Cheap but unreliable?
From the post-war era until the late 1980s, the Japanese system of lifelong employment and seniority-based wages has contributed to the success of Japan’s corporate infrastructure. Unconditional commitment and devotion, endless unpaid overtime and absolute loyalty used to be the cornerstones of a system that no longer seems to function. The Japanese company – the kaisha – used to be seen as a kind of extended family. Companies would hire new employees right after their graduation from high school or university and train them within the company. Employees could gain different experiences and expertise in various sectors of the company through job rotation. Through this system, tacit knowledge and special skills could be acquired on the job and passed on directly.
The increasing use of non-regular employees though, might in the long run, endanger the existing system. Loyalty is decreasing while job changes are on the rise. The longevity of corporate employment is no longer assumed and many companies now risk losing the experience and knowledge of their workers at any given moment.
Furthermore, differing incentive structures often create tension between regular and non-regular employees; as a consequence, the work atmosphere suffers. In the kaisha-family, the non-regular employees must indeed feel like disadvantaged orphans in comparison to the seishain, the regular employees.
This is surely not beneficial for the overall productivity of an enterprise. But even for the seishain, the situation is not as agreeable as it used to be, due to increased pressure from global competition and the current financial crisis. On the other hand, the advantages companies get out of splitting their staff into regular and non-regular employees cannot be denied, be it cost saving, thanks to cheaper non-regular workers, or flexibility in recruiting and dismissing staff based on momentary needs and economic trends. The U.S. system has shown that economic success can be possible without – or because of – lifelong employment.
Nevertheless, U.S. companies also seem to be aware of the fact that the success of an enterprise is closely related to its employees and to the working environment. Recent studies have shown that sudden dismissals and departures have a negative impact on overall employee performance. Robert Sutton and Jeffrey Pfeffer, professors at Stanford University, have been arguing for years that treating employees well will benefit the company in the long run. This also includes fair and transparent recruitment policies.
The Japanese enterprise YKK, a world market leader, can be considered a pioneer in this respect. Tadahiro Yoshida, YKK founder’s son and CEO, has made ‘fairness’ one of his leading principles and considers it fundamental, especially when it comes to recruiting. He even thinks of it as the key to YKK’s fast global expansion. In the case of Japan, the particular situation of demographic change must also be taken into account. In the near future, Japan will most likely face a labor shortage as the working age population (20-64 years) is forecast to shrink by 4.1 percent from now until 2020 and another staggering 26.5 percent between 2020 and 2050. Indeed, according to a report by the Cabinet Office, the Japanese labor force might shrink from 66.57 million in 2006 to 42.28 million by 2050.
Whereas companies once relied on cutting employees as a means of restructuring up until just a few years ago, by now many of them must worry about a potential shortage of workers due to a decreasing population combined with baby-boomers reaching retirement age. This should strengthen the negotiating position of potential employees, as well as inspire companies to create more regular employment in order to boost employee retention company-wide. What this new dynamic may reveal is true imperative behind the freeter phenomenon: Have they deliberately picked their current, less than optimum, working situations, or will they rapidly, and gratefully, accept the promise of regular employment after all?
What is a ‘freeter’?
In 1987, the magazine Recruit from A coined the term ‘freeter,’ a combination of the English word ‘free’ and the German word ‘Arbeiter’ (worker) to label a new, freelance type of worker. According to the Ministry of Health, Work and Welfare, freeters are generally between 15 and 34 years-old, and work in part-time employment (so-called arubaito). They are neither enrolled in any kind of job training, nor are they full-time housekeepers. Since the beginning of the 1980s, the number of freeters had quadrupled from 500,000 to 1.8 million in 2007. Depending on the respective definition, the group is thought to encompass more than 4 million workers in Japan. Among employees between the ages of 15 and 34, around 20 percent work as freeters. This group is not only increasing in number, but also growing older. While in the late 1980s, the majority of freeters were in their early 20s, in 2004 more than half of them were over 25 years old. The official age limit of 34 no longer makes much sense due to the fact that freeters in their 40s are no longer an exception to the rule.
Dr Carola Hommerich and Dr Florian Kohlbacher are both senior research fellows at the German Institute for Japanese Studies (DIJ) in Tokyo.
hommerich@dijtokyo.org
kohlbacher@dijtokyo.org
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