Japanese Employees Want a Return to Lifetime Employment & the Seniority System

The Japanese employment system is now under review. It would not be an exaggeration to say that the secret of Japan's rapid post war economic growth were the lifetime employment and seniority systems. Japanese treated it as a matter of course that employees would work at the same company for life, and the longer one's career, the higher the income and position that could be expected.

Under these systems, employees were treated as members of a corporate family. In order to promote employees' sense of belonging to an organization, the company hosted travel excursions and sports meetings for employees, and built dormitories and welfare facilities for staff. On top of that, the company returned a portion of the profits to staff during profitable periods. Since people believed that the company was a big 'family' and that management and laborers were in the same boat, companies rarely laid off employees. Those company leaders who fired employees were regarded as incompetent. Employees were 'attached' to their companies as their income and positions were guaranteed. Therefore, employees were reluctant to go on strike since it would affect company profits. Far from it, they became loyal warriors for the company and accepted overtime work without complaints.

However, everything changed when the bubble economy collapsed in the 1990s. Many goods made in China and other Asian countries that have cheap labor flooded into Japan and Japanese manufacturers producing high cost products became less competitive. Companies started mercilessly laying off staff, and those in their 40s and 50s receiving high salaries became targets for the axe. Subsequently, the merit system was introduced by many companies in place of the seniority system. Employees in their 20s and 30s welcomed the new system since they were unsatisfied at not being able to receive higher salaries under the seniority system. A new perspective subsequently emerged in which company leaders who did not lay off staff were regarded as incompetent.

Less than 10 percent of employees are rewarded under the merit system
However, as the merit system continues to be used in Japan, it has become clear that less than 10 percent of employees are enjoying the benefits. In short, the majority of employees cannot produce 'acceptable' good results and subsequently remain on lower salaries. The use of this system creates a fundamental controversy about who and how to estimate employees' results, and this creates seeds of dissatisfaction.

The TV program "WBS" recently reported that more than 50 percent of young people want the seniority system and nearly 50 percent leave their companies within two years of entering (Cabinet office, Goverment of Japan survey). According to a survey carried out by the Japan Institute for Labor Policy and Training in August ~ September, 2004, 78 percent of respondents support the lifetime employment system and 66.7 percent support the seniority system. These figures are the highest since the survey began in 1999.

Metaphorically speaking, the merit system is golf without a handicap. The champion is limited to several talented players. While the seniority system is golf with a handicap, anyone has the chance to be a champion. In another words, those non-talented have also chance for promotion as long as they work diligently. The merit system is more common in the international business environment, however Japanese people and the corporate system have for a long time placed more value on the equality of people. You could say this used to be the Japanese version of socialism, a system that is now being reviewed.

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