Employment in Japan

· November 18, 2018

I’ve been on vacation this past week in Japan, which continues to be an exceptionally nice place to visit. One of the many things that strikes me as unusual is the number of older people, mostly men, doing certain kinds of work - things like waving a flag to direct traffic around construction, which led me to a quick look at the Japanese labor market. 

The labor market is tight, and is in some ways a lot more structurally rigid than in other countries. Most people graduating university look for seishain jobs, which offer lifetime employment, training and development, membership of company specific unions, and seniority based pay. Because of the strong tradition against lay-offs, hiring is conservative, which means changes in need are handled through non-regular employment: contract and part time. 

The non-regular staff come from many sources, and can be employed directly or via a separate company, often a subsidiary. Retirement age is fairly low, so men who retire from seishain jobs may work part time during their retirement. Women are often disadvantaged by being put on non-career tracks, and so may end up in non-regular employment. Finally, immigration has increased in recent years to provide some new workers - including some recent controversy around proposals to create a new class of visas for guest workers. 

The seniority based pay on regular jobs has some interesting effects - pay demands are generally only slowly influenced by tight labor markets because of it, and there is a strong disincentive to change companies as it means starting at the bottom of the pay scale at the new firm. 

Maintaining the system requires support from government and finance, particularly in recessions. In the private sector this has led to numerous cross-holdings that help align the interests of the different firms involved. On the government side, the Abe administration has done a whole lot of quantitve easing to boost the economy, but also worked on improving career prospects for women. 

It’s interesting to see a broadly successful but somewhat different approach to economic management. It also underscores one of the general, worldwide opportunities: the lost productivity of women due to systemic lack of opportunities.