Japan needs a working hours overhaul

We will send our products to the people of the world
Our hard work and toil like the sound of water
Gushing from the spring
Industrial progress, industrial progress
Number one for harmony, Matsushita Electric

That song, performed by workers dressed in identical jump suits, was fairly typical of Japanese corporate culture in the now distant go-go decades of the 1960s and 1970s when the economy was going like gangbusters. Much of that extraordinary postwar success was built around a set of corporate practices very different from those that prevailed in the west. At large corporations there were several elements to this system, from seniority pay and lifetime employment to worker-led initiatives in productivity improvement.

At its heart was a social contract between employer and employee that some have compared to the relationship between daimyo feudal lord and samurai retainer. In return for absolute loyalty, the employee would be paid more each year regardless of performance. The system applied only to those who worked for big companies. Many workers — almost all male — would show more devotion to their company than to their spouse, putting in hours of unnecessary overtime and carousing late into the night with colleagues and corporate clients.

Such a system is easy to mock. Yet it had a certain rationale in the catch-up era. In today’s Japan it makes no sense at all. It now needs fewer companies that can make a better widget (like Sony) and more that can dream up software that renders the widget redundant (like Apple). It needs a multidisciplinary workforce capable of switching mid-career, not only between different companies but also between entirely different fields. It needs to bring more women into the workforce, not to make up the numbers but to usher in new thinking. The corporate culture Japan is stuck with is unsuited to these challenges.

The good news is that Japanese companies are changing. Itochu, a general trading house, and Ricoh, a printer maker, are among those promoting flexible working hours aimed at putting an end to masochistic overtime. According to data from the Organisation for Economic Co-operation and Development, the average employee worked 1,728 hours a year in 2011, down from 1,809 in 2001. That almost certainly under­estimates the amount of unpaid overtime. The decrease also reflects a weak economy. Even so, that was 100 hours more than the UK, and 300 more than the Netherlands; though a tad fewer than the US and far fewer than South Korea, whose employees clocked in a mind-numbing 2,193 hours.

Cutting the workload should raise productivity, still low by OECD standards. Low productivity is actually a Japanese ace in the hole. As the workforce shrinks, which it is doing by 250,000 a year, productivity will rise, especially in the service sector. Think of all those elevator attendants or men ushering cars energetically into parking lots.

Reducing hours would also entice more women into good jobs. Many, especially mothers, find the long working hours impossible to juggle with home life. That, the cynic might say, is precisely the point. Japanese men have deliberately constructed practices inimical to working women — and will be slow to change them as a result.

Still, in other areas of corporate culture, there are signs of change. One is seniority pay. Hitachi is now rewarding its 11,000 top managers based on job performance. (Why it sees the need for 11,000 top managers is a question for another day.) From this month, Sony says it will promote some employees in their twenties to management positions and demote some older employees with a commensurate cut in pay. Toyota is bringing in performance-based pay for many of its workers. So is Panasonic, as Matsushita is now called.

The fact that many big companies have stuck to seniority pay, in which wages rise with years served, has had unintended consequences. One is that, in tough years, many stopped hiring new recruits, pushing a generation of young people into casual work. Since the early 1990s, the proportion of temporary workers has doubled to nearly 40 per cent. That has harmed wages, skills, productivity and aggregate demand. Another unintended consequence is that older workers become too expensive to retain, making it unnecessarily difficult for them to work past the official retirement age — something the government wants in order to increase worker participation and contain the social security bill.

Most changes need to take place at corporate level. The government can do only so much. Still, it should press ahead with legislation to bring the conditions of those in temporary work closer to those in full-time employment. The International Monetary Fund estimates that well-executed reform could push the share of non-regular workers back down below 30 per cent.

On balance, corporate Japan is probably adapting faster than outsiders realise, but slower than is necessary. Japan urgently needs to create a working environment that is more flexible, imaginative and, ultimately, more productive. Today, the employees of Panasonic still sing a company song. The lyrics now contain a nod to “a celebration of being free”. For corporate Japan as a whole, being free from pointless overtime would be an excellent start.


David Pilling


Fonte: FT