Specter of Deeper Job Cuts Keeping Public on Edge

Proliferation of contingent employment becoming source of controversy as times get tougher; gov't facing crucial short-, long-term challenges

Masahiko ISHIZUKA (Councilor, Foreign Press Center Japan, and Lecturer, Waseda University)

Job cuts - and the prospect of more of them coming - have suddenly emerged as one of the most pressing concerns in Japan. While the worst of the unfolding economic crisis appears yet to come, the startling speed of deterioration is its signature characteristic. Nowhere is this more keenly felt than in the job market, leading to considerable societal unease.

Such mighty corporate names as Toyota Motor Corp., Honda Motor Co., Nissan Motor Co., Canon Inc., Sony Corp., Sharp Corp. and the like have, one after another, announced job cuts by the hundreds or thousands in the past couple of months. Cuts are spreading into many other firms as well.

During the post-bubble economic difficulties of the 1990s, Japan underwent extensive corporate restructuring that eliminated redundant jobs in significant numbers. That said, the kind of immediate impact on jobs that we are witnessing today is something that has never been experienced before.

Aside from the rapid contagion of the current global financial and economic crisis, fueling controversy is the fact that the contingent workforce has increased exponentially in this country over the past decade. These are contract workers, part-timers, temporary staff, dispatched workers and the like, who are lumped together as "nonregular employees." In one measure, they account for 34.5% of the total workforce, or one out of three workers falls into this category.

The implications of this are that Japanese society is increasingly insecure, due to the vulnerability of such workers who can be easily and casually dismissed when times get tough for employers.

Many contract workers are being told that their contracts - up to three years by law - will not be renewed, or that they will be terminated even before their terms end. Dispatched workers are even more vulnerable, as they are being cut off immediately. For employers, these people are expendable and provide a convenient cushion against rough business conditions.

There are public protests, but the fact remains that it is legal for employers to get rid of these workers. Behind the increase in contingent workers is the relaxation of labor laws that used to restrict such employment practices, presumably to protect workers' job security. But deregulation was advanced under the Koizumi government as part of its reform agenda, giving companies greater flexibility in managing the size of their workforce to fit business conditions. In 2007, the worker dispatching law was amended to allow manpower agencies to send workers to manufactures for assembly work.

Such deregulation was considered to be beneficial for workers as well, since if it were not for the relaxed rules, employers would not hire as many workers as they might hope to have. According to its supporters, it contributed to job creation. But that was a time when the Japanese economy was at long last beginning to recover from a prolonged post-bubble slump, and industry was finding itself in fresh need of manpower.

In those days, such a sudden and precipitous deterioration of business conditions worldwide as is happening now was virtually unimaginable. So too was the dismissal of large numbers of contingent workers in such a short space of time, and only at the beginning of what is considered likely to become a very long and deep recession.

Not only workers, but also employers and the government have been caught off guard by this sudden turn of events. Faced with angry dismissed workers and a public that is sympathetic to their plight, employers are embarrassed. All they can do is argue that they will not be able to survive if they do not take relentless action.

Basically, they are right. And that leaves it to the government to provide temporary help to those who have lost their jobs. Many have become homeless, since they were ousted from the company dormitories that came with the job.

For the government of Prime Minister Taro Aso, which is struggling with a spectacular downturn of the domestic economy and an increasingly worried public, job-related measures have become a matter of utmost importance. The government will pay, for example, a certain amount of money to companies that decide to keep temporary workers even if they are unneeded, or companies that hire workers dismissed by other companies.

However, two basic - and difficult - questions are being raised, and this is a time for the nation to ponder them.

Corporate social responsibility has been a popular concept for some time. But is employment not the ultimate way for companies to fulfill their CSR? If this is not CSR, what is?

A most plausible answer to this question is that for companies, survival is the alpha and omega. Unless a firm survives to make earnings, everything will be lost, including whatever employment it can offer. It can also be argued that a company does not exist for employees only. Nevertheless, the re-regulation of labor practices is a trend gaining momentum.

Another question relates to the division between regular employees and nonregular ones, as the former's job security takes precedence over the latter's. Regular employees can remain in their jobs at the expanse of nonregular workers at times of contingency. In Japan, the gap between regular workers and nonregular workers is especially wide in terms of wages and working conditions. Is such a society peaceful and stable?

Who's next?

If things get worse, even regular workers cannot be spared. As Honda Motor President Takeo Fukui put it so bluntly at a recent news conference: "If the yen remains strong at the current level of ¥90 or less to the dollar, even regular employees in Japan will have to be eliminated in the next fiscal year as we will be forced to relocate production overseas." The company's mandate, he said, "is not to lose money."

Major Japanese manufactures - and hence the Japanese economy that has heavily depended on them - have taken a steep plunge because they depend on foreign markets, which have collapsed amid the global financial crisis.

Weak domestic demand was a prominent feature of Japan's anemic economic recovery from early 2002 through early 2008. That, in turn, was blamed on stagnant wages as firms, despite record profits, were thrifty in passing profits on to workers, citing the need to maintain a competitive edge with foreign firms.

A relatively weak currency rate, low interest rates on deposits and low wage increases formed a vicious circle that has kept domestic demand weak. This has made the shock from the downturn in overseas markets, coupled with a spike in the yen, all the more wrenching.

In the short run, the government must rush emergency measures to soften the impact of rising job losses. But it is also a time to contemplate long-term strategies to promote domestic demand in earnest, an issue that has long been left unanswered.

(Originally appeared in the December 29, 2008 issue of The Nikkei Weekly, reproduced here with permission.)