This document summarizes research on changes to the employment and treatment of regular employees in Japan. It finds that while some changes have occurred, such as a flattening of the age-wage profile and less emphasis on seniority, the core features of the Japanese employment system have been adapted and preserved. HR departments remain central while gaining some new market-oriented practices. The system appears to be evolving into a hybrid model rather than fully converging with the US model.

1. Rebick, M. (2005)
‘CHANGES TO THE EMPLOYMENT AND
TREATMENT OF REGULAR EMPLOYEES’

2. RESULTS FROM SURVEY OF LITERATURE
Main areas Changes Reasons
Employment security:
•Incr. with age, except for 20-24 [2003] •Education, dismiss ones with shorter tenures
i. Tenure,
•Similar, flatter in favour of young •PT workers, conc. stockholding
ii. Mobility
Career structure:
•More demand for training •Highly specialised industries, finance and IT
i. Skills,
•Less formal recruitment ceremonies •Breakdown of annual hiring patterns
ii. Corporate culture,
•Scarce managerial positions; •Opportunism, observability, cooperation
iii. Career ladders
↑average age for promotion; breakdown; deal with aging workforce by
↑fast-track promotion motivating younger employees
Compensation
Defined benefits plan  defined
i. Incr. complexity of determination of pay;
contribution plan Flattening of age-wage profile;
ii. Seniority- to performance-based Change of incentive from loyalty to personal
wages; rise of individualism reward
Hours of work Decline based on surveys, Pressure for long-hour culture: be noticed, be
but increase in unpaid/unreported work heard, SURVIVE;
hours PRP induced behaviour.
Main empirical changes:
o Age of mandatory retirement increased from 55 to 60
o Flattening of age-wage profile o Less managerial posts held by high-schoolers
o Higher education attainment o Lower employment for middle-school graduates

3. CONCEPTUAL PROBLEMS WITH SURVEYS
Multiple career tracks:
 Problems in documenting trends towards specialist careers
 Difficulty in distinguishing title between seniority and expertise
Unreported, unpaid long hours are not on record
Complex PRP system implies difficulty in mapping its effect on productivity
Causality issues: age-wage profile and use of payment systems
IMPLICATIONS: X-EFFICIENCY
The weakening of the following X-efficiency values:
 Security that encourages investment in supplying firms?
 Trust that encourages rapid flow of information?
 Emphasis on quality?

4. CONCLUSION: WHY HAS JAPAN CHANGED?
Why is there a decline in employment, change in career
structure and compensation?
 Changes in structural constraints:
 Prevalence in „Shukko and Tenseki practices‟ =
shock-absorbing mechanisms by using redeployment
to avoid redundancies
 Baby boomers reaching middle-age, extension of
retirement age = “age-wage profile”
 Results in pressures to reduce employment, thus
weakening traditional „three pillar‟ system

5. FURTHER QUESTIONS
Do we see a shift from organisation-centred to a

market-centred employment system in context of
the „three pillars‟ system?
Why does Rebick conclude that “there has not

been great change in the nature of standard
employment in Japan”? How does this statement
cohere to his findings?

6. Inside Japanese Companies Today

Jacoby


7. HR
Key element in Japanese system was

headquarters HR department
 Today Japanese companies are experiencing
pressure to conform to U.S style corporate
governance & to adopt market-oriented
employment practices that would weaken the
corporate HR Function.
 Is this actually happening?

8. SURVEY
Survey & analysis of 7 Japanese companies

Looks at companies that are both diversified and

specialised
Looks at companies which are both centralised and

decentralised.

9. CHANGES
Headquarter Reorganisation

In all organisations, efforts to make headquarters smaller, focused and more efficient.

HR not singled out; economic measures made across the board and no disproportionate

negative effect on HR.
Corporate Governance

Reforms undercutting shareholder approach by giving more weight to shareholders and to

finance-driven decisions – weakening central HR in corporate hierarchy.
Trade Unions

Unions are becoming weaker and reducing the perceived relevance of corporate HR

departments.
Employment Practices

Both employment practices and social norms underpinning them are gradually becoming

more market-oriented. Lead to erosion of HR influence in corporation.

10. CONTINUITY
Re-organisation

Despite re-organisation, no divisional HR units – preservation of central HR unit.

Belief in using central HR to realise cross-unit synergies and to sustain a strong

companywide culture that can hold the company‟s diverse pieces together.
Corporate Governance

Recent legal reforms have made permissible a variety of U.S. Style corporate-governance

practices, Japanese companies have changed far less rapidly than the law.
Trade Unions

HR relies heavily on the union as a routine part of the employee relationship despite

eroding of managerial support.
Employment Practices

HR still firmly in command of recruitment.

HR has key role in identifying rising stars.

HR required to handle the practice of shukko and chuto saiyo.


11. CONCLUSION
Corporate governance is changing slowly

Decline in union power has been a long and slow process taking place

outside large companies
Changes in employment practices are nothing more than incremental

changes, and are sometimes nothing more than symbolic changes.
Means that core features of Japanese corporate system are adapted to

changing environment and thereby preserved.
For HR, this means while it has lost power it still occupies a privileged

position.
Organisations in Japan are moving towards a hybrid system – there is

no convergence with the US but emergence of something new.

12. QUESTIONS
Is the Japanese employment system simply

remodelling itself to cope with a changing economic
and demographic environment?
To what extent is employment in Japan converging

on the Anglo-Saxon Model?