February 27, 2019
Current problem facing Japan
Currently, Japan is facing a declining birth rate and an aging population. It has decreased the number of young workers and affected the Japanese economy. This is why the Japanese government has managed to promote work style reform. Before getting into this issue, take a look at the Japanese employment system.
Two types of employment
Companies in Japan have two types of employment, full-time and non-regular. Usually, most companies overseas may hire employees with contracted duration. However, most Japanese companies hire their employees on the full-time basis and they make use of non-regular employees as an additional and adjustable workforce. What is the difference between the full-time and non-regular employees in Japan?
Difference between the full-time and non-regular employees in Japan
In the case of full-time employment system, once a full-time employee enters a company, the company guarantees his/her employment until retirement and provides a gradual salary raise according to length of service. Instead of those merits, full-time employees are forced to work comprehensively. They can get an actual job after entering a company and in a few years their position will be changed in company because companies want them to have various skills. It means that they do not know exactly what types of job they can get before they enter a company. In addition, they tend to work overtime. You may be confused why companies do not offer a job before employees apply for the company. However, this is the reality of Japanese employment system. Probably, there has been a basic bargain between a company and their employees: while a company guarantees life-long financial security, their employees devote themselves to the company.
On the other hand, non-regular employees have a contract period and may get a lower salary than a full-time employee. Instead of guaranteed retirement and raises, they can chose a specific job and do not need to work overtime like full-time employee because their job time is exactly decided.
The Cause of the Wage Gap
Both of these systems have merits and demerits. From overseas practices, full-time employment may be a rare case. However, in Japan it is quite common. Unfortunately, those two patterns cause a huge wage gap. Even if full-time and non-regular employees do the same job, full-time workers can get higher salary than non-regular employees.
Currently, the wage gap has become a subject of nation-wide discussion (figure 1).
Figure 1: The Japan Institute for Labor Policy and Training (2012)
This problem prevents more women who seek to have work-and-life balance from becoming full-time workers (figure 2). If elderly people after retirement want to continue working at the same company, they are forced to switch to non-regular track, because companies want to stop the wage raise (figure 3.4).
Figure 2: Ratio of Part-Time Workers by Gender
Figure3: Employment Format Composition by Age (Male Employees)
Figure 4: Employment Type Composition by Age (Female Employees)
Although Japan needs their performance because of a long term economic stagnation period, the employment system in Japan prevents their performance. This is why the government has changed their work style. Government insists that it tries to close the wage gap of non-regular and full-time employees by giving an equal wage for the same labor in condition to keeping full-time workers, then women and elderly people can work with equal wage.
The work style reform will work or not ?
However, it is doubtful whether same-work, same-wage policy will be an effective action to adjust the wages of non-regular employees. If the Japanese government wants to give equal wage, the government should erase full-time workers or they should encourage the companies to give up full-time employment system with too much wages by making them keep length of service even if they change a company. As long as full-time workers get the higher wages and are guaranteed long-term employment until retirement, it is impossible to achieve the goal of equal wages for same labor.