JILPT Research Eye
The Employment System Project and Research by JILPT

May 19, 2015
(Originally published on January 16, 2015 in Japanese)

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Takahiko KUSANO

JILPT Adviser


Launch of the "Employment Systems and the Law" Project

Labor policy has found itself at a major turning point recently. As the need to break away from deflation is now paramount, the government's reconstruction strategy advocates a shift in policy "from excessive employment stability to smooth labor mobility." Recently, in fact, the government has launched a rapid succession of initiatives, such as raising wages and reducing long working hours, as well as the introduction of working hour exceptions for high-income professions.

This "turning point" also raises questions over the nature of research on labor. In the short term, an urgent task for JILPT is to provide policy information and knowledge quickly in response to various administrative issues. However, another important mission is to conduct basic research from medium- to long-term perspectives.

One is our launch of the "Employment Systems and the Law" project, under an initiative led by JILPT President Kazuo Sugeno from this fiscal year. I would now like to explain some aspects of this project, reconsidering the structure and mission of JILPT's research from now on.

This project will cover an intensive period of three years from fiscal 2014, taking Japan's employment system as its central theme, and has the aim of researching topics such as the following.

  1. Identifying and enumerating changes in Japan's employment system in recent years, from multiple angles with focus on the "Japanese-style employment system."
  2. Observing the interaction between the employment system and legal policy, and identifying the functions and issues of legal policy in its relationship with the realities of employment system.
  3. Searching for issues and political implications of Japan's employment system based on the state of change mentioned above.

As discussed in the next section, in order to ascertain trends in Japan's employment system, this project focuses on the "Japanese-style employment system". Here, we have taken two main approaches, as means of defining the relationship between the employment system and legal policy.

The first is the "contemporary approach." This involves aspects of interaction between the two in our contemporary socio-economy – in other words, socio-economic trends and interaction between the employment system and labor policy in response to these trends. By observing the interaction between these in detail, we aim to identify useful policy findings, such as the directionality of change in employment systems in a period of transition and the role the law plays in it.

The second is the “transitional approach,” depicting transitions in interaction amid a series of major changes in the contemporary socio-economy. In this way, we aim to ascertain major trends of our age related to labor policy and confirm where we stand at the moment, as well as providing findings that will serve as useful reference when considering the significance of policies and future directions.

Based on these approaches, the project will be carried out according to the following schedule. Mainly in fiscal 2014, our work will focus on “overviewing changes in the employment system” (involving trends since the collapse of the bubble) and “enumerating changes in and issues of labor law and policy” (involving changes in labor policy based on the transitional approach). Then, mainly in fiscal 2015-2016, we aim to present i) the interaction between the employment system and legal policy (principally through the contemporary approach), ii) future directions for the system and issued on legal policy, and iii) policy information and knowledge.

Problem awareness with focus on the “Japanese-style employment system”

In this project, we are searching for trends in Japan's employment system as a whole, with particular focus on the “Japanese-style employment system” and its central tenet of long-term employment.

As is well known, the so-called “Japanese-style employment system” refers to the system of employment typically seen in large Japanese corporations, with elements of long-term employment, seniority-based treatment and company unions. However, the core of the system could be said to lie in a cooperative relationship based on long-term training and utilization of core personnel by companies, and sharing of interests between labor and management.

Although this system had been formed historically and in stages, it reached a particular state of completion as a system after the oil crises were overcome. Judicial precedents and policies also supported the system from legal and institutional angles, and it even became elevated to a system of legal policy transcending corporations. Meanwhile, the method of settling wage levels via “spring offensives” and the mechanism of policy decisions by tripartite councils developed as mechanisms supplementing the system. Eventually, the system came to represent Japanese employment and labor relations as a whole, peaking in the 1980s, in what could arguably be called “a stable employment society.”

Since then, the system has undergone various modifications, amid environmental change such as globalization and the advance of declining birthrates and aging population, as well as international economic upheavals including the Asian currency crisis and the global financial crisis, market-led regulatory reform, and social policies aimed at protecting the economically vulnerable. Recently, moreover, it has been the target of skeptical opinions from the perspective of economic revitalization; points of contention include disparity in the treatment of regular and non-regular workers, a lack of distinctive human resources, long working hours, the closed nature of the internal labor market, and the underdevelopment of the external market.

On the other hand, however, the system has been supported by both labor and management in the field, on account of advantages including stability of employment, long-term human resource development, stable labor relations, and the active support and contribution of employees. In fact, notwithstanding various modifications focusing on systems of wages and treatment, the main framework has been retained to the present day. In JILPT surveys, too, it continues to enjoy strong support[Note 1] and has deep-rooted durability.

By nature, typical employment systems include those based on internal markets and those based on external markets. Each of these has its advantages and disadvantages[Note 2], and it is difficult to discuss their relative merits in general terms. Moreover, the historical circumstances, values and cultural elements lying behind each country’s employment system cannot be overlooked. Currently, various countries are adapting their employment systems to their respective environments, and these are not necessarily converging on a single system geared to globalization[Note 3].

In fact, initiatives designed to adapt to the environment of globalization and increase in focus on markets have also been started in Japan’s internal market-based employment system. These include reforms of corporate governance, the introduction of performance-based treatment, the multi-stage stratification of employee grades, and the diversification of working styles. With these, the system could become greatly transformed and segmented. Also, foreign-capital companies, venture companies and others account for a significant section of the labor market, constituting a mixed picture together with the “Japanese-style employment system.”

Under this unpredictability of future developments, I think it essential, in our policy research, that we observe in detail the situation whereby Japan’s employment systems are being amended while adapting to environmental change, and the role played by the law in this. In doing so, we need to discover some kind of rules or directionality in these and link them to policy, with special focus on the “Japanese-style employment system,” while referring to employment systems and policy trends in other countries.

Through our research in this project, we hope to clarify the appearance and directions of these changes; in particular, what has been kept and what is changing as these modifications to the employment system progress, and as a result, what the overall image of the employment system is. And as an extension of this, we would like to find political implications and hints concerning the future image of employment.

The structure and tasks of JILPT research

As labor problems stand at a major turning point, the “Employment system and the law” project is also an attempt to reconsider the structure and tasks of JILPT research.

Since JILPT became an independent administrative agency, it has reached its third term. Research until now has mainly concerned labor relations, working hours and other problems, with particular focus on employment and career problems of labor supply side ―youth, women, the elderly, non-regular workers, and others. The importance of continuing research on these supply-side issues in future goes without saying. But when we look ahead to a desirable framework with focus on employment systems, issues like the following emerge.

Firstly, research on the internal markets and employment systems of companies on the demand side (e.g. ascertaining changes in systems of wages and treatment) has not necessarily yielded adequate results since the second term. Trends in employment systems are major problems that affect the whole of future labor policy as outlined above; they need to be placed at the core, sustained and reinforced, taking advantage of research and study connected with this project.

Secondly, there are certain areas closely related to the realities of the external labor market, and positioned outside employment systems until now, in which sufficient research has not necessarily been made. The government’s revitalization strategy calls for an industrial metabolism and “zero-unemployment labor mobility” to growth sectors, and advocates the elimination of mismatches and functional strengthening of external markets. To make these policies effective, a concrete strategy based on the realities of an extremely complex and congested external labor market will be indispensable.

Thirdly, to pursue policies while confirming the position of Japan’s employment systems amid the advance of globalization, research on ascertaining and comparing the realities of employment systems and policy trends in other countries becomes increasingly important. Consideration should also be given to future frontier research (e.g. social initiatives by NPOs and others in the community, new independent ways of working by professionals, new working styles for the elderly, changes in project organizations and labor law, pioneering overseas initiatives in these areas).

Figure Structure of JILPT research

Figure Structure of JILPT research

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Based on the above, what emerges as the structure of future research is a scheme where “Workers,” “Internal labor market” and “External labor market” are placed as three core perspectives/fields, around which research on other countries, related systems of social security, and future frontier research are arranged, as shown in the figure. As well as each having its own unique characteristics, these also interact with each other and form the entirety of labor problems.

In recent years, labor problems have assumed complex and structural aspects, including measures to address non-regular labor, strengthen function of the external labor market, and resolve mismatch and labor distribution. In addition to the core of basic research, there is a growing need to perceive problems with a multi-faceted approach, including policies in related fields.

JILPT, with its mission of contributing to policy, will be required not only to accumulate basic information and knowledge through systematic and continuous research on the above fields, but also, on top of this, to conduct applied research from multifaceted perspectives and study commissioned by the administration, among others.

Labor policy should ideally be proposed on the basis of evidence, amid a broad and lively debate including labor-management and tripartite discussions. The role of JILPT in providing policy information and knowledge to this end is increasing in importance. As an independent administrative agency, we aim to provide reliable information and knowledge appropriately, based on incessant self-reflection, and to present the extent, depth and breadth of labor problems.

Note 1. According to the JILPT “6th Survey on Working Life” (2011) (only in Japanese), the ratio of respondents supporting “Lifetime employment” was the highest ever at 87.5%, while the ratios of those supporting “Sense of solidarity with the organization” and “Seniority-based wages” also posted record highs of 88.1% and 74.5%, respectively. Meanwhile, according to the JILPT “Survey on Future Industrial Trends and the Nature of Employment” (2010) (only in Japanese), around 70% of companies (less than 100 employees: 65%, 100-299 employees: ca. 70%, 300 or more employees: 75%) replied that “Long-term stable employment” “has greater merits.”

Note 2. According to Peter Cappelli “The New Deal at Work” (2001), the internal market type has advantages including employment stability, reciprocal trust and contributions, and active investment in training. On the other hand, it has problems including organizational constraints and the difficulty of changing jobs. The external market type, meanwhile, has advantages including flexibility of management (including ease of dismissal and restructuring) and clear contract contents, but also problems with maintaining core employees, securing employee commitment, and developing specific skills.

Note 3. As well as diversity between countries, some prominent views also highlight diversity within countries (e.g. Masahiko Aoki, “Corporations in Evolving Diversity,” Mitsuharu Miyamoto, “The Future for Japan’s Employment and Corporate Governance”).