The Journal The Authority on Global Business in Japan

ADVOCACY | GROWTH STRATEGY

OCTOBER 2014

Labor Mobility Shows Signs of Movement

By John Amari

At the height of summer, the government of Japan announced its intention to create an advisory committee to consider proposals to increase labor mobility in the country.

Many of the government’s ideas are similar to those advanced in an ACCJ Viewpoint, “Add Flexibility to the Labor Contract Law to Address Burgeoning Social Inequality While Spurring Economic Growth,” published in March. The proposals also reflect those made in the chamber’s 2010 white paper.

Two people with key roles in drafting the viewpoint—Barry Hirschfeld, vice chair, Growth Strategy Task Force (GSTF) and Women in Business Committee, and Bryan Norton, chair, Globalization and Labor Diversity Committee—welcomed the government’s announcement.

For Hirschfeld and Norton, any proposed labor mobility reforms—including an additional, flexible contract for workers returning to employment after a break—should promote the role of women in the workforce, thereby contributing to one of Prime Minister Shinzo Abe’s flagship goals.

“If Japan is really going to bring more women back into the workforce,” Norton said, “then the government needs to promote an employee contract that will bring them back in as full-fledged employees.”

If that happens, Norton added, not only will the Abe administration be more likely to achieve its aim—which includes a goal to increase the number of executive-level women to 30 percent by 2020—but Japan’s growth strategy will also get a much-needed shot in the arm.

Inequality in the labor market, and subsequent low productivity, has been a problem here since the 1970s. Since then, the country has had a largely two-tiered labor market divided into regular (seishain) and non-regular (hiseikishain) employees, Norton said.

Regular workers are relatively secure in their positions and, typically, join a company as graduate recruits. Non-regular employees, 70 percent of whom are women, are usually hired on a contract or temporary basis, and often include returnees to the workforce, such as mothers back from full-time childrearing.

Non-regular workers comprise almost 40 percent of the workforce in Japan, but receive much lower salaries compared with their regular counterparts (¥1.7 million and ¥4.7 million, respectively).

Companies, furthermore, are loath to invest in staff who are not considered full-fledged members of the workforce, which results in low productivity.

Like Norton, Hirschfeld believes a supplementary employee contract scheme is needed that allows women returning to work and those changing jobs mid-career back into the workforce as regular employees.

“The idea is, we create a contract mechanism that, in law, turns out to be a signpost that says: ‘This is a formal way for someone who is reentering the labor force to do so as a regular worker, and to receive any necessary training,’” Hirschfeld said.

The proposed contracts scheme, he said, should be extended to foreign workers, such as international students graduating in Japan who wish to stay and contribute to the economy.

As reported in the Nikkei on August 24, the government’s planned advisory committee—which will be jointly administered by the Ministry of Justice and the Ministry of Health, Labour and Welfare—will consider all aspects of labor mobility policy, including possible changes to labor contract laws.

One likely proposal for the advisory committee’s consideration, the Nikkei reported, is a scheme under a judge’s authority where severance pay of about one to two years of an employee’s salary is awarded in cases for which an employee’s termination has been deemed “invalid” and when the parties involved agree to have a judge rule on the matter.

Although the details are pending, this policy change would be a first in Japan—a country where the only recourse a judge currently has in such cases is to reinstate the employee to the company, a situation that is often less than satisfactory.

The advisory committee’s recommendations will be presented to the Diet in 2016. Hirschfeld and Norton, meanwhile, are optimistic the government is on the right path to ensuring labor mobility.

Amari

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John Amari is a consultant, writer, and researcher with experience working for a United Nations agency.

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