Japan’s Employment Rights Offset Reform Potential

Japan’s Employment Rights Offset Reform Potential

Deep-seated cultural practices continuously shape economic activity, not only in Japan, but across the globe. Economic analysis is often made through a generic lens applied across countries, leaving out such specific cultural influences. Looking at these less appreciated dimensions of society and how they shape economic activity offers much insight about Japan’s ability to reform its economy and continue its growth trajectory.

A recent New York Times article, “Layoffs Taboo, Japan Workers Are Sent to the Boredom Room“, helps illustrate the subtleness of Japanese traditional traits, such as the taboo of being unemployed, and how they shape Japan’s economy.

According to reporter Hiroko Tabuchi, Sony offers early retirement packages to reduce ‘expansive’ pensions, and in other cases dismisses often long-time employees in the hope of decreasing the burden it is to pay out expensive benefits. Caught in this dragnet of corporate reshuffling, Miwako Sato, an employee at Sony since 1974, received one such direct command from a superior at work: “Your job no longer exists.”

Japanese labour law protects workers’ rights to the extent that it allows employees to refuse termination, which Sato did, and thereby offsets flexibility in the labour market required for competing globally.

This story highlights a fundamental tension in Japan between employees that view lifetime employment as a norm and large corporations that continuously seek to streamline work-forces to better compete. Sony is attempting to stay relevant as it fights for customers and defend itself against being “outmaneuvered by more nimble competitors.”

Japanese traditional practices, such as a workers having the right to refuse termination, are a difficulty for the government that will most certainly continue to shape Japan’s economic future as the Abe administration move towards further reforms to sustain the current growth trajectory.

Japan has recently been highlighted as a ‘miracle nation,’ largely because of its ability to get back on economic track after the economic drought it suffered in the 1990s. Much of this success is a direct correlation of the state’s ability to intervene in economic activity. Because of this, much of the population devoted their ‘undue’ support not only to the state, but also to many corporations that have become global industry leaders.

Devotion to the state remains a critical theme within Japanese life. As such, Japan’s ‘economic miracle’ is deeply tied to the belief that, “a combination of lifetime employment, seniority-based pay and intense worker loyalty to the company was credited for Japan’s postwar economic miracle.”

As Japan continues to restructure its internal market for exporting and competing globally, Japanese authorities and corporations will be forced to attempt to unlearn many of the deep-seated traditional practices once strongly enforced.

Categories: Asia Pacific, Economics

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