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The information up to "The 1990s" is By Mark Harcourt, 1996.
Relations Industrielles, Vol. 51, 1: 177-201

Yonatan Reshef
School of Business

University of Alberta
Edmonton, Alberta

Japanese lifetime employment (see link I and link II) or shushin-koyo refers to the employer practice of recruiting employees directly from high-school or university every spring and then retaining them until retirement at between fifty five and sixty years of age (Clark, 1979). The formal policy of lifetime employment is only guaranteed to approximately thirty five percent of the work force (Cole, 1972; Dore, 1973; Ouchi, 1981), although coverage varies from a low average of approximately twenty percent in the smaller enterprises with fewer than fifty employees to a high average of approximately seventy percent in larger enterprises and government departments with more than one thousand employees (Whitehill, 1991: 130). Nevertheless, Japanese firms provide long-term tenure to a second tier of employees excluded from lifetime employment, thereby guaranteeing a kind of de facto "near-lifetime" employment. Tenure lengths are consequently long for all gender, age, and firm-size groups. For example, the average tenure length for 1986 to 1988 was thirteen years: sixteen years for firms with more than a thousand employees and ten years for firms with between ten and ninety nine employees (Clark and Ogawa, 1992: 337). A comparison for the late 1970s also shows that Japanese men have substantially longer tenure than American men, especially in the smaller firms and younger age groups (Hashimoto and Raisan, 1985: 723, 726). An O.E.C.D. study similarly indicates that tenure lengths are seventy percent longer for Japanese than Canadian men and thirty percent longer for Japanese than Canadian women (Tachibanaki, 1987: 669). Moreover, separation rates in Japan are almost twice as high for women as they are for men, and yet output-employment elasticities suggest that Japanese women are still less than half as likely to lose their jobs in an economic downturn as either American men or women (House man and Abraham, 1993: 47).

Formal and informal variants of lifetime and 'near-lifetime' employment are common in Japan today, but before World War Two these practices were limited to skilled workers and management. Even as late as 1962, average employment tenure for Japanese males was no longer than that for American males (Koike, 1978), because the lifetime employment system had at that time been in existence for only a decade. Employment tenure was greatly lengthened in the 1960s with the major economic boom, but was not generally shortened after the onset of recessions and slowdowns in the 1970s and 1980s. In fact, average tenure increased by four years during this time period: two years for workers aged thirty five to forty nine, and five years for workers aged fifty to fifty nine (Clark and Ogawa, 1992: 337).

Japanese organizations offer lifetime employment, not as a legal guarantee, but as part of an informal, psychological contract in which employee devotion to the company is expected in return (Clark, 1979). A quid pro quo is established whereby lifetime employees promise not to quit and employers promise not to dismiss or lay these employees off. An employee demonstrates his commitment to the firm during a rigorous induction process that frequently encompasses a written exam, personality evaluation test, panel interview, physical examination, letters of recommendation, background check, and probationary work period before any assurance of lifetime employment is extended (Clark, 1979; Dore 1973; Marsh and Mannari 1976; Rohlen 1974). Employees are selected for displaying "the right attitude of eager deference" to managerial authority, together with a "demurely and obediently persevering" manner (Clark, 1979: 178). However, women, foreigners, retirees, and mid-career employees recruited from other firms are generally excluded from any consideration for lifetime employment status, under the assumption that these employees cannot demonstrate, or have not previously demonstrated, sufficient organizational commitment. Women, for example, are expected to accommodate the demands of child-raising by maintaining a casual or temporary work force attachment (Carney and O'Kelly, 1987; Whitehill, 1991), even though in reality most continue to work full-time for one employer after their children are born (House man and Abraham, 1993).

An employer reciprocates a lifetime employee's commitment by taking measures to ensure that individual's employment security within the firm. If an employee engages in grave misconduct, for example, an employer is likely to use transfers and demotions as substitutes for dismissal (Clark 1979; Rohlen 1974). Similarly, when revenues are down and costs have to be reduced to restore profits, an employer is likely to implement hiring freezes, shorter work weeks, production for inventory, early retirements, layoffs of contract workers, and employee transfers to other companies in its keiretsu as alternatives to layoffs (Beefy and Cernosia 1990; Hashimoto 1990; Sethi, Namiki, and Swanson 1984). Changes in working hours provide the first (Tachibanaki 1987) and primary adjustment mechanism for accommodating more than half the fluctuations in the output of the Japanese economy (Hamada and Kurosaka 1984: 85). The termination of new hiring generally follows, when decreases in working hours prove insufficient to cope with a drop in orders. If this second step fails to resolve cost problems, companies then resort to work force reductions. These initially take the form of transfers to other firms within the same keiretsu. Once these are completed, further position eliminations are accomplished through voluntary retirements of older personnel who are induced to quit through severance payments or management pressure. Finally, any additional work force cuts are achieved through layoffs, with temporary, day, or part-time female workers discharged first, followed by female regular employees, and then by male regular employees covered by lifetime employment (Tachibanaki 1987).

The various techniques for avoiding layoffs have faced many demanding tests over the past twenty years. Oil shocks, resections, currency appreciations, and product demand shifts have periodically forced Japanese companies to sharply decrease their operating costs (Beefy and Cernosia 1990; Dore 1986; Sethi, Namiki, and Swanson 1984). Firms have responded in all their usual ways, but hiring freezes, overtime reductions, shortened work days, and layoffs of temporary and day workers have remained the most popular options (Hashimoto 1993; Mroczkowski and Hanaoka 1989). As a result, lifetime and 'near-lifetime' employment endure and even flourish, despite the economic strains.

The lifetime employment system and its associated practices have helped minimize the incidence of involuntary turnover for all workers in Japan, even though male lifetime employees have benefited more than other groups. Temporary layoffs in Japan typically account for only one fifth of one percent of the work force as against one percent in the United States (Hashimoto 1990: 41). As a result, the unemployment rate, even when adjusted to match U.S. definitions, is highly insensitive to changes in economic conditions (Tachibanaka 1987: 648). Hamada and Kurosaka (1984: 85, 92) have, for example, estimated that a one percent rise in the unemployment rate requires a G.N.P. decline that is proportionately five times greater in Japan than in the U.S.. This would mean that the same percentage decline in output generates one fifth of the increase in the unemployment rate in Japan than in the U.S., even after adjusting for definitional differences in unemployment.

Post-war Innovations in Support of Dominant Interests

Japanese lifetime employment achieved its present dominance in the 1950s, when employers used it as a strategy for undermining militant, left-wing trade unionism and for re-establishing managerial control over, and cooperation from, the work force. In contrast, the traditional employment practices of pre-war Japan provided little job security. Early capitalist development in the late nineteenth century followed the earlier British model in its reliance on casual labour for cottage industries (Cole, 1978). In silk, lacquer, pottery, porcelain, sake brewing, and fish canning among others, family groups performed most of the work and hired day and seasonal laborers to cope with the peak product demand periods (Cole, 1978: 252). Work on larger-scale construction, mining, shipbuilding, and transportation projects was organized through internal contracting in a manner consistent with earlier British experience (Cole, 1978). Work was in these cases subdivided into parts that were then subcontracted to gang-bosses. Each gang-boss or oyakata then hired, trained, directed, and compensated a team of other workers who performed the work on the premises and with the tools of the original contractor. Whenever production was complete, each team either disbanded or moved on to work for a new contractor in a different location (Crawcour, 1978; Dore 1973; Fruin, 1989; Nakagawa, 1989).

Job security improved as work time was regularized to suit the new and expanded product demands of militarization, following the 1894-5 Sino-Japanese and 1905 Russo Japanese Wars. New industries developed in cars, trucks, chemicals, railway equipment and other heavy industries, and these required new forms of skilled labour. Established industries in shipbuilding, iron and steel, and mining also grew dramatically, producing a major labour shortage in existing trades (Dore 1973; Fruin 1989; Hirschmeier and Yui 1975). Total employment in the entire engineering sector jumped from 13,000 in 1890 to 150,000 in 1905 (Dore, 1973: 387). Firms increased in size and capital intensity, creating problems in the coordination of work gangs. However, the internal contracting system was poorly adapted to cope with these changes. For instance, low unemployment facilitated the movement of work gangs across firms, thereby inhibiting the possibilities of training in the new skills. In addition, the independence of work team activity rendered coordination and integration within large firms very difficult. Several major employers responded to these problems by abolishing the gang-boss system and replacing it with the direct employment of young, male primary school graduates who were then trained for skilled work (Crawcour, 1978; Dore, 1973; Hirschmeier and Yui, 1975; Nakagawa, 1989). As an example, Mitsubishi Nagasaki Shipyard created a five-year internal training program in 1899 which had completely superseded the internal contracting system by 1908 (Fruin, 1989; Iwauchi, 1989; Nakagawa, 1989). Yawata Iron Works, Kanegafuchi Cotton Mills, and Yasuda zaibatsu among others also developed their own internal training programs that were sometimes complemented by bonus and compulsory savings plans to discourage employees from quitting and taking their expensive skills with them (Iwauchi, 1989; Hirschmeier and Yui, 1975; Nakagawa, 1989). Many of the cotton mills also instigated sick pay and pensions as part of welfare capitalist efforts to attract and retain new recruits while simultaneously dampening industrial unrest and undermining political support for proposed labour standards legislation (Dore, 1973). These initiatives were predicated on the managerial ideology of 'familism' under which employers assumed paternalistic responsibility for the health and welfare of their employees (Dore, 1973; Hirschmeier and Yui, 1975). The principal beneficiaries of these changes were skilled employees who gained some measure of employment continuity and security. However, employment remained casual for the majority of unskilled workers.

The present lifetime employment system emerged in the aftermath of World War Two from a power struggle between unions and employers over the right to control the firm. Prior to the war, unionization was limited by both aggressive management opposition to organizing campaigns and vigorous state suppression of strike activity (Gordon, 1985). Union fortunes completely reversed with the arrival of a deep economic crisis and the American Occupation authorities at the end of the war. The economic difficulties began when military production and raw material imports from former colonies ceased, jobless soldiers returned to Japan, and newly-elected politicians instigated a ruinous, inflationary monetary policy (Gordon 1985; Moore 1983). A smooth transition to civilian production was also hampered by the destruction of organizational capacity, resulting from the American decision to dismantle the zaibatsu in an attempt to decentralize power and thereby prevent future militarization (Clark 1979; Dore 1973; Hirschmeier 1975). The net effects of these changes on the Japanese economy were devastating. Exports plummeted to five percent of their 1944 level and gross national product dropped a calamitous fifty percent (Maddison 1991: 318-323, 214-219). Neither exports nor gross national product fully recovered until 1951 (Maddison 1991: 318-323, 214-219), when the outbreak of the Korean War renewed the demand for Japanese-made war materiel.

The severity of the post-war economic depression created widespread destitution, with most families unable to afford even the basic food, clothes, and shelter necessary for survival (Moore 1983). Poverty provided a virulent environment for the rapid spread of communist and socialist sympathies (Moore 1983). At the same time, business and political leaders enjoyed little credibility because of the part they played in the humiliating surrender of Japan at the end of World War Two (Dore 1973). The American administration, as part of its efforts to demilitarize the country, concurrently popularized both the concept of liberal democracy and the important role of unions in protecting worker freedoms from encroachments by employers or the state (Dore, 1973; Hirschmeier and Yui, 1975). Rights to organize, bargain collectively, and strike were legitimated through the protection of the 1945 Labour Union Law (Gordon, 1985; Levine, 1958; Moore, 1983). Mediation, conciliation, and voluntary arbitration, as provided by newly established industrial relations commissions, were made available through the 1946 Labour Relations Adjustment Law (Gordon, 1985; Levine, 1958; Moore, 1983). These institutional reforms funneled working-class discontent into a major upsurge in union membership that later peaked in 1949 at fifty five percent of the nonagricultural work force (Dore 1973: 239).

The rising tide of union strength encouraged leaders in the Communist-aligned Sanbetsu and Socialist-aligned Sodomei labour federations to press for code termination over all personnel and wage issues through the creation of special management discussion councils (Gordon, 1985). In the first six months of 1946, several unions representing 157,000 workers went even further when they temporarily usurped all managerial functions in 255 incidents of factory takeovers (Gordon 1985: 332). Revolutionary fervor eventually culminated in February, 1947, when the Socialists and Communists called a general strike to pressure more fundamental and permanent economic and political changes (Gordon, 1985; Levine, 1958; Moore, 1983). The Communist-fearing American authorities countered this imminent industrial insurrection with a general strike ban bolstered by the threat of military force. They also revised the Trade Union Law in 1948 so as to both abolish the right to strike and restrict the right to bargain in the public sector, where the more militant unions were concentrated (Gordon, 1985; Levine 1958; Moore 1983). Union use of company premises and acceptance of company financial aid were also legally prohibited, thereby denying these advantages to those unions strong enough to achieve them through industrial action (Gordon, 1985). Finally, the Americans organized a Red Purge at the outbreak of the Korean War in 1950 to rid the public sector of 12,000 employees with Communist leanings (Gordon, 1985: 333). These initiatives sapped the labour movement of its revolutionary zeal and blocked the renewal of a unified front against the authorities.

Legislative reform helped limit the broader political and economic ambitions of the labour movement, but it was the anti-inflationary Dodge Plan of December, 1948, that provided employers with the economic conditions necessary to diminish union power on the shop floor. In this context, the American administration sought to transform Japan from an impotent, but democratic, former foe into a stable, prosperous bulwark against Communism in East Asia (Gordon, 1985; Levine, 1958). However, the tightness of the initial monetary squeeze carried out under the Plan severely depressed product and labour demand, leading to major layoffs and large reductions in wages. Moreover, management exercised their improved bargaining position to regain full control over important business decisions by reducing or nullifying the contractually-based powers of the management discussion councils (Gordon, 1985). The labour movement resisted these 'roll-backs', but many employers responded by dismissing Communist unionists or offering sole recognition status to weak and isolated enterprise unions founded by loyal employees (Dore, 1973; Gordon, 1985). Firms received tacit approval from the American administration for these unfair labour practices primarily through the example provided by the Red Purge dismissals in 1950.

Coercive measures were generally insufficient to defeat the Communist and Socialist unions while their membership backing remained strong. Some concessions to the ideology of democracy and equality were therefore made to strengthen the legitimacy of enterprise unions at the expense of their radical counterparts. For instance, the old status hierarchy differences between white- and blue-collar workers were abolished as rank systems were consolidated and special privileges and perquisites were eliminated. As part of these changes, employment security was gradually extended during the Korean War economic recovery to cover the majority of regular, full-time workers (Dore, 1973; Hirschmeier and Yui, 1975). For employers, this layoff avoidance strategy brought industrial peace at a time of rapidly rising orders and full utilization of production capacity (Gordon, 1985).

Employers have since used lifetime employment to solidify their power over workers by transforming large Japanese corporations into 'total institutions', within which organizational life pervades every aspect of personal existence in a manner comparable to the military or priesthood (Ouchi, 1981). A high degree of insularity is reinforced through policies of welfare capitalism, whereby some firms provide their employees with special medical, recreational, and housing facilities (Dore, 1973; Hanami, 1979; Marsh and Mannari, 1976). Efforts to neutralize outside influences and inculcate corporate values are made easier by the policy of hiring lifetime employees at age eighteen or twenty one when they are still malleable to managerial influence (Clark, 1979; Dore, 1973; Rohlen, 1974). New employees are also indoctrinated through special courses about the firm, its organization and financial system (Pascale and Athos, 1982). The widespread practice of monitoring also provides new recruits with an additional means of learning about company norms (Clark, 1979; McMillan, 1985). Organizational culture is further reinforced through symbols, myths, and rituals. One such ritual includes the ringi method of reaching a consensus in decision-making (Ouchi, 1981). Some rituals even serve a function in defusing conflicts which might otherwise disrupt the harmony of the corporate culture. For example, an office party might provide a subordinate with the opportunity to berate a superior, while using intoxication as a face-saving guise (Ouchi, 1981).

The internalization of company values through the lifetime employment system creates a culture of shared meanings between employer and regular employee. As a result, Japanese corporations require few written rules or explicit performance targets to guide the work behaviors of their employees, even though there is a high degree of nominal formalization in practice (Abegglen 1958; Lincoln, Hanada, and McBride 1986). Employees are prepared to work hard and help their co-workers without fearing that their higher productivity might result in redundancies (Whitehill and Takezawa 1978). For the same reason, lifetime employees accept technological changes which might jeopardize particular jobs without affecting overall employment security (McMillan 1985; Whitehill and Takezawa 1978). Trust in management is also evident in the employees' increasing willingness over time to support management's unilateral promotion and performance appraisal decisions (Whitehill and Takezawa 1978). Lifetime employment thus provides the large Japanese corporations with a cooperative and compliant work force which can be easily directed and redirected in the pursuit of high performance (Rohlen 1974; Sullivan and Peterson 1991). The policy of retiring lifetime employees to senior posts with subcontractors also enables larger companies to influence smaller ones in its keiretsu or group. This transfer of personnel provides an ideal conduit for transmitting corporate values and thereby ensuring cooperative and coordinated relationships among interrelated firms (Ouchi 1981). The high degree of control provided by lifetime employment thus allows management to make decisions expeditiously and unilaterally, without worrying about the possibilities of countervailing obstructionist behavior so typical in the immediate post-war period.

The 1990s

I. New, Cooler Climate for Manufacturing

  • In the mid to late 1980s, Japanese manufacturers moved swiftly into any newly perceived market, to cater to each consumer whim, as well as to create additional ones.
  • The race resulted in shorter and shorter product cycles.
  • With the greater product variety and correspondingly smaller production batches, many manufacturers have lost economy of scale. The decreased efficiency has contributed to higher production costs.

    New Developments

  1. The focus has turned away from market share at all costs toward making a profit
  2. A significant reduction in planned manufacturing-sector capital investment
  3. Cutting production
  4. Longer product cycles -- from 3-4 years to 6-7 years
  5. Fewer options -- standardization
  6. Sharing of parts -- commonalization of parts among a number of different manufacturers
  7. Fewer products in a single category -- e.g., fewer models of VCRs

II. Major Workplace Changes

  1. Growth of the service sector, which requires more flexible staffing systems to cope with fluctuations in business volume
  2. Technological innovation in production machinery and methods, which has, for example, begun to blur the traditional blue-collar and white-collar roles
  3. New managerial strategies which focus on individual abilities rather than maintenance of an efficient and uniform work force, and on individual accountability for setting goals, as well as on hiring mid-career experts for new business developments at home and in unfamiliar international markets
  4. A longer-term labour shortage, foreseen as demographic changes transform Japan into an aging society, resulting in the need to entice normally non-mainstream workers, such as women and retirees, into the work force by creating conditions that suit their life-style patterns
  5. A fundamental change in work attitudes, motivation and perception of the 'ideal' job, now that economic growth has enhanced lifestyles and created more diversified interests
  6. Cost cutting, which is resulting, for example, in a short-term easing of the labour shortage and a reduction in work hours

III. The Evolution of White-Collar HRM in Japan

    Taken from: Motohiro Morishima, 1996, in Advances in Industrial and Labor Relations, Vol. 7, JAI Press: 145-176.
  • The evolution is occurring along two key dimensions of Japanese HRM: long-term employment security and nenko-base appraisal. Under the nenko system, an employee is promoted to higher levels within a company and receives salary increases as the age of the employee rises. Note, the length of service is used as a proxy for the level of skill development.
  1. With the regard to the long-term employment security, the policy itself is not being abandoned. Due to the labor cost implications of this policy in these times of ageing workforce and slower firm growth, Japanese firms are devising a variety of ways to work around its constraints (e.g., increase the use of part-time workers, removing senior white-collar employees from the workforce).
  2. Stronger changes are occurring regarding the nenko practices in that firms have started to introduce a more performance-based policy as well as to treat employees' careers as individualized with differentials in career attainment being created according to their performance records.

The Early 2000s

The following is based on this report

Collective bargaining

Japan has no nationwide or regional labour-management negotiating processes to determine working conditions for employees. Trade union organisations have a three-level structure - enterprise unions, industrial federations and national centers. Usually, labour-management talks at the individual enterprise level determine most employment conditions, including wage levels. For their part, industry union federations do not enter into negotiation with employers, but do establish industry-wide targets and work out specific strategies, including negotiation-duration and strike schedules, in order to improve the negotiating capabilities of their affiliated trade unions. Since about 1960, Japan's annual labour-management negotiations have usually taken place in March or April, giving rise to the name 'shunto' (spring wage negotiation). In the spring wage round, trade unions usually set targets based on the wage increases obtained within the leading company in a particular industry. This means that wage increases in the top companies have a significant impact on pay movements for workers in other major companies, the public sector, and small- and medium-sized enterprises (SMEs), leading to relative parity in Japan’s overall remuneration levels.

Recent developments, such as the lower economic growth rate and more intensive international competition, have extended the degree of disparity in business performance between companies, thus making it more difficult for trade unions to set industry-wide wage increase targets and to achieve 'horizontally egalitarian' pay rises than used to be the case before the late 1990s.

With the economy mired in a protracted slump and deflationary phase, the spring wage negotiations have been difficult ordeals for trade unions over the past few years as they have been forced to choose between maintenance of employment levels and pay rises. Since 1999 in particular, employers had been moving toward the concept of 'total labour costs management' , 'company-specific wage determination' and 'performance-based pay systems' . At the same time, employers have tried to avoid treating labour costs as fixed, emphasizing their view that achievements should not be reflected in 'base-ups' - a wage rise due to pay revision that reflects an upward trend in the prices index or the company's business performance - or regular pay increases - a wage rise based on the individual employee’s ability or age (or length of service) - but rather in lump-sum bonuses and incentives.

Spring wage negotiations in 2003-4

With the majority of enterprise unions obliged to defer their demands for a 'base-up' increase (see above), the primary focus of wage talks in 2003 was on continuation of regular pay increases, and the amounts of lump-sum bonus payments.

Since the 'IT recession' in 2001, Japan's major electronic products manufacturers have been reviewing their wage payment schemes. In the 2003 spring wage talks, these major manufacturers acceded to most of the trade unions' demands, including proposed regular pay increases. However, some companies entered into discussions with unions on amending their regular pay increase schemes, or shifting seniority-based wage systems from a medium- to long-term viewpoint. Such consultations were conducted separately from the spring wage talks, suggesting that the shunto could be losing its bargaining power.

Since discontinuing the submission of a unified demand for a basic wage rise in 2002 (JP0311101F), the Japanese Trade Union Confederation (Rengo) has placed more emphasis on improving common 'institutional' frameworks for all workers, including reduced working hours, work-sharing schemes and extension of retirement age limits. In the 2004 spring wage negotiation, Rengo worked on three main tasks: eradicating unpaid overtime work; improving working conditions for part-time workers; and providing proper support to employees of SMEs. On the last point, Rengo established its first-ever unified wage rise demand for trade unions in SMEs. In the past, SME trade unions based their wage negotiations on pay increases achieved within large corporations in the same year. However, the recent trend toward wage negotiations at large corporation level being held on an individual company basis, rather than coordinated industry-wide, has made it difficult for SME trade unions to determine their baseline wage rise levels. By setting a unified wage hike demand level for SME trade unions, Rengo has worked to eliminate, as far as is possible, disparities between company rates.

According to a Rengo analysis, the 2004 spring wage negotiations led to larger wage hike than in 2003 at the SME level, and also slightly raised the overall wage level, but Rengo also noted that there had been insufficient progress in raising part-timers' wage levels and in eradicating unpaid overtime work. The Japan Business Federation (Nippon Keidanren) has been pressing for the spring wage negotiations to become a forum for a wider variety of discussions, including corporate personnel systems, rather than focusing exclusively on wage rise talks as in the past. Nippon Keidanren has expressed confidence that the 2004 wage talks represented a positive move in this direction.

Collective bargaining and joint labour-management consultation process

According to a government survey conducted in 2002 (the Ministry of Health, Labour and Welfare's Survey on Collective Bargaining and Labour Dispute, which covered 5,000 trade unions, with an effective response rate of 80%), 64.6% of trade unions had experienced collective bargaining over the past three years, which represented a slight decrease from the 1997 survey level (65.1%). Of the trade unions that belong to umbrella organisations, 52% did not conduct collective bargaining because their 'umbrella organisation is in charge of collective bargaining' . On the other hand, 79.1% of trade unions without umbrella organisations did not conduct collective bargaining because they 'had discussions at their labour-management council' . Trade unions intend to resolve labour-management difficulties through such forums as the 'labour-management council' (56.4%) and 'collective bargaining' (39.2%). According to the survey, 80.6% of trade unions have their own labour-management councils. As for trade unions with 300 or more members, 90% have labour-management councils.

Japan has no law that governs labour-management consultation processes, but this practice has taken root in many Japanese companies. This means that many trade unions resolve labour disputes at individual company level. As a rule, each trade union will have a different strategy for collective bargaining and labour-management consultation. They resort to collective bargaining to discuss 'wages' (58.1%), 'employment practices and personnel affairs' (41.5%), 'working hours' (37.9%) and 'company's management policy' (22.0%). On the other hand, they use the labour-management consultation process for discussing 'employment practices and personnel affairs' (48.7%), 'working hours' (45.0%), 'working conditions' (41.8%) and 'wages' (40.3%). When discussing 'job security during a time of poor business performance' , 20.3% replied that they use collective bargaining, while 28.5% replied that it is discussed at labour-management councils.

Revision of the Labour Standards Law - Dismissals

With the number of labour disputes concerning dismissals increasing steadily, a revised Labour Standards Law was approved in June 2003, and was enacted in January 2004.

The Civil Code gives employers the right to dismiss workers. At the same time, the Labour Standards Law (LSL) provides that employers must give at least 30 days’ advance notice of dismissal, or pay the worker in question a sum equivalent to his or her average wage for at least 30 days. However, as there is no law setting out the criteria for dismissal, judicial decisions have to be reached on the basis of case law, forging so-called 'legal principles' , which in practice place restrictions on abuse of employers’ right to dismiss. This is the established principle justified by the highest court. The latest version of the LSL supports and makes use of these legal principles, clearly stipulating that in cases where a dismissal is not based on any objectively reasonable ground, and is not acceptable as a rightful decision in light of current social norms, the dismissal will be deemed invalid, constituting an abuse of the right to dismiss. Part of the discussion focused on introducing a financial solution for dismissals, but labour and management failed to reach an agreement in this area.

At the same time, Rengo and other trade unions have been calling for the clear stipulation of four requirements relevant to judging the validity of dismissals as a corporate restructuring measure, which is usually accepted by lower-level courts but has not yet been the case of the highest court. These four requirements are: (i) necessity for dismissals; (ii) obligation to Endeavour to avoid dismissals; (iii) reasonable selection of people to be dismissed; and (iv) obligation to hold labour-management discussions. These were not included in the LSL revision, but despite this a supplementary resolution in favor of the four items was approved in the House of Councilors, requesting that employers be familiarized with the items. Rengo was satisfied with the resolution, saying that it would serve to some extent as a check on unfair dismissals.

Enacting the Employment Tribunal Law

Due to an increase in labour disputes in recent times, the Diet enacted the Employment Tribunal Law in April 2004. The specific date of enforcement has not yet been decided, but the law will probably come into effect around spring 2006.

The current labour mediation schemes, which is managed by public administrative organisations, will continue to play a central role in the prompt settlement of labour disputes, but the new legislation will enable a panel in a district court (comprising a judge and two labour experts) promptly to provide specific solutions for labour disputes. In this new scheme, the panel shall at first try to mediate the case and, if it is difficult, proposes a solution after examining the rights and obligations concerned. The new law requests the panel to try to finish all these proceedings within three sessions. However, the new law does not incorporate a 'citizen-participation system for labour disputes' , which was strongly urged by trade unions.

The organisation and role of the social partners

The estimated trade union organisation rate was down from 20.2% in 2002 to 19.6% in 2003, with membership declining by 269,000 to 10,531,000, continuing the downward trend that has been in evidence for 28 consecutive years. Major falls have taken place in the larger companies, with a decrease of approximately 1 million members in the past six years. For part-time workers, on the other hand, the organisation rate increased slightly from 2.7% in 2002 to 3% in 2003 (up 0.3 percentage points). The proportion of total union membership made up by part-timers, however, was still low at 3.2%.

Of the three main national centers, Rengo organized 6,807,000 workers in 2003 (down 138,000 from the previous year), while: the National Confederation of Trade Unions (Zenroren) had about 993,000 members (down 25,000); and the National Trade Union Council (Zenrokyo) had 166,000 (down 5,000).

With fewer workers joining trade unions, there has been a trend since 2001 to integrate and merge industry trade unions.

Nippon Keidanren is the largest employers’ organisation, incorporating 1,623 member groups, including 1,306 leading companies, 129 industrial associations, and 47 regional associations throughout Japan (as of May 2004). Nippon Keidanren reappointed Hiroshi Okuda as its chair at its general convention in May 2004.


Due to new management philosophies among employers, and changes in worker’s attitudes to their jobs, the number of non-regular employees is highly likely to increase. Because of diversified working patterns, employers are expected to establish proper merit-based wage schemes and fair evaluation frameworks, shifting away from traditional, 'one-size-fits-all' human resource management practices. It is unlikely that increasing numbers of regular workers will join trade unions in the future. The spring wage negotiation strategy based on horizontal egalitarianism no longer works effectively, because of the transition from collective industrial relations to individual ones.

Here is a very good source of recent labor statistics

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