HRM 603 – COMPARATIVE STUDIES

IN INDUSTRIAL & EMPLOYMENT

RELATIONS

Topic 4:
EMPLOYMENT RELATIONS
IN JAPAN
 Lecture outline
• Key themes
• Context
• The ‘Japanese’ model
• Union growth and decline
• The end of lifetime employment?
• Employers and their associations
• Collective bargaining
• Current issues
• Changes in labour market institutions: globalisation of firms and
corporate governance
• Growth of atypical employment
• Long working time
• Conclusions
 Key themes
• The Japanese model – ‘lifetime employment’, seniority with merit-
based pay, and enterprise unionism – has been under pressure in recent
years
• Key changes include the growth of overseas activities by Japanese
multinational companies, the deregulation of corporate laws and the
rise of non-standard employment
• Contemporary Japanese employment relations are relatively stable, and
relations between labour and management are generally cooperative
(but the number of individual labour disputes is growing)
• Union membership is declining and a range of social, economic and
labour trends pose challenges to the future of unions
• The growth of non-regular employment has been linked to increasing
inequality and poverty, and raises questions about how to protect the
employment and working conditions of atypical workers who are not
represented by trade union
 Employment relations context 1
• Japan is one of the largest economies in the world. It has a
labour force of 66 million and in 2012 it had a labour force
participation rate of 74%.
• Since the burst of the ‘bubble’ economy in 1991, the
Japanese economy has been grappling with low growth and
mild deflation. Nominal wages diminished slightly over the
last two decades
• The declining fertility rate and ageing population are major
issues for the future
• Japan’s unemployment rates were among the lowest in the
world until the 1990s. After having reached 5.4% in 2002,
the rate went down to 4% in 2013
 Employment relations context 2
• Politics are dominated by the conservative Liberal
Democratic Party (LDP). After the dismal interlude of
the Democratic Party (2009-2012), the government of
Shinzo Abe (LDP) pursues an aggressive monetary
policy in order to stimulate the economy and to stop
the deflationary trend which has been at work for the
last two decades

• Unions are generally considered close to the DP but

have little influence on members’ voting decisions
 The ‘Japanese’ model
• The Japanese model of employment relations is based on
cooperative labour relations between employers and
unions at the enterprise level and long-term employment
relations. It was gradually shaped in the 1950s and 1960s,
after a period of strife following the democratization of
Japan under the Allied Powers of General Headquarters
(1945-1951)

• This model is believed to have contributed to Japan’s solid

economic performance in the 1970s and 1980s

• The model is under pressure due to the growth of overseas

activities by Japanese enterprises and the decline of union
density
Union growth and decline
• The freedom of association was recognized after WWII (the
Trade Union law of 1949 replaced that of 1945). The labour
movement was rebuilt very quickly. The peak density level
was 56% in 1949
• After the 1970s, membership and density stagnated and
then steadily declined. Union density in 2013 was 17.7%
• The decline is attributed to:
– changes in the industrial structure, especially the shift towards the
service sector
– changing attitudes towards labour unions
– a steady increase of atypical workers who are not organised by
Japanese unions
 Lifetime employment
• Regular employees have become more concerned about the
competitive position of the companies for which they work, and most
of them seem to have a high degree of commitment to the enterprise
• Companies only recruit new school leavers or graduates and train them
with the expectation that they will conform to the company’s norms
and remain committed to the enterprise. This means that those
employees who voluntarily quit the company in mid-career would face
a considerable reduction of their wage and poor career opportunity
• Performance management practices encourage long-term employment
in the same firm
• Lifetime employment generally applies to men, not women
• Employees are expected to stay in the same company until their
mandatory retirement age (usually 60 years, but a 2005 legislation
stipulates that workers should be offered employment up to 65 years)
 Enterprise unionism 1
• Enterprise-based unionism is the basic form of labour unions;
enterprise unions consist solely of regular employees of a single
company regardless of their occupational status, up to the lower levels
of management. If you leave the firm then you leave the union
• The primary core of regular employees (in the public sector and large
enterprises) constitutes only about one-third of all employees. The
other two-thirds work for SMEs or on a temporary or part-time basis
and are often not union members (they are usually not allowed to join)
• As most part-time workers are women, union density among women is
much lower than among men
• Rengo is the largest confederation and has pursued cooperative
labour-management relations. However, it has found it difficult to
represent the interests of union members at grass-roots level
 Enterprise unionism 2
• Most union activities occur at the enterprise level, and enterprise
unions are financially independent. A small part of union fees is
levied to industrial federations and to Rengo
• The relationship between unions and management is based on trust
and mutual benefit and employees support management initiatives
to enhance the competitiveness of the firm
• Pay differentials between managers and lower-rank staff are small
and senior staff are promoted internally from the ranks, encouraging
employee identification with the enterprise
• The advantage of enterprise unionism is that policies are adapted to
each enterprise rather than the sector or an ideology
• Critics of enterprise unionism suggest that by only focusing on core
workers of large firms it discriminates against non-core workers who
are often more vulnerable (and likely to be women)
 Employers and their organisations 1
• Many violent labour disputes occurred immediately after
WWII because of economic hardship and the shortage of
material necessities

• To restore managerial authority, Nikkeiren (the Japan

Federation of Employers’ Associations) was founded in
1948

• Nikkeiren had important functions until the 1990s, and it

merged with another large organisation, Keidanren, in
2002 to form Nihon Keidanren (Japan Business
Organisation)
 Employers and their organisations 2
• Nihon Keidanren coordinates and publicises employers’
opinions on labour problems, selects representatives to
government commissions and ILO delegations, and provides
services to member organisations

• Each year at the time of Shunto (the Spring Labour Offensive),

Nihon Keidanren assists employers in dealing with union
demands during collective bargaining

• Three factors influence the magnitude of Shunto:

1. demand and supply conditions in the labour markets
2. consumer price levels, and
3. business conditions

• Employers have increased their control over employees in

recent years
 Collective bargaining and industrial disputes
1
• Distinguishing features of collective bargaining in Japan are:
1. Collective bargaining takes place at the level of the
enterprise only
2. In most unionised enterprises, there are elaborate joint
consultation mechanisms in which unions participate
3. Collective bargaining focuses on pay issues, particularly
during the Shunto spring wage round
4. Pay agreements may be concluded separately from
agreements on other issues
5. Agreements are almost always reached without strikes or
lock-out. Industrial disputes have practically disappeared in
recent years
Collective bargaining and industrial disputes 2
• Grievances are often settled informally and formal
procedures are rarely used
• Disputes are usually settled directly between the parties
concerned but sometimes a third party, the central and
local labour relations commissions, is called upon for
conciliation
• Since the 1990s, individual disputes have been clearly on
the rise. To deal with individual cases, a labour tribunal
was created in 2006, together with new administrative
services
 Current issues
• After the long recession of the 1990s, a slow economic recovery was driven
mainly by exports in the manufacturing sector. The financial crisis of 2008
hit this sector hard. In 2011, huge earthquakes followed by a tsunami struck
the northern regions of Japan and devastated the Fukushima nuclear power
station. This created a large number of displaced people
• Most large Japanese firms invested in overseas subsidiaries so that many of
them became multinational enterprises with their headquarters in Japan
• The international context surrounding Japan has changed since the 1980s:
– Korea and Taiwan have become strong competitors in many hi-tech industries
– Chinese markets are of crucial importance for many Japanese multinationals

• Long-term problems in Japan’s social and economic context are associated

with domestic trends, in particular:
– the ageing population
– declining fertility rates, and
– increased female participation in the labour force
 Labour market deregulation
• Successive governments have subscribed to the ideologies of free
markets and have deregulated market institutions
• In recent years, a drastic change in corporate law has helped
many firms to reorganize themselves through mergers and
acquisitions
• Although most top managers are still attached to the model of
stakeholders, the balance of power between shareholders and
employees is changing due to the deregulation of corporate laws
• Several labour laws have facilitated the use of temporary agency
workers. These workers are mostly women and young; they are
paid much less than regular workers
• Nevertheless, deregulation has been modest in the labour field
because of the pre-existing flexibility in the Japanese
employment system
 Long-term employment
• Long-term employment is the cornerstone of human resource
management in large Japanese firms
• Lifetime employment, seniority-based pay, internal promotions up to
top management, and the linking of directors’ pay levels to
employees’ pay levels are the main features of this traditional
employment model
• The notion of the ‘firm as a community’ is deeply rooted in Japan
• Long-term employment practices have been under pressure since
the 1990s downturn. Large firms have reduced their intake of new
recruits and have increased recruitment of non-regular workers and
outsourcing
• The average length of service of regular workers has not been
affected, however there has probably been a drop in the number of
people with long-term employment status
 Growth of atypical employment
• In recent years, there has been a steady increase in atypical
employment, covering part-time workers, fixed-term
workers and temporary workers. Today, nearly 40% of
employees are in non-standard employment
• Non-regular workers typically do not have job security
• Most firms are using non-regular workers to reduce labour
costs and to adjust to changes in the business cycle
• A serious issue with this practice is a large wage differential
between regular employees and non-regular employees,
pushing the latter into working poor. There is a lack of
pathways from atypical to regular employment
 Long Working time
• Long working time is a serious issue. Annual working
time per full-time employee has remained at high level
(2.030 hours in 2012)
• Overtime work is largely practiced, in part due to the
lack of penalty for excessive overtime work. Some
overtime work is not recorded by the enterprise,
therefore not paid
• As there is no custom of long vacation, Japanese
workers tend to take only half of the paid annual
holidays to which they are entitled
 Conclusions
• Since the 1990s, the context in which employment relations are
placed has undergone considerable changes. Firstly, the relative
position of Japan vis-à-vis China and other neighbouring nations
has changed greatly, due to the slumping Japanese economy in
contrast to the phenomenal economic growth of China. Japanese
enterprises had to develop overseas activities at the expense of
domestic employment
• Within Japan, most employment creation has been in the service
sector, in particular in retail or health and welfare. The growth of
atypical employment is associated with a cost reduction effort in
the manufacturing and the trend towards a service economy
• Young people are overworked as a result of recruitment
cutbacks, yet on the other hand many service sector companies
are employing mainly part-time or fixed-term workers
• The social norm of lifetime employment is being eroded; given
the limited coverage of unions, the lack of employees’ ability to
voice problems is also a source of concern
Reference
• Bamber, G., Lansbury, R., Wailes, N & Wright C (2015). International and Comparative
Employment Relations: National Regulation, Global Changes (6th ed.). UK, London: Sage
Publications Ltd.

• Deery, S and Plowman, D, 1985. Australia Industrial Relations, 2nd edn, McGraw-Hill Book
Company, Sydney.

• Moore, JB, 1987. Students brief: Japanese Industrial Relations, Labour and Industry, vol 1,
no.1, October, pp.140-155