Japanese trade unions and their future: Opportunities and challenges in an era of globalization (summary)

By Sadahiko Inoue, Rengo Institute for Advancement of Living Standards, Tokyo, 1999

Summary: Challenges to Japanese trade unions

Change and continuity

In spite of significant changes in the economic environment, labour/management relations in Japan have not changed to any significant extent from the previous two decades. The basic characteristics of the company-based union, the seniority-based wage profile, the spring labour offensive that features annual wage talks early in the year, long-term employment and workforce adjustments organized primarily within the internal labour market all continue to this day. Any increase in labour disputes typical of a low-growth economy has not yet been observed. It can be said the Japanese trade union movement has made few changes in its traditional style and practice. One reason could be the fact that divisions in the post-war labour movement which persisted for years have at last been overcome and most unions have been consolidated into the 8-million strong Rengo. For the first time, trade unions have shaped themselves into a stable social force.

Institutional changes in industrial relations remain minimal as a result of two factors. First, partnership and confidence between labour and management, which have developed steadily over many years, remain firm in the 1990s. This is the base of the Japanese corporate system, which forms a quasi-community for employees. Here, the accepted idea is that lay-offs only occur in marginal enterprises suffering persistent poor performance. Lay-offs, which are common practice in the United States, basically do not occur in Japanese companies. Second, Japanese employment and wage systems are not rigid by any means, contrary to what many observers erroneously report. The internal labour market of a Japanese corporation, and the quasi-internal labour market including its affiliates, provide for employment adjustment based on moving workers to different jobs, training/relocation, and restraints on recruitment. Therefore, the mobility of the workforces is considerable. The pay system featuring seniority, which is not directly related to job type, serves to facilitate the mobility of labour within the corporation. This makes it unnecessary for corporate management to resort to lay-off, so that normal practice is to retain employees.

The social consensus and information sharing leading to wage determination through the spring labour offensive helped the Japanese economy recover from rampant inflation in the aftermath of the oil crises in the 1970s, because of its wage moderation effect. In the current serious recession and the deflationary pressures on the Japanese economy, the spring labour offensive serves to slow the deflationary spiral caused by the worsening employment situation and the decline in wage levels. The approach helps adapt wage levels to fluctuations in the economy and to inflation or deflation, and acts as a built-in stabilizer.

Against the market doctrine

In the context of continuing economic problems, there is a tendency to favour public policies and corporate management practices based on the new market doctrine. There is also a school of thought that relates the causes of Japan's economic stagnation to the traditional practice of retaining workers and using a largely equitable pay system. Advocates of market principles argue for enhancing flexibility by making lay-offs much easier, and by attaching more importance to the external labour market. Since 1997, there have been moves towards expanding temporary staffing schemes and promoting job-placement agencies in the private sector. Recent revisions of the Labour Standards Law allow more scope for fixed-term employment contracts. Trade unions have launched campaigns against these moves, which have resulted in some restrictions on implementing the revised provisions.

Under the tightening budgetary constraints, initiatives to reduce social welfare, pensions and health care benefits have become highly controversial issues.

Holding companies, previously very restricted by anti-trust considerations, are generally permitted to divest operations into separate corporate entities, or reorganize themselves and their affiliates into industry groups. These developments have caused some concern that the effectiveness of collective bargaining at company level might decrease with the globalization of corporate management.

On the supply side of labour, too, several factors have emerged to facilitate these changes. The employment of women and older people is increasing and since these workers show a strong tendency to opt for part-time jobs, they help diversify employment forms and working conditions. They also help develop changes in the traditional wage structure based on full-time workers and thus reduce wage discrepancies.

No social force is overtly hostile to trade unions in Japan. However, the market approach seems to be gaining influence, even though unemployment is rising and widening wage discrepancies are observed in some sectors. Also, for corporate management, a tendency towards short-termism is observed. This approach looks for short-term returns on investment and respects fast decisions on business options, rather than attaching importance to long-term, stable employment and business success.

Long-term stable employment and equitable short-term employment

Rengo defends long-term employment and stable wages. It also attaches importance to expanding individual union members' options in their working style, increasing union involvement in human resources development, and fair positioning of staff. Rengo has drawn up guidelines for the growing new workforce with its higher mobility and part-time workers. The guidelines propose assuring workers' right to subscribe to social insurance schemes, and the right to fair treatment. These efforts are in line with Rengo's policy of increasing trade union representation at workshops.

A joint study between Rengo and DGB on The future of work, published in September 1997, touched upon this point.1 The study states: in the working and employment systems, long-term, stable employment for regular workers must be placed in their core. Long-term, stable employment of regular workers can assure a labour system that combines contemporary technological innovations with human skills. Namely, it can help provide effective future-oriented training schemes that enable to supply high performance labour, or required skills. High performance labour can not be materialized under short-term, unstable employment. Also, for short-term employment, fair wages and working conditions must be assured.

A campaign against the doctrine claiming market principles are best is expressly stated as the basis of Rengo's policy for 1997 to 1999. This position is geared to Rengo's social strategy of a sustainable welfare society built in the long-term interest of people living on their salaries.

A better socioeconomic model

Rengo Rials has presented its concept of future society. The research institute has provided two social models, in which Rials affirms that society in the 21st century will have to choose between two options: one is individualism or the almighty market, and the other is respect for individuals and social solidarity.2 The second model is presented as the basic concept of the welfare socio-economic model which is a sustainable system.3 This concept looks at inter-dependence between the social system and the market system, and aims to achieve the optimal balance between economic success and social welfare. This is a kind of macro-socioeconomic model that makes the best use of market forces within a framework of the development of human abilities and welfare as a social foundation, participatory democracy and guidance in macroeconomic policies.

Higher competitiveness and the corporate model

Rengo Rials has also examined competitiveness for business enterprises facing fierce international competition, and it proposes a competitiveness model compatible with social progress. This model is set against the behaviour of corporations which seek to exploit low-wage workers employed on short-term contracts. Such companies readily dismiss employees and transfer their operations from one place to another, seeking the least expensive location. This is the low-road approach leading to lower wages and lower productivity. This direction emphasizes shareholders' interests, looks at return on equity as the sole criterion for successful management, and disregards job security and the social aspects of corporate activities. Managers often try to undermine the effectiveness of government policy, evade public responsibilities, or deny trade unions. This can be described as the competitiveness for shareholders model. Against this, Rengo Rials has proposed the competitiveness for stakeholders model.4 This is based on long-term employment, better use of innovations in corporate organization and technology, highly skilled workers and the benefits of industrial democracy, including labour/management consultation. All these elements provide flexibility for an industry or business enterprise. This model is based on the traditional Japanese employment system which was established as a sustainable social compromise arising from the fierce industrial conflicts of the early post-war labour movement in Japan. It can be described as a Japanese version of the high-road approach, reflecting a belief in high skills/high reliability/high quality/high productivity. This model was an important theme in an international symposium held in December 1997 in commemoration of the tenth anniversary of Rengo Rials.5

Japan sees many discussions on corporate governance. In the business world, some argue for new regulations on company management and corporate structure in order to further promote shareholders' capitalism: Rengo criticizes these efforts. Rengo is preparing its campaign strategy for the 21st century, aiming at a realistic and desirable model of social and economic progress.

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1Rengo/DGB: Future of work, future of social welfare state, future of trade unions, 25 September 1997, Tokyo. [return]

2Rials: Future tense of happiness, Rengo Research Institute Report No. 6, 1996.

3Rials: Towards a welfare society, market and social solidarity in 21st Century Japan, Rengo Research Institute Report No. 7, 1998.

4Inoue, S.; Suzuki, F.: The high road approach in the Japanese context: The stakeholders' agenda for the coming century, Rengo Research Institute Report No. 7, 1998.

5Inoue, S.: Meanings and main points of the International Symposium by Rials, Rengo Research Institute Report No. 8, 1998.