Lifetime Employment Is No Longer a Given at Japanese Companies

By Sheryl WuDunn, New York Times, 12 June 1996

OKYO—When a major Japanese tire-and-rubber company asked a 53-year-old senior researcher to retire early last year, he refused.

So the company moved him to a bare desk in the corner of a factory and told him that every two weeks, he would have to turn in a report on the same topic: My Second Life. For six months, he stubbornly stuck it out, writing about himself until he had nothing left to say. In desperation, he turned to a friend, Kiyotsugu Shitara, who gave him two books on insects and animals, which turned out to be his salvation.

He said, ‘I can read about the lives of butterflies and animals and then I can write thousands of reports,’ said Shitara, who runs a union for managers. He is still writing.

His friend's predicament may not seem so bleak, in light of the armies of unemployed white-collar workers in Europe and the United States. After all, he still has a job.

But his plight is one of numerous signs that after five years of economic troubles, the tight link between Japan's companies and its workers—symbolized by the concept of lifetime employment—is starting to come undone.

The changes are modest and evolutionary in most cases, but together they may add up to a revolution that would have far-reaching reverberations for Japan and for competing economies in the United States and elsewhere.

Seniority is losing out to performance in raising pay. Young and ambitious recruits are quitting to start their own companies. Employees are spurning their employers—if only by occasionally quitting work a few hours earlier—to indulge in family life.

But the backdrop is the harsh new reality that the guarantee of a lifelong job, declared on the way out before but still a staple of many of the country's biggest companies, is finally beginning to break down. Shitara's friend may be hanging on, but Japan Inc. has succeeded in ridiculing, ostracizing and bullying other idle workers off the payroll.

The traditional Japanese system that bound loyal workers and paternalistic employers to each other, in good times and bad, produced a level of commitment and a lack of labor unrest that were unknown in the West—factors that helped make Japan a world economic power.

But one cost was a bloated work force, particularly in the white-collar sector, which proved to be a painful drag that prolonged the economic troubles. While the recovery is now finally under way, Japan's maturing economy is bringing slower growth than before the troubles began—and pressure is building for action aimed at greater productivity, including downsizing. That could mean American-style chronic unemployment as well as a redefinition of the concepts of loyalty, team dynamics and security.

If Japan emerges stronger from the process—more open, flexible, efficient and entrepreneurial, as in the Western economic model—then American companies will have a new challenge on their hands. But if Japan has trouble adapting, then its workers and companies may find themselves adrift, without the familiar anchor of the past, and increasingly at odds with each other.

For now, the only thing certain is that a shift has begun.

The long-term-employment system is crumbling gradually, even in the large corporations, said Kazunori Morishita, president of the Pasona Bright Career Co., a job placement agency for managers in Tokyo.

In a nod to the continuing power of corporate identity, people here still sometimes introduce themselves with their company name, before offering their own.

But polls of workers are now reflecting a spreading sentiment that the notion of a one-company career may no longer be ideal. When asked in 1987, in a survey by the Labor Ministry, to choose between keeping a frustrating job or switching to a more satisfying one, only 42.3 percent said they would dare move. Last year, those willing to jump rose to 63.4 percent.

Indeed, while the shift away from security is highly painful for some, like Shitara's friend, for others it is liberating, auguring a period of greater job-hopping. This new spirit offers both a release from a single-minded devotion to work and a chance to pursue greater job satisfaction. It also means Japanese companies will not have the kind of control over their workers that they used to enjoy.

To be sure, the promise of lifetime employment has never been a universal one in Japan, generally applying only to male employees working for big companies. Over all, only about one in five workers in recent years have been offered jobs for life. And it has long been the case that the promise did not prevent employers from encouraging some older workers to retire.

That happened to Yoshio Atsuda, a 63-year-old graduate of Kyoto University, a decade ago. His bosses at Nippon Steel suddenly told him one day that he was being transferred from his engineering post to a headhunting job, which he regarded as an extreme insult.

In Japan, someone with a good education can't do such a low-class task, where usually 9 out of 10 people are going to refuse your telephone call, Atsuda said. Within a week, the telephone began to feel heavier and heavier, and I no longer wanted to make phone calls.

He added, The aim of Nippon Steel was to put people like us into such places so we would become unable to tolerate it and would quit.

Atsuda endured for a while, but his life was miserable, with nightmares and marital problems. After six months, he jumped to a job at a patent office.

Now, however, that office is revamping, and Atsuda fears he will lose his job again. These days, there's a feeling that employers can do restructuring anywhere in Japan, he said.

While statistics on such harsh treatment are hard to come by, anecdotal evidence indicates that more people are now being pushed toward the door—enough so that Shitara operated a call-in service last week to offer advice and consolation to people like his friend.

Nonetheless, some economists say that pronouncements about the decline of the lifetime-employment system are overdone. The system is still a basic tenet of the business ethos and philosophy of Japan, they say, adding that while the tectonic plates of Japanese industry may be shifting in fundamental ways, the process of change is proceeding at a geological pace akin to an inch a year.

Layoffs remain minuscule, these experts say, even after the long economic downturn, which has included real estate and stock market crashes and a banking crisis.

Remarkably, they note, Japan's unemployment rate is still only 3.4 percent, compared with 5.6 percent in the United States and more than 10 percent in much of Europe. But other data show that productivity in Japan lags behind both the United States and most other Western economies.

So now, many economists say that Japan would be better off with a harsher approach.

A faster pace of layoffs in inefficient industries probably would have been a net benefit to companies and shareholders as a whole, said Robert Alan Feldman, chief economist at the Tokyo branch of Salomon Brothers Asia Ltd. Without more layoffs and a sense that they have to change their ways, they won't prepare for the future in the long run.

About one-third of Japanese companies are now trying to cut employment, according to a survey conducted recently by the Labor Ministry. But the gingerly methods that some are still using tend to take a great deal of time, further dampening productivity.

When the NKK Corp., the nation's second-largest steel manufacturer, wanted to cut 1,500 white-collar employees a couple of years ago, department managers were involved in the search to find new places for some of their unlucky subordinates.

We have overemployment but we have to secure jobs for our employees, said Fumikatsu Ito, a personnel manager at NKK.

Many companies have been proceeding cautiously for fear of depressing morale or being caught short-handed when the economy rebounds. Moreover, sagging birth rates mean that the size of the labor force is likely to decline after the year 2000, and so companies want to insure that they have adequate staffing for the future.

Yet while many companies may be struggling to find the right mix, it is increasingly likely that the promise of lifetime employment will not be held out to many new hires.

College students are now in permanent oversupply and there is no reason why lifetime employment should be valid for all of them, said Takashi Kiuchi, head economist at the LTCB Research Institute, a private research center in Tokyo.

Eventually, economists say, if companies want to remain competitive and grow, they will have to become more cold-hearted in evicting longtime workers who are not needed.

If unemployment is not tolerated in the long run, this will erode business, said Haruo Shimada, a labor economist at Keio University. It will be the slow death of the Japanese economy.

That means, Kiuchi said, that Japanese companies are moving much more toward the direction of U.S. companies, where labor mobility is a given—and not necessarily a bad thing.

Some managers, like Kazuhiko Tashiro, have already gotten the message.

In 1991, when Tashiro did not like the managerial post he was given, he asked for a transfer. His company, the Sumitomo Corp., one of the nation's most prestigious, sent him to the Okura Yusoki Co., a midsized manufacturer of conveyors that had a distant relationship with Sumitomo.

Okura paid a fee to Sumitomo, and Sumitomo paid Tashiro's salary. But four years later, when Tashiro, an energetic 58-year-old with a degree from Tokyo University, wanted to return to Sumitomo, his bosses explained that there was no job for him at headquarters and he should stay at Okura.

Tashiro refused. So, last November, after 33 years at Sumitomo, he took early retirement. Now, he works at Sugiyama Shoji, a small apparel company, where he travels door to door, drumming up sales of men's socks and T-shirts.

It is fun, he said cheerfully, to go about doing work yourself.