Products evolve quickly in Japan. Society is rigid and resistant to change. But it is coming, says David Kilburn.
Japan's manufacturing prowess is the envy of its competitors worldwide. The speed with which emerging technologies get incorporated into new products, flexible manufacturing techniques, and the rapidity with which products evolve to meet market needs all bespeak a highly adaptable, pragmatic society that can respond swiftly to challenge. But the ease with which the Japanese upgrade technology and production contrasts with a perverse rigidity when there is need for social structures to evolve. This is especially evident with labour practices.
Last December, an announcement of planned redundancies at Pioneer Electric Company created a furore in Japan; in the US or UK this would have seemed sadly normal. Pioneer wished to release 35 'lifetime' employees, all over 50, from among its 9,000 employees in Japan. The 35 had no subordinates and few responsibilities. They were members of the madogiwazoku or 'window-gazing tribe', a term used to describe ageing white-collar employees who have nothing to do but admire the view. They draw salaries but are, in essence, unemployed. Their careers are over. They are simply waiting out the years till retirement.
Pioneer proposed to pay them up to two years' salary as part of compensation for going early. 'They must have gone crazy,' said a trade union official. Faced with enormous opposition from other employees and the union, Pioneer backed down in January. An internal memorandum said that there had been some misunderstanding and that management would 'duly consider whatever needed to be considered'.
Lifetime employment is a pillar of Japanese society. Bank loans and mortgages are granted to lifetime employees on the assumption that they will never lose their jobs and therefore the ability to repay. There are also legal hurdles to dismissal. A firm must stop recruitment, cut overtime, fire part-time staff, re-organise its labour force, ask for volunteers to leave, and offer the redundant workers jobs at affiliates before they can legally be sacked. In consequence, when a company needs major restructuring, it tries to avoid wholesale job losses. When Nissan announced last February that it would close its Zama factory in 1995, it took pains to explain that jobs would not be lost except through natural wastage.
Despite a prolonged recession which has seen the profits of most major companies collapse, the institutionalised job security of Japan's roughly 43 million lifetime employees - two-thirds of the labour force - has not been undermined, though it is being challenged. Internal unemployment (people companies would release if they could) now probably affects up to one million people and is not reflected in unemployment statistics. If it were, the official unemployment rate of about 2.3% would rise to around 3.5%.
Most of the people working for the large companies which offer the security of lifetime employment are not haunted by fear of joblessness, but there are still anxieties. Employees can be transferred with little notice to branches or subsidiaries in other parts of the country, sometimes having to leave their families behind. The twice-yearly bonuses that make up to 40% of pay have stopped growing. Overtime, typically 10%, but rising as high as 25% of salaries, has been cut back or eliminated. Individual window-gazers can be encouraged to retire early by progressively making their lives more unpleasant. Most can still gaze their remaining years away.
For the one-third who do not enjoy lifetime jobs there is no cushion against the harsh realities of recession. Their jobs can end abruptly and often do. Some may have worked for years as contract employees with large firms, putting in the same effort as lifetime employees, but without the security. Cutting their jobs quickly reduces staff costs without the problems of eliminating lifers. For the first time in nine years, Japan's unemployment insurance payments this year are expected to top one trillion yen ($6.4 billion), an increase of more than 10% on last year.
Today's labour surplus contrasts with the shortage a couple of years ago. In March 1991, there were 1.47 job vacancies for every Japanese eligible for work. Newspapers reported companies going bankrupt because they couldn't hire enough people either to make or deliver their goods. Companies such as Nippon Steel revamped their corporate images and ran national TV campaigns to woo recruits. Special bonuses, overseas training trips and subsidised luxury apartments were used as lures for staff. University graduates were dined in expensive restaurants and given thinly disguised holiday trips round Japan to inspect company facilities, to win them over.
Now it is a buyers' market, but not for too long. According to the Japan Center for Economic Research, after hitting a bottom of 0.83 in the third quarter this year, the job offer-to-applicant ratio will reach 1.05 in the second quarter of 1994 when labour shortages should reappear.
Most companies have suffered from worker shortages. If they now take even mildly optimistic views about the future of the economy and their own businesses, they know they could be starved of staff again. Since a firm which is known to be likely to fire might find it even harder to recruit, many managers see their challenge as developing new skills among their staff and increasing internal job mobility. If they can't do that, then it is better just to weather the recession. Releasing staff is a last resort, and one that is fraught with difficulties.
Not surprisingly, there are problems for the young about to join the workforce. In January this year, Kodak Japan cancelled job offers it had made to eight university students due to join on 1 April. The offers were not legally binding but Kodak eventually paid the students Y2.5 million (nearly £16,000) each in compensation.
The Ministry of Labour reacted to this, and similar incidents, by issuing 'administrative guidance' requesting companies to honour their employment offers. Even so, at least 114 firms cancelled job offers and of those, 14 quickly went bankrupt. Though it has no legal foundation, 'administrative guidance' is a powerful coercion in Japan. In a highly regulated society, a business will find many occasions when it must seek bureaucratic permission to develop or change some aspect of its affairs. Those companies ignoring guidance may find that the ministries turn deaf ears to their requests for years to come. Such problems arose during the oil shocks of the '70s. At that time people also began to question the lifetime employment system. But the oil shocks jolted Japan out of smokestack industries and into high technology. The economic growth that followed stifled such difficult questions.
This time there is an extra ingredient in the talk about the need to change employment practices. Traditionally, Japanese companies have promoted people on a basis of age and seniority, at least until they neared top management. A young recruit, no matter how able, had to wait for those above him to be promoted before he too could move up. Foreign firms entering Japan stuck to their own merit-based promotion systems which they found helped in attracting bright young recruits. Japanese working abroad have discovered the advantages of promoting on merit and have helped spread the idea back at home. This April, a survey by Nihon Keizai Shimbun (Nikkei), Japan's pre-eminent business newspaper, found that 80% of top managers at 450 major Japanese corporations wanted the seniority promotion system abolished.
'Japanese management philosophy cannot just continue as it has for the past 40 years,' says Shotaro Watanabe, vice-president of Kao Corp, Japan's leading maker of detergents, toiletries and personal care products. Takuma Yamamoto, chairman of computer maker Fujitsu, suggests that the seniority promotion system has actually been losing ground for several years, giving way to performance-based pay systems.
Lifetime employment is a more sensitive issue. Nearly 40% of Nikkei's respondents insisted it should be retained while 25% favoured abolition. Many executives think the system should be maintained to ensure employee loyalty. Though an increasing number of lifetime employees switch jobs, most are expected to spend their lives in the same firm. Today's talk of restructuring comes at a time when values are changing. When lifetime employment was being questioned in the '70s, Japan's priority was to build a strong economy and a manufacturing base that could hold its own internationally. No one questioned the need for hard work and personal sacrifice to do this. Now, with that objective met, or even exceeded, people are considering the quality of their lives.
Everyone agrees that improving quality means working less. In 1992, the total number of hours worked by the average employee dropped below 2,000 for the first time ever, to reach 1,972 hours. But this is still a long way from the government's target of 1,800. Cutting total hours equates to a combination of shortening the working day, adopting a five-day week in more companies, and persuading employees to take longer holidays. Older people find it hard to work less, so some companies make holidays compulsory or provide special schemes to encourage longer holiday taking. Omron, a leading maker of automation controls, has introduced sabbatical leave for its middle managers to pursue a hobby or have a second honeymoon. Car maker Daihatsu gives prizes to its salarymen who make outstanding contributions to their local communities. Trading company Itochu gives employees paid leave to work on community projects of their choice.
Leisure is something new to modern Japan. There is not even a Japanese word with the same meaning, so the English, rendered as 're-ja' is used. While younger Japanese are comfortable with the concept of leisure, those who worked to rebuild the post-war economy find it hard to change. The difference in attitudes towards work and leisure between older and younger employees is pronounced according to research by the Hakuhodo Institute of Life and Living (HILL), the research arm of Japan's second-largest advertising agency.
HILL found that changing attitudes to work are steadily undermining the foundations of lifetime employment. The workaholic older generation is giving way to middle-aged mercenaries who are no longer so blindly loyal to their firms. Meanwhile the younger workers often seem more interested in leisure than in the office.
The greying corporate patriarchs who put in 12-hour days and live only for their jobs are reaching retirement. Supplanting them are baby boom managers in their mid-forties. These men have seen their country and companies prosper but haven't fared quite so well themselves. Land prices have risen faster than their incomes, forcing them to live modestly in distant commuter suburbs and strap-hang to work on overcrowded trains. Some are bitter that years of double-digit economic growth have left them less comfortable than their counterparts in many other countries.
Though still loyal to their companies, they are not as willing as their elders to sacrifice their lives to the economic good. This generation is well-educated, resourceful, and highly competitive. Significantly, they value consensus less and are not quite as group-oriented as their predecessors. Holidays, hobbies, family life are important to them as they seek a more balanced, richer life than their greying seniors. Why kill yourself for the company many say and, occasionally, why not change company?
The generation of salarymen in their late twenties and thirties have even less in common with the generation that rebuilt Japan. They have had lives of abundance, choice, and easy opportunity. The company and their private lives are two separate things. Education, jobs, personal possessions have all been easier to achieve. They value weekends and free time in the evenings and are less inclined to clock up long hours with no respite. Jobs are more personal to them. They look for employers who will make full use of their abilities and provide opportunities. They are less inclined to be pegged into whatever slot pleases the personnel department; and more inclined to change jobs if they sense more opportunity.
To the older generation that runs and speaks for Japan Inc, a world without lifetime employment is hard to imagine. The younger generation feel less threatened by new thinking about the pillars of society. An ever-dominant Liberal Democratic party (LDP) and endlessly rising land values were also seen as foundations of society. These have both been demolished, so it is not hard for the young to reconsider fundamental ideas about employment.
According to Nikkei, 90% of large firms are restructuring or planning to do so. Head office staff are being sent to work in the salesforce. Loss-making subsidiaries are closing down, suppliers are being cut, production jobs are moving to lower cost centres overseas. But not all the changes affect jobs so directly. Product life cycles are lengthening, more parts are being standardised, and excess inventories eliminated. The excesses of Japan's 'bubble economy' of the '80s are coming to an end in a return to the traditional values of thrift, frugality and diligence. Shopping behaviour, as belts tighten, shows that the new mood affects consumers. Sales of salt and soy sauce are up; dining out is down. Sales at high-priced Tokyo department stores have been declining since February 1992 and discount stores are mushrooming. Car and most domestic appliance sales are static or down.
The changes will help restore company profits, but some argue that they do not go far enough. With a declining birth rate and ageing population profile, Japan will soon become a society where the old will outnumber the young. At the beginning of the 21st century, one in four Japanese will be 65 or older and one in eight will be 75 or more. Japan will have the highest proportion of old people in the world. There will be as many people in Japan of 65 or over as there are under 15. There is need for a rethink of more than employment practice. There is need for political leadership to formulate new ideas for society and hammer out a consensus for their implementation. With the LDP in disgrace, it remains to be seen if a long-docile electorate will at last begin to dictate some of the nation's priorities.
Books about the future are popular in Japan. Alvin Toffler, John Naisbitt, Lester C Thurow, in Japanese translation, are all best-sellers. There is broad agreement that change is called for and the year 2000 is a popular date for achieving it. But so far there is no clear consensus about how to engineer the transition from a workaholic, production-oriented society to one where life has added dimensions and is more enjoyable. The mood was captured in a 1991 Nissan commercial starring Toffler himself. He described how Nissan and Japan should approach the next century: 'Uniformity was yesterday. Diversity is tomorrow.' Survival in the power shift era may require another kind of shift as well - a mind shift.