Increased international competition has put pressure on U.S. firms to restrict the
proportion of workers with income or job security and to increase the contingent
work force. Similar pressures are at work in Japanese firms, and we expect this trend
to become more visible as a secular adjustment when the Japanese recession ends.
Overall, the labor market institutions in Japan have changed much more slowly
than in the United States, and a much deeper economic crisis seems to be required
before firms make adjustments in their practices to reduce costs. Even then, their
adjustments tend to be marginal compared to the changes undertaken by U.S. companies facing intense global competition.
The 1990s recession has brought renewed emphasis to the benefits of employment security in the United States and to the costs of employment security in Japan. After analyzing the employee involvement, training, and wage systems, we
will return in the concluding chapter to the question of what type of employment
system, including security, would be effective in the United States, given its emphasis on mobility and individual autonomy and its macroeconomic institutions.
We also discuss to what extent American (in)security practices are transferable to Japan.
Nondiscretionary expenditures are those that maintain a family's normal daily life and
cannot be changed without disrupting the family's life-style. For a more complete discussion, see
Vickery ( 1979).
We distinguish this individual human capital, often referred to as general human capital, from organizational capital, which refers to skills and knowledge that are developed
through experience on the job, are related to organizational activities, and are valuable only
within the organization. Organizational capital includes relationships among employees;
workers' knowledge of the firings culture and structure; workers' knowledge of rules and procedures; workers' experience in teaching certain skills to others; the firm's knowledge of
workers' skills and talents; and proprietary knowledge (e.g., research-and-development secrets, financial data, supplier information). Although organizational capital might be
thought of as specific capital, it is not solely embedded in one individual and may not become lost to the organization when that person quits or retires. Rather, organizational capital is embedded in groups and is learned incrementally. Therefore, the loss of capital to the
organization when one individual leaves is quite small and can quickly be replaced with a
minimal amount of job experience for the person who is transferred to the vacant job. However, if several people in a work group leave at one time, the training costs can be high since
the natural training structure embedded in the work process has been destroyed.
On the origins and dynamics of institutions in Japan, see Upham ( 1987) and Campbell
( 1992), and in the United States, see Jacoby ( 1985).
These figures are for 1979, 1989, and 1991. The inflow is given as a percent of population aged 15-64 minus the unemployed; outflow is given as a percent of the total unemployed (
OECD, 1993a, pp. 88-89).