To the Editor

Back to Contents of Issue: February 2003

Lifetime employment is a myth. Mobility has always existed in Japan. When times are different, pundits have to come up with a new explanation. Real unemployment has always been high in Japan.

by Thomas Winant

One of the more interesting letters we received this month was from a reader who took us to task for using the phrase "lifetime employment" in one of our newsletters.

When, oh when, will the myth of "lifetime" employment be laid to rest? James Abegglen created a monster way back when I was an undergrad in Japan more than 40 years ago.

At no time in the past has "lifetime" employment been the rule in Japan. Several things ought to be understood:

1. Prior to World War II, the Japanese work force was highly mobile and only family firms could count on a steady group of workers and then only because they were relatives.

2. After the war, the Occupation imposed a nest of labor laws and rules that made firing someone very difficult. The New Deal folk who imposed these laws could not accomplish what they wanted in the US, but they had an open field in Japan. That inhibited dismissal of employees but never ended it. Mobility slowed but did not grind to a halt. The rules no more favor the employee than rules in other countries. "Creative" managers are always able to unload unproductive employees.

When Japan attempted to recover after World War II, the work force was in considerable disarray and companies had trouble keeping staff. The idea of offering incentives to stay on to help rebuild the companies and the country was more to benefit the companies than the employees, and what happened did not in any way mean that company or national policy offered or assured "lifetime" employment. As a result of trying to keep staff, though, several new features appeared:

A. Companies began to subsidize housing for staff, even building dormitories for single employees (these had existed before the war, but the building was especially necessary after World War II because of the widespread destruction of the war and the homelessness of many workers) and also apartment blocks for married couples with families. When buildings became more expensive, the housing subsidy appeared so that employees could live in their own "mansions'" or houses, and the transportation fee took on a life of its own.

B. Companies began to tie employees to them by offering balloon departure packages at retirement, which until the 1970s was usually about age 55. It should be noted that until the 1960s, the average university student was in his early to mid 20s, not in the high teens as they are these days, so the average worker did not have as long a working career as they do today when retirement is usually 60. Thus the payouts were less then. The problem today is that the 60s generation and later started earlier, stay longer and so the balloon departure payments are way beyond what companies imagined they would be.

Those balloon payments, by the way, helped many a retiree set himself up with a small business that was sometimes related to the former employer but was often quite different. One of the reasons Japan resisted the large store demands of the US for so long was that the big stores would remove an income option for retirees in their 50s and 60s. Those who don't remember what neighborhoods were like before the 1980s would not know that.

C. Only the biggest companies could offer "lifetime" commitments, so rarely did the concept affect more than about 20 percent of the entire work force, and even then there ought to be all sorts of caveats employed. Knowing only the redundant literature, the world of the keiretsu, and the fleshpots of Tokyo, it is no wonder that those lacking perspective would perpetuate the myth.

"Lifetime employment"... what a crock that is! Temporary or part-time workers have been fixtures in Japanese offices and factories for generations. The situation was not "lifetime" employment but "underemployment."

I have known executives who have stayed with the same keiretsu for many years, but there are few who actually stay with the same direct organization for an entire career, even in the best of times. On the other hand, I also know individuals who have had as many as half a dozen employers, and they are not that unusual.

Mobility has always existed in Japan. It's just that when times are different, pundits have to come up with a new explanation. Real unemployment has always been high in Japan. Only those with a belief in fairy tales actually think that the official figures come anywhere near being accurate. All firms are doing now is shifting out some of the deadwood, though they as often as not keep the wrong people.

Lifetime employment is a myth and no more reflective of reality as a result of continued repetition these last four decades. I suspect that if you only knew people at one of the biggies, you might think it true, but it's not been the case for Jiro Tanaka. Let's stop trying to perpetuate that myth, shall we?

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