Zenroren, the communist supported national center of labor unions
(Nakayama 1999).
20. They claimed that the invention of the quasi-DWS was enabled by the
abusive use of the Flextime system. They claimed that the quasi-DWS
simply hides the unpaid overtime premium, and they visited the Labor
Standards Supervision Office fifteen times after 2001. The result of this
lobbying was the admonishment of the violation abatement by the reim-
bursement of the unpaid overtime premium (interview: alternative labor
union member).
21. Another sign of this change can be seen in the policy shift decided by Denki
Rengo. In 2002, Denki Rengo proposed setting different levels of wage
demand for different types of job at Shuntō wage bargaining. The proposal
assumes to use two categories ‘professional/35 years old’ and ‘technical
worker/30 years old,’ and intends to expand the category to six including
‘clerical’ ‘SE’ and ‘sales’ by 2006 (Nikkei 2002a).
6 Conclusion: Changes and Future Directions of Japanese

1. The expansion of non-regular employment forms is a sign of the increasing
reliance of companies on the external labor market. Non-regular workers
are not considered firm members; they are often called ‘gaibu jinzai,’ literally
‘external personnel’.
2. This conclusion is only in terms of the deregulation of labor market. With
regard to the formal side of employment security, the impacts of the revi-
sion of Commercial Code (see footnote no. 33 in Chapter 3), for instance,
is the potential factor that erodes the employment security of regular
workers.
3. The fact that tenseki practice began to be applied to younger workers is an
important indication of the erosion of the employment security of regular
employees in addition to more visible example of the increasing cases of
‘early retirement.’
4. As Fligstein notes, in the case of managerialism where enterprise unionism
is dominant, the distinction between the internal and external labor mar-
ket tends to be the major cleavage of labor market segmentation.
5. Many Japanese scholars now see this as one of the most important social
problems for the future, given the rapid ageing of the Japanese population
and the decline in the labor force expected in relation to low birth rates.
6. They also attract workers in managerial levels who work increasingly under
harsher pressure (kanri-shoku yunion).
7. In 2005, the election of the board directors of Rengo got a surprising vot-
ing result. It had been negotiated among leaders of Rengo to select Takagi,
the president of the largest industrial member federation, Zensen Domei,
as a next board director. Kamo, the president of Zenkoku Yunion (literally,
national union), the newly founded federation for traditionally nonunion-
ized sectors of workers such as part-timers and temporary dispatched work-
ers expressed a sense of crisis and announced her candidacy right before the
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Notes 209
election day. As the vote is distributed to each industrial union in proportion

to the number of membership, there was no doubt that Takagi would win
with overwhelming majority. The result, however, caused astonishment.
One third of the delegates voted for Kamo. This news was considered as the
new move of Rengo to take the issue of declining organization rate seriously
and to expand its reach to workers in non-regular forms of employment.
9780230_209084_09_not.indd 209 11/29/2010 8:34:10 PM

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Glossary
Terms
arubaito temporary workers who are mostly students
buchō name of a high rank managerial position (or the person
who occupies the position); usually refers to the head of
department
haken temporary dispatched worker
kachō name of a middle rank managerial position (or the person who
occupies the position); usually refers to the head of section
keiretsu horizontal and hierarchical networks of Japanese companies
keiyaku temporary workers
kisei kanwa deregulation
kōnai ukeoi a practice of labor lending in which the subcontractor dis-
patches workers to parent or client companies
seika-shugi results- orientation
shingikai advisory council set up under ministries to deliberate policy
issues
shokutaku temporary workers who are mostly rehired elderly by previ-
ous employers
shukkō a practice of labor lending within Japanese company net-
works, referring labor mobility from parent company to sub-
sidiaries without contract transfer
shunin name of an entry level managerial position (or the person who
occupies the position); usually refers to the head of work group
shuntō spring offensive, an institutionalized pattern of collective
bargaining in Japan that has cross-sectional influence
tantō-sha rank and file employee
tenseki a practice of labor mobility with contract transfer within
Japanese company networks
ukeoi subcontracting
paato temporary workers who are predominantly middle-aged
women
Proper names
Denki Rengo Japanese Electrical Electronic and Information Union
Domei Japan Confederation of Labour
Jidosha Soren Confederation of Japan Automobile Workers’ Union
Keidanren Japan Federation of Economic Organizations
Nikkeiren Japan Federation of Employers’ Associations
Rengo Japanese Trade Union Confederation
Sohyo General Council of Trade Unions of Japan
223
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9780230_209084_11_glo.indd 224 11/24/2010 3:54:31 PM
Index
Administrative Management Agency, job announcement system, 152–6

58, 178 labor management reform at, 123–30
Administrative Reform Committee, labor unions and, 129–30
46, 61, 64 mobility at, 153
advisory council, 43, 44, 62, 111, 112, organizational chart, 135, 191
168 organizational restructuring at,
arubaito, 30 127–9, 134–7
authority relation, 3, 6, 9, 11–12, 14, organizational roles, 143–6
40, 156, 162, 170 personnel evaluation system,
129–34, 138–42, 146–52
belt-tightening management, 22–7, 55 results-oriented labor management
blue-collar workers, 19, 20, 105–6 at, 123–5, 130–56
Bretton Woods Regime, 50 self-management at, 152–6
bubble economy, 12, 50, 59, 104 white-collar workforce at, 126–7
business conjuncture, 25, 26, 96 consumer culture, 21
contract/effort, 2, 4–6
career, 8 contract relations, 3, 5, 7
changes, 86 contracts, 3–6, 15, 162
formation, 35–7 changes in, 162–5
notion of, 7–8, 15, 167 effort and, 6
right to, 173–5 indeterminacy of, 4
track diversification, 142–6, 158–9 inequalities between regular and
Central Labor Standards Council, 44 non-regular, 77–82
citizenship, 3 limited-term contracts, 27, 30,
see also company citizenship 63–6, 77, 180–2
civil rights, 10 negotiation of, 9
clerical workers, 53, 58, 59, 61, 70–3, non-limited term contracts, 27, 41
75, 77, 86, 104, 105, 145, 163 in postwar period, 27–32, 40
collective bargaining, 4, 5, 9, 30–1 reconfiguration of, 89–91
see also spring offensive termination of, 77–8
company-based socialization, 32 unions and, 4, 167–70
company citizenship, 32–3, 41, 64, contract workers, 28, 77, 88–9
81, 89, 93–8, 172–3 control, notion of, 6, 9, 11, 15
company man, 26, 97, 175 corporate-centered society, social
competency management, 146–52 structure, 20, 35, 40, 41, 173
competition, 33, 38–9 corporate reform, 1–2
COMPUJ corporate restructuring, 51, 54–5
career track diversification at, 142–6 corporate welfare, 55, 81–2, 91
competency management at, 146–52 corporatism with labor, 24–5, 42–3,
conflicts at, 138–42 46, 168
consequences of changes within, Council for Regulatory Reform, 49
158–60
context of, 125–30 deflation of employment, 170–3
DWS and, 152–6 democracy, 18
225
9780230_209084_12_ind.indd 225 11/25/2010 3:39:27 PM

226 Index
densan-gata chingin, 19 non-regular, 21–2, 30–1, 57, 65–72,

deregulation, 1, 46–9 81–2, 90–1, 170–5
of labor markets, 59–89, 90, 162, ranking and qualification system
164, 166–7 for, 22, 37
political climate and, 59–62, regular, 20, 21, 27, 28–30, 55, 57,
111–19 66, 70, 81–2, 170–2, 174
radical, 62–4, 90 employer-led reform initiatives,
of working time, 92–121, 164 169–70
deregulation committees, 47–9, 61, employer representatives, 44
64, 168–9 employment adjustments, 26
Diffusion Index (DI), 73 employment adjustment subsidy, 24
discretionary workers, 116, 155 employment contracts, see contracts
Discretionary Work System (DWS), employment diversification strategy,
13, 100–4, 106–11, 188–9 52–3
at COMPUJ, 152–6 employment insurance, 78–9
effort-bargain and, 119–21 Employment Insurance Act, 24, 94
increasing use of, 115 employment laws, 18
political dynamics of, 111–19 see also regulations
white-collar workers and, 106–11, employment relations, Japanese, 1–3
119–21 changes in, since 1990s, 161–70
discrimination, against blue-collar future directions of, 161–75
workers, 20 negotiation of, 2
disparity society, 171 postwar Japan, 17–49
doctrine of abusive dismissal, 94 regulations of, 42–9
Domei, 24, 25, 46 sociological theory of, 1–16
Dore, R., 53 state-firm-labor negotiations, 8–12
Durkheim, E., 5 structure and regulation of, 15
DWS, see Discretionary Work System working time regulation and, 92–3
(DWS) employment security, 2, 5, 18, 24,
55, 63, 77–9
economic recession, 1, 50, 125 see also job security
economy Employment Security Law (ESL), 18,
in 1970s, 22–3 54, 63, 178, 179
in 1990s, 50 employment status, 65–9
postwar, 20–1 access to rights of company
Edwards, R., 6, 93. citizenship and, 81
efficiency, 26 distribution of, 86
effort, 6, 15, 103–4, 106, 162 method of wage payments by, 80
changes in, 165–6 mobility among, 82–9
in postwar period, 32–5, 40 employment structure, 28
white-collar workers, 122–3 employment systems, 7–8
effort-bargain, 97, 103, 119–21, Endo, K., 33
165–6 enterprise bargaining, 9, 15, 162, 169
elderly workers, 61 enterprise unionism, 30–1, 46, 75, 90
employees, 20, 21 ESL, see Employment Security Law
see also workers exports, 23
competition among, 33, 38–9 external labor market
dismissal of, 55 expansion of, 57–9
mobility of, 35–40 restrictions of, 54–5
9780230_209084_12_ind.indd 226 11/25/2010 3:39:27 PM

Index 227
female workers, 58, 75, 86 job announcement system, 152–6

feudal labor practices, 54 job-rate wage system, 22, 97
firm-internal mobility, 37 job security, 19, 20, 29, 55, 63, 77–9.
first labor unions, 20 see also employment security
flexibility, 33–4, 41–2, 94, 96, 97, 103
flexible rigidities, 53–7, 89 Kawanishi, H, 19
Flextime system, 100, 106, 109, 156 Keidanren, 46
Fligstein, N., 7 keiretsu, 31, 55, 57–8
France, 7–8 keiyaku, 30, 67, 70, 71, 76, 80
full employment, 21 Koike, K., 37
Koizumi administration, 64
gender division of labor, 36 kōnai ukeoi, 56, 57
Germany, 8 Korean War, 20, 32
globalization, 156–7 Kumazawa, M., 22, 26, 33
Gordon, A., 18, 19
labor, 4, 11
haken, 30, 67, 71, 74, 77, 80–1 excess of, 52, 104–5
gender division of, 36
Iida, Yotaro, 46 marginalization of, 111–16
illegal dispatching, 58 labor adjustment, 55–6
ILO Convention, 61–2 labor bosses, 54
Income Doubling Plan, 21 labor contracts, see contracts
indeterminacy of labor contract, 4 labor costs, 25
industrial citizenship, 5–6 labor disputes, 45, 46
industrialization, 3 labor force adjustments, 26
industrial organizations, 1 Labor Force Survey, 35
industrial policies, 1 labor intensification, 109
industrial structural changes, 72–7, labor laws, 18
124, 156–7 labor lending, 31–2, 55–6
institutions, 1–3, 10, 13, 18, 23, 32, labor management, 9
50, 161–2 dynamics of reform, 157
international competition, 156–7 future principles of, 124, 190
intra-firm employment adjustment, labor unions and, 174–5
26 marketization, formalization and
Irregular Working Hour System individualization of, 156–60
(IWHS), 100 practices, 6, 9, 11–12, 15, 40, 42, 52,
79–81, 93, 106, 122, 125, 127,
Japan 146, 156–7, 161–3
postwar economic recovery, 17–18 reform of, and white-collar effort,
recession in, 1 122–3
Japanese employment relations, 1–3 results-oriented, 2, 106, 119,
changes in, since 1990s, 161–70 122–61, 167
characteristics of, 27–42 temporary workers and, 79
future directions of, 161–75 labor market regulations, 5, 9, 10, 41
history of, 17–27 see also regulations
postwar, 17–49 labor market, 2, 3
Japanese employment structure, 28 changes in, 64–77, 183–5
Japanese management, 51 changes in occupational
Japan Productivity Center, 20 composition of, 72
9780230_209084_12_ind.indd 227 11/25/2010 3:39:27 PM

228 Index
labor market – continued living standards, 24

deregulation, 59–90, 162, 164, long-term employment, 2, 105
166–7 lost decade, 50
employers’ initiative for reform, low-interest policy, 23
50–3 LSA, see Labor Standards Act
expansion of external, 57–9
flexible rigidities in, 53–7 Maekawa, Haruo, 99
impacts of industrial structural Maekawa report, 23, 99
changes on, 72–7 male wage earners, 36
lack of mobility in, 35–40 management authority, 20, 21, 22
legal framework, 7 management by objectives (MBO),
political segmentation of, 50–91 130–4, 142–6, 159, 164–5
power relations in, 3 management (managerial)
regular/non-regular composition prerogative, 8, 26–7, 33, 38, 40,
of, 57 41, 89, 120–1, 137, 153, 169–70
role of new actors in, 88–9 management renovation movement,
segmentation, 18, 30, 53, 81–2, 166 129
social organization of, in postwar managerialism, 7, 8
period, 53–9 managerial rank, 143–6
societal construction of, 9–10 Manpower Japan, 58
labor market structure, changes in, marketization of wage, 158, 171
65, 68–9 market orientation, 2
labor mobility, see mobility Marx, K., 4
labor power, 4, 6, 11 mass consumer culture, 21
labor standards, 5, 7, 9, 10 merit-based pay, 97
Labor Standards Act (LSA), 1, 13, 18, micro electronics, 23
54, 78, 93–8, 99, 113, 118, 178–82 middle class, 21
labor union movements, 3–6, 24–5, midterm termination of contract,
45 77–8
alternative, 14, 15, 114 Minimum Wage Law, 18
grassroots, 172 Miyauchi, Yoshihiko, 46
labor unions, 20–2, 37, 173–5 mobility, 2–4, 6–8, 15, 52, 162
COMPUJ and, 129–30 changes in, 166–7
decline in, 167–70 at COMPUJ, 153
disarmament of, 43 between employment statuses,
DWS and, 109 82–9
enterprise unionism, 30–1, 46 facilitation of, 60
non-regular employees and, 30–1 firm-internal, 37
principle of productivity and, 25 increased, 86
layoffs, 77–8 within labor force, 83
life course, 35 in postwar period, 35–41
M-curve, 36 reconfiguration of, 89–91
structured, 36, 41 between regular and non-regular
lifelong employment practices, 29, 55 statuses, 87
life-stage adjusted wage system, 20, restricted external, 54–5
22, 29, 35–6, 41, 97, 122, 158 trends in, 83
lifetime employment, 36 vertical, 37
limited-term contracts, 27, 30, 63–4, Murayama coalition administration,
77, 180–2 46
9780230_209084_12_ind.indd 228 11/25/2010 3:39:27 PM

Index 229
Nakamura, K., 112 profession/technical occupations, 75

New Age Japanese Management, 51–3 public-interest representatives, 43, 44
Nikkeiren, 20, 24, 26–7, 51, 52, 108 Public Job Placement Agency, 54
non-limited term contracts, 27, 41
non-regular contract, 77–82 quality of life issues, 98–9
non-regular employees, 21–2, 30–1,
57, 65–72, 81–2, 87, 90–1, 170–5 radical deregulation, 62–4, 90
ranking and qualification system, 22,
occupational composition, 72, 73, 74 37, 97
oil crises, 22–3, 24, 46, 51, 54, 82, 97 redistribution system, 21
older workers, 88–9 redundant workers, 104–5
organizational level, 9, 11–12, 15 reform movements, 1–2
Osawa, M., 20, 29, 36 reform without labor, 16, 43–9, 168
Ota, N., 33–5 regular contracts, 77–82
outplacement services, 88–9 regular employees, 20, 21, 27–30, 55,
outsourcing, 23 57, 66, 70, 81–2, 170–2, 174
overtime, 25, 26, 34–5, 42, 94, 96–8, mobility between non-regular and,
103, 106, 155 87
overwork, 109 mobility change of, 82–6
regulations, 178–9
paato, 30, 55, 66–7, 70, 75, 79 decentralization of working time,
Paato Law, 173 116–19
part-time workers, 30 discretionary work, 188–9
pensions, 29, 52, 81 employment relations, 42–9
corporate, 29, 81, 82 levels of, 9
employee, 81, 82 LSA, 93–8
performance-based wage system, working time, 1, 6, 92–3, 186–7
164–5 Rengo, 25, 46, 106, 109, 112–13, 115,
personnel evaluation system, 26–7, 116, 172, 174
32–4, 41, 129–34, 138–42, restructuring services, 88–9
146–52, 174 results-oriented labor management
Plaza Accord, 23 system, 2, 106, 119, 122–61, 167
policy environment, 59–62 at COMPUJ, 123–5, 130–56
postwar economic recovery, 17–18 conflicts in implementation of,
postwar employment relations, 17–49 138–42
characteristics of, 27–42 management by objectives and,
effort, 32–5 130–4, 142–6
labor struggle and consequences, retirement allowances, 81
17–22 reverse movement, 20
mobility and, 35–40
power relations, in labor market, 3 second labor unions, 20, 22
principle of productivity, 24, 25 Sekizawa, Tadashi, 123
priority production system, 17–8 self-management, 118–19, 122–3,
policy of, 54 152–6, 166
privatization, 23–4, 25 seniority-based wages (seniority wage
productivity, 24, 105, 127 system) , 1, 2, 18–20, 22
productivity coalition, 31, 32–3, 41 shagaikō, 31, 32
productivity movement, 20 Shiina, Takeo, 46
professionalism, 7–8 shingikai, 43, 62
9780230_209084_12_ind.indd 229 11/25/2010 3:39:28 PM

230 Index
Shire, K., 33 temporary help industry, 88–9

shokutaku, 30, 67, 76, 80 temporary workers, 21, 58–61, 63,
shukkō, 31, 56, 59 75, 79
shunin, 155 tenseki, 31, 56, 59
single mothers, 36 THA, see Temporary Help Agency
skilled workers, 59 trade issues, 23
skill formation, 36–7 trade surplus, 23, 24, 50
social constructs, labor markets as, Trade Union Law, 18
9–10
social institutions, 2 ukeoi workers, 55–6
socialization, 32, 33 unemployment rate, 59–60, 62, 77
social organization, of labor markets, unionization trends, 45
53–9 United States, 8, 23
social pact, renegotiation of, 2 unpaid overtime, 34–5, 42, 96–8,
social relations, 3 103
societal level, 9, 12, 15
societal level regulations, 43 vertical mobility, 37
sociological theory, of employment vocationalism, 7, 8
relations, 1–16
Sohyo, 22, 24, 25 wage bargaining, 5
Special Committee on Deregulation, wage payment methods,
46–8, 61 employment status and, 80
Special Committee on Economic wages
Structural Adjustment, 99 marketization of, 158, 171
Special Committee on Private Labor merit-based, 97
Market Intermediary System, 62 seniority-based, 2, 18, 19–20, 22
spring offensive, 21, 30–1, 41 of temporary workers, 79–81
state, welfare-employment policies wage security, 19–20
and, 10–11 wage system
state-firm-labor negotiations, 8–12 job-rate wage system, 97
state professionalism, 7–8 life-stage adjusted wage system,
state subsidies, 55, 102 20, 22, 29, 35–6, 41, 97, 122,
status, 5 158
notion of, 5, 15, 172 performance-based, 164–5
Streeck, W., 11 welfare-employment policies, 10–11
strikes, 24–5, 46 white-collar workers, 20, 103–4, 106,
Structural Impediments Initiative, 109, 111
23 changing working time
Study Group for the Adjustment regulations for, 117–19
of the Economic Structure for at COMPUJ, 126–7
International Cooperation, 23, DWS and, 106–11, 119–21
99 effort of, 122–3
symbolic effort, 34–5, 42 productivity of, 105, 127
worker dismissal, 55
Temporary Dispatched Work Law worker dispatch, 57–9
(TDW Law) , 58–9, 60–1, 178, worker representatives, 44
179 workers
Temporary Help Agency (THA), 59, see also employees
88–9 blue-collar, 19, 20, 105–6
9780230_209084_12_ind.indd 230 11/25/2010 3:39:28 PM

Index 231
workers – continued reduction in, 98–111

clerical, 53, 58, 59, 61, 70–3, 77, trends in, 95
104, 105, 145, 163 working hour systems, 102, 103
contract, 28, 77, 88–9 working time, 1, 6, 25
discretionary, 116, 155 chronology of regulations, 186–7
elderly, 61 at COMPUJ, 153–6
female, 58, 75 decentralization of regulations,
flexibility of, 33–4, 41–2, 94, 96, 103 116–19
mobility, 6–8, 35–40 deregulation, 164
number of, who changed jobs, 84–5 deregulation of, 92–121
older, 88–9 LSA regulation, 93–8
part-time, 30 political dynamics of deregulation,
redundant, 104–5 111–19
skilled, 59 practices, 41–2
stratification of, 5 reduction in, 98–111
submissive, 26 regulation of, 92–3
temporary, 21, 58–61, 63, 75, 79 workplace control, 35, 159–60
white-collar, 20, 103–4, 106, 109, workplace level, 9, 11–12, 15
111, 118
work hours, 34, 35, 94, 96 yatoi-dome, 78
by firm size, 101 yen, 23, 52
9780230_209084_12_ind.indd 231 11/25/2010 3:39:28 PM

9780230_209084_12_ind.indd 232 11/25/2010 3:39:28 PM

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The Transformation of Japanese Employment Relations

9780230_209084_01_prexiv.indd i 11/25/2010 8:21:42 PM

9780230_209084_01_prexiv.indd iii 11/25/2010 8:21:43 PM

9780230_209084_01_prexiv.indd iv 11/25/2010 8:21:43 PM

List of Tables viii

List of Abbreviations xii

1 Sociological Theory of Employment Relations 1

2 Employment Relations in Postwar Japan 17

3 Political Segmentation of the Labor Market: The

9780230_209084_01_prexiv.indd v 11/25/2010 8:21:43 PM

The comparative strength of ‘flexible rigidities’ 53

4 The DWS: Deregulation of Working Time and Its Impact

5 Re-bargaining Effort: The Introduction of

9780230_209084_01_prexiv.indd vi 11/25/2010 8:21:43 PM

Marketization, formalization and individualization

6 Conclusion: Changes and Future Directions of Japanese

9780230_209084_01_prexiv.indd vii 11/25/2010 8:21:44 PM

1.1 Domains of contention by the levels of regulation 9

9780230_209084_01_prexiv.indd viii 11/25/2010 8:21:44 PM

5.2 The MBO evaluation sheet at COMPUJ (translation

9780230_209084_01_prexiv.indd ix 11/25/2010 8:21:44 PM

2.1 The comparison of trade surplus: Japan and

9780230_209084_01_prexiv.indd x 11/25/2010 8:21:44 PM

4.6 Expanding use of various working hour systems

9780230_209084_01_prexiv.indd xi 11/25/2010 8:21:44 PM

ARC Administrative Reform Committee

9780230_209084_01_prexiv.indd xii 11/25/2010 8:21:44 PM

9780230_209084_01_prexiv.indd xiii 11/25/2010 8:21:44 PM

This book emerged from my dissertation presented to the State

9780230_209084_01_prexiv.indd xiv 11/25/2010 8:21:44 PM

Did Japanese employment relations change?

9780230_209084_02_cha01.indd 1 11/24/2010 3:53:20 PM

was ‘the introduction of the results- oriented labor management system’

9780230_209084_02_cha01.indd 2 11/24/2010 3:53:20 PM

Employment relations in sociological perspective

Employment relations emerged at the intersection between industriali-

9780230_209084_02_cha01.indd 3 11/24/2010 3:53:20 PM

labor union movements are organized to form collective fronts in terms

9780230_209084_02_cha01.indd 4 11/24/2010 3:53:21 PM

firm organizations. A contract is concluded by employers and workers,

9780230_209084_02_cha01.indd 5 11/24/2010 3:53:21 PM

citizenship – established the authority relation at workplaces (Marshall

9780230_209084_02_cha01.indd 6 11/24/2010 3:53:21 PM

to occupation, organization to organization, employment to educa-

9780230_209084_02_cha01.indd 7 11/24/2010 3:53:21 PM

intervention that controls credentials, the USA as a mixture of profes-

State–firm–labor negotiations at societal,

The constitution of the aspects of employment relations involve three

9780230_209084_02_cha01.indd 8 11/24/2010 3:53:21 PM

in societal, organizational and workplace levels of regulation.7 In the

Societal construction of labor markets

Table 1.1 Domains of contention by the levels of regulation

Societal Organizational Workplace

Domains of Industrial relations Enterprise Control and

Note: Italics indicate the domains especially emphasized in the book.

9780230_209084_02_cha01.indd 9 11/24/2010 3:53:21 PM

Welfare- employment policies

9780230_209084_02_cha01.indd 10 11/24/2010 3:53:21 PM

Employment relations are actually shaped directly and indirectly by

Labor management practices and authority relations

9780230_209084_02_cha01.indd 11 11/24/2010 3:53:21 PM

The regulations at these levels are broadly contoured by the outcomes

Research strategy and the structure of the book