Japanese Employ Creative Means to Keep Unemployment Low Official Subsidies and Cultural Taboo Keep Idle Workers on Payrolls

By Clayton Jones, writer of The Christian Science Monitor | The Christian Science Monitor, August 18, 1993 | Go to article overview

Japanese Employ Creative Means to Keep Unemployment Low Official Subsidies and Cultural Taboo Keep Idle Workers on Payrolls


Clayton Jones, writer of The Christian Science Monitor, The Christian Science Monitor


IF the Japanese economy worked like that in the United States, the stock brokers at Cosmo Securities Company would be looking for new jobs this week.

The company had a brush with bankruptcy last Friday, but instead of going under and laying off hundreds of employees, Cosmo was rescued by a peculiar safety net in Japan that has helped to keep unemployment at a level far below that in the West.

Cosmo was saved by Japan's Finance Ministry and a creditor, Daiwa Bank, despite the company's confession that it had defrauded $700 million from investors. "It's important to rescue Cosmo Securities," says Finance Minister Hirohisa Fujii, "to protect Cosmo's employees at the time of an economic slump."

Such rescue efforts, combined with a near-sacred creed among big Japanese corporations to avoid layoffs at all costs, have helped to keep Japan's joblessness low - at 2.5 percent in June - despite the country's most prolonged recession since World War II. In the past few months, however, as the recession has entered its third year and a strengthening yen has hit exporters hard, corporations are straining for creative ways to maintain Japan's famed lifetime employment system.

As in previous recessions, such as in 1974-75 and 1986-87 when unemployment was worse, many workers this time are being relegated to the so-called "in-company unemployed." They are asked to stay home (with partial pay) or are assigned to the "window tribe," sitting idly or doing little, perhaps staring out a window.

An estimated 1 million or more of Japan's 66 million workers are being kept on payrolls in such an idle status. If the economy does not pick up soon, these unproductive workers could be a bulging burden that could burst into Western-style joblessness.

"About 300,000 to 400,000 of that group may need to be fired in the next half year," says Keio University labor economist Haruo Shimada.

Few of the inactive employees complain. Being laid off in Japan carries a social stigma. Japanese refer to it as "cutting off their heads." And Japanese firms, with their usual deep pockets and long-term perspective, want to keep workers and avoid the cost of recruiting and training new workers later.

Six months ago, the Labor Ministry pulled top business leaders into a meeting for the first time since 1975 to "advise" them not to fire employees. Two months ago, in an upbeat report, the ministry predicted the job-for-life system would be maintained.

But with economic recovery elusive and chances slim of Japan ever returning to 5-7 percent growth, many firms are reaching the breaking point on cash and credit available to keep workers, says Kazuo Nukazawa, managing director of Japan's leading business group, Keidanren. …

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