Why do we need to introduce work-style reforms now?

Sep 19, 2018 [No.55-2018]

Dr. Hisashi YAMADA
Research Director, Chief Senior Economist
The Japan Research Institute, Limited


The labor reform law was enacted in June 29, 2018. The introduction of the principle of equal pay for equal work and setting upper limit regulations for overtime with penalties are the two pillars of this law. In a background in which such amendments to this law were conducted, there have been delays in improving labor conditions in the workplace, such as disparities in treatment between regular and non-regular employees and long working hours, in spite of corporate performance largely improving in recent years.


Upon entering 1990s, the Japanese economy, after facing the collapse of the bubble economy and the economic growth of emerging countries, was in a state of economic recession. Japanese companies suppressed the hiring of regular employees whose employment adjustment was difficult; when facing an increase in the demand for labor required, they responded by hiring non-regular employees with fixed-term contracts, easy employment adjustment and low salary costs. As a result, while in the beginning of the 1990's, one out of five employees was a non-regular employee, that number has been increasing to about two out of five employees recently.


In the past, many people who were working as non-regular employees, such as students, housewives and seniors, had sources of income other than their own salaries for their cost of living. Now, there is an increase in the number non-regular employees who need to support their cost of living with their own salaries such as single mothers, middle aged men who lost their jobs and those who were unable to become regular employees after graduating school. As for the details of the jobs, not only are they in charge of marginal duties, but starting to become in charge of essential duties. In such a situation, it has been becoming difficult to socially approve of the fact that the treatment of non-regular employees is lower than that of regular employees. On the other hand, behind the rise in non-regular employment, the volume of the tasks for regular employees has increased and responsibilities have become heavy. It has led to problems such as long working hours, increased stress and excessive overwork. In addition, social issues, for example, death from overwork and overwork-related suicide have been getting worse. This is why the introduction of the principle of equal pay for equal work and corrections to long working hours have been promoted as government initiatives.


Of course, it is found that some companies are not taking a passive stance toward improving labor conditions, but actively pursuing them. This is because the labor shortage is becoming a serious problem as the population continues to shrink. In particular, with the decline in the young population, overtime reduction initiatives are vital in order for the companies to hire new graduates. If rumors regarding bad labor conditions spread, companies are labeled "black companies" and gathering students become extremely difficult. Shortages in human resources are also becoming incentives of the better treatment of non-regular employees. When labor market becomes tight, they can easily move to a company that treats them well, because advanced techniques or skills are not required.


Furthermore, from a long-term point of view, correcting long working hours and introducing equal pay for equal work will be vital in order for the companies to survive. In Japan, the basic reason that long working hours were popularized and equal pay for equal work has not been implemented is the concept that men of working age are the core labor force and their employment stability is the source of corporate competitiveness. It was thought that the so-called "lifetime employment" and "seniority system" were basically only for men of working age; women and seniors were just a supplementary labor force; housework and child upbringing were for women. Working male employees have been asked to contribute to companies in exchange for their employment security. Therefore, long working hours have become natural and career changes and transfers have been given at the company's convenience.


However, the number of men of working age has already been decreasing and the number will decrease more and more in the future. If women and seniors do not play real and active roles, workplaces cease to function. To prevent this, long working hours must be corrected and men and women must work together in doing housework and bring up their children. We need men and women to be on equal footing when it comes to working conditions. Also, in order to build a work system in which even physically weak seniors can display their abilities to the fullest, long working hours need to change. To have such a variety of human resources show their abilities, we call for the principle of equal pay for equal work that does not discriminate by employment status.

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